How virtual power plants will help the UK meet its net zero targets

by Emma Davidson, Head of Strategy and Energy-as-a-Service at SSE Distributed Energy

The integration of power generators and users in the form of Virtual Power Plants (VPPs) is set to become an increasingly important part of the UK’s energy system. By pulling together the output of disparate power generating/using units such as small, decentralized power producers and on-site renewable sources such as wind and solar, VPPs are carving themselves a key role in bringing higher efficiency and more flexibility to the UK’s energy supply. And as we transition to a net-zero economy and the energy market reviews the generation mix that provides homes and businesses with electricity, cloud-based power plants could play a vital role in achieving the 2050 net-zero objectives. 

VPPs enable connection with, and control of, assets to enable them to participate in energy trading and balancing markets. And by pooling power production, VPPs make it possible to enact quicker, aggregated responses to energy demand from a variety of assets. In this way, small, low carbon producers and large energy users both can be active participants in the energy system, harnessing assets to help balance demand and even generate additional revenue. 

As the deployment of transmission and distribution connected renewable energy continues to pick up momentum, VPPs can provide a coordinated response across the system. This includes increasing stability at a national level and improving energy balancing at the regional level, thus alleviating grid constraints and promoting localisation of energy. 

Increasing stability of energy supply nationwide 

The intermittence of renewable energy sources alongside changes in demand are creating a volatile energy market. Moving away from large, steady power stations to a greater reliance on intermittent, renewable energy generation increases the possibility of system imbalance as a result of sudden and unpredicted changes in weather. This requires fast acting assets to be available to respond quickly to meet the system’s needs.

In response to this market opportunity, battery projects are springing up across the UK and their sole purpose is to participate in system balancing. However, we should not ignore the significant balancing resource that is already available to us in the form of flexible generation and load such as heating, ventilation and air conditioning (HVAC), backup power and combined heat and power technology (CHPs). Additionally, there will be a sizable flexible load from new technology that will become available to us over the coming years, with the growth in electric vehicles (EVs), vehicle-to-grid (V2G), and even hydrogen electrolysis.

Utilizing this demand in a way that maximizes flexibility to complement renewables requires a complex solution. It requires an understanding of each asset’s limitations, and its current commitments. If we take a chiller that uses a lot of electricity to create the cooling, it would be better if the cooling was scheduled to operate during the day when it is lovely and sunny in the South and/or incredibly windy in the North (as sometimes is the case!). This would allow greater electricity usage at the times when renewables are operating, while still ensuring the cooling requirements of the unit/system are met. 

Specific assets may require more complex solutions. For example, with the growth in EVs, we are essentially deploying batteries across the UK that can absorb excess renewable generation and help balance the grid when required. However, the added complication comes from the driver’s schedule and charge expectations, which may vary from one day to the next. The driver’s needs remain the priority, therefore VPPs must take into account the potential of this uncertainty when making commitments to the system, ensuring that EVs support grid stability. 

Across National Grid’s Future Energy Scenarios, V2G creates a huge swing in the gigawatts required to support EV charging at peak demand and will create a large amount of potential charge to help support grid stability as renewables rise, if utilised correctly. In short, if they are to make a meaningful contribution to local networks, electric vehicles will need to be charged and discharged at the right time.  

Balancing supply and demand at a local level

Although we can expect to continue to need the ongoing support of large-scale renewables, there is a growing drive to accompany this with local energy generation, and local use of that power. This is at least in part fuelled by the need of businesses to reduce carbon output, as well as a growing interest in providing local areas with low-carbon energy. However, these producers are often constrained to smaller deployment sizes because either they have to be the off-taker themselves or they shoulder the burden of finding a long-term option to off-take the energy. This can be especially problematic for investment projects. 

This is where a VPP has a role as a conduit between the end-customer (with either a supply or demand requirement), and the energy market, facilitated by suppliers, the DSO (Distribution System Operator) and the National Grid, to provide the balance required.  

It may be that large energy users that wish to actively participate in the energy system can use their existing assets to help balance demand on the electricity grid while creating a new revenue stream. While this can be done currently, challenges remain in managing merchant risk. 

In addition to the current markets, a new market mechanism is needed to facilitate agreements of peer-to-peer trading. The ability to include more than one source of off-taker for renewable generation could be an important facilitator in enabling more private organisations to deploy generation. Making it possible to apportion that energy across multiple customers would help reduce the risk associated with a number of these business cases and VPPs are well placed to help facilitate these types of transactions in the future. This could be seen as a new, more direct market for power producers/users, to the end customers that use that energy. 

While it is likely certain parameters would have to be met (i.e. only if on a private network, or through a scheme created by a local authority) it would help encourage more local usage of energy allowing companies to support multiple local businesses by providing them with green energy. It would also enable greater certainty over origination of power, as customers would know where this power was generated from. The technicalities of this are complex and would require policy changes and potentially use of new technologies, such as block chain, however it would likely help support investments in renewable technology. 

It is clear that there is a significant role for virtual power plants in the balancing of energy at the national and the local level, and that their impact on the pursuit of zero-carbon targets will be large. VPPs make it possible to synchronize demand and supply with maximum efficiency and flexibility, taking advantage of the balancing resources already widely available, as well as facilitating peer-to-peer trading that brings carbon reduction benefits to local production and use of power. 

About the Author

Emma Davidson head of Strategy and Energy-as-a-Service, SSE Distributed Energy

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Source: Renewable Energy