What’s virtual power plant-the advantages and disadvantages

With the global climate problem becoming more and more serious, the traditional power grid has been impacted by extreme weather, and the relationship between energy supply and demand is deteriorating.

At the same time, the continuous increase of renewable energy with strong volatility and poor stability in the energy supply structure also puts forward new requirements for grid adaptability.

The popularity of energy storage has brought achievements to many companies, which can be shown in the top 10 energy storage battery manufacturers in the world in 2022.

How to establish a more flexible, reliable and efficient system to manage power resources to meet the new needs of both the supply and demand sides is a difficult problem. The virtual power plant is a possible answer. This article will introduce virtual power plant in detail.

What is virtual power plant

Virtual power plant (VPP) is a highly intelligent energy management system. Based on the Internet of things, it integrates the distributed power generation, energy storage facilities, controllable loads and other resources in the power grid, conducts centralized dispatching, participates in the dispatching operation of the power grid, and provides flexible services for the power market.

The virtual power plant has similar functions to the power plant, but has no traditional workshop, so it is called “virtual power plant”.

What’s the advantages of virtual power plant

The most obvious feature of virtual power plant is that it can not only supply power to the system for peak load regulation, but also increase load consumption and cooperate with the system for valley filling;

It can quickly respond to instructions, cooperate to ensure the stability of the power grid and obtain economic compensation, and can also directly participate in power market transactions, power ancillary services transactions, etc. like traditional power plants.

Another advantage of virtual power plant is excellent economy. According to the calculation, if the peak load reduction and valley filling of the power system are realized through the thermal power plant, an investment of 400 billion RMB will be required to meet 5% of the peak load.

However, to achieve this goal through virtual power plants only requires an investment of 50 billion to 60 billion RMB, which is 1/8 to 1/7 of the cost of thermal power plants. Its cost performance advantage is far superior to the traditional system construction scheme.

The industrial chain composition of virtual power plant

The industrial chain of virtual power plants consists of the upstream basic resources, the midstream virtual power plant operators and the downstream power demanders.

● Upstream basic resources: adjustable load, distributed power generation and energy storage equipment

The controllable load focuses on industrial, commercial and public buildings, residents, etc. The load adjustable potential of different application scenarios is quite different. The adjustable load of commercial and public buildings is mainly air conditioning, lighting, power, etc., which is relatively easy to manage.

The adjustable load distribution of residents is scattered, the single point capacity is small, and the aggregation is difficult. Besides, distributed power refers to small distributed photovoltaic, wind power, thermal power, hydropower and other units. Energy storage includes mechanical energy storage, chemical energy storage, electrochemical energy storage, etc.

● Middle stream virtual power plant operators: resource aggregators and technical services

Resource aggregators mainly rely on Internet of things, big data and other technologies to achieve coordinated control of virtual power plants, which is a key link in the virtual power plant industry chain. Technical service providers focus on the construction of virtual power plant software platform to provide technical services for resource aggregators.

● Downstream power demanders: public utilities (power grid companies), energy retailers (power selling companies) and all the subjects involved in the power market trading

They achieve the participation of power trading, peak shaving and frequency regulation, and demand side response to obtain benefits.

The business model of virtual power plant

There are two relatively mature examples of current virtual power plants in the world. The first is to focus on distributed generation units, and gain income by participating in power trading; The other is to focus on the power resources at the user end, and obtain benefits by providing auxiliary services.

In the first business model, the virtual power plant mainly collects commissions by providing technical support, optimizing power generation costs and reducing unnecessary losses; Or the auxiliary power generation unit can be connected to the power grid, complete the power transaction, and obtain the service fee and premium share.

The representative enterprise is Next Kraftwerke, a German virtual power plant company, which is also the largest virtual power plant operator in Europe. Next Kraftwerke’s profit model is roughly divided into three types:

● Provide services to renewable energy power generation enterprises, assist power producers in monitoring power generation, and save unnecessary costs;

● Provide short-term flexible energy storage services to the grid side, and provide peak shaving and frequency modulation services from the power generation side to earn income;

● Service the grid side by controlling the demand side to earn corresponding fees.

By the second quarter of 2022, Next Kraftwerke has managed 14414 distributed power generation equipment, including highly diversified equipment such as biomass power generation device, cogeneration, hydropower station, wind power station, etc., with a total management scale of 10836MW.

The second model is common in the US electricity market. Energy retailers carry out the virtual power plant plan to exchange part of the household’s power control by providing low-cost energy storage batteries or cash, and provide power to retailers when necessary.

The retailers’ virtual power plants aggregate these energy storage and provide them to users in need during peak power consumption, so as to obtain ancillary service income.

What’s the disadvantages of virtual power plant

We need to make it clear that the virtual power plant does have many positive meanings, but it does not mean to completely subvert the existing energy supply system, nor does it have the ability to solve all problems.

Virtual power plant can not fundamentally solve the problem

Virtual power plant only more efficiently coordinates distributed power generation resources and various forms of available power generation capacity or stock power, and achieves more intelligent power allocation, but it cannot fundamentally solve the problem.

For example, the serious power shortage in Sichuan and Chongqing, China, is due to the severe drought, which caused a sudden drop of 40% – 50% in the power generation capacity of the hydropower system, and hydropower accounts for more than 80% of the local power generation structure. The residential electricity consumption caused by the superimposed high temperature has increased significantly, leading to a huge power gap.

This cannot be solved by virtual power plant. Even if there is a mature virtual power plant system in the local area, it is only possible to carry out limited optimization, further reduce unnecessary consumption that has not been paid attention to, and ensure residents’ power consumption in a more efficient way.

Virtual power plant needs to rely on and match equipment

The construction of virtual power plant is far from just developing a new set of digital control system, but also depends on the equipment matching its functions to operate.

If the current power grid wants to adapt to the regulation mode of virtual power plants, it will need to upgrade more extensive technical facilities. Considering the huge volume and complexity of the power grid, the corresponding infrastructure will be a rather tedious and long-term systematic project.

The special risks of virtual power plant

Network security is a special risk faced by virtual power plant. In the virtual power plant, the entire system is composed of equipment interconnection, which leads to network attacks that may occur on any grid connected equipment.

However, the current development rhythm of the energy industry does not adapt to the development mode of the digital era. The traditional energy industry is likely to be slow in responding to cyber attacks and unable to effectively respond to the crisis.

For example, in 2015, the Ukrainian electric power company was invaded by the network, resulting in large-scale power outages in more than half of Ukraine; On May 7, 2021, Cloonel Pipeline Transportation Company, the largest fuel pipeline operator in the United States, was attacked by hackers and forced to close the entire pipeline system.

This led to fuel shortages and panic buying in many parts of the United States, fuel prices soared, and even forced the federal government to declare a state of emergency. In China, the data of a province shows that in 2020, the province’s power network will suffer more than 420000 network attacks, of which high-risk attacks account for 65.4% and overseas attacks account for 18.27%, mainly from the United States, India and other countries. 

If the network attack occurs in the virtual power plant system, it may lead to a large-scale paralysis of the entire power grid, and the loss will also expand rapidly with the increase of coverage. In addition, external partners introduced by virtual power plants, such as network providers and cloud service providers, often have low requirements for security and reliability. 

To mitigate such risks, the energy industry may also need to establish a new collaboration framework, purchase higher security level digital services from suppliers, and better adapt to the upgrading cycle of security measures in the Internet era, but this undoubtedly represents more costs and lower profit margins.