What Is A Virtual Power Plant? Your Questions Answered

August 4, 2023 by Admin

With the world of energy, renewables and green initiatives often moving too quickly to keep up with, it’s understandable you might not be familiar with a virtual power plant. A relatively new concept, the idea of virtualised power and decentralised energy has long been theorised, but has only become a reality in the last decade or so.

As we transition towards a brighter and more energy-savvy future, ideas like virtual power plants are fast becoming an innovative and forward-thinking approach to the current climate catastrophe we face. But what exactly are they, and how do they work?

At Tariff, we’re fully dedicated to bringing your business energy to the 21^st century, and as one of the UK’s leading energy switch services, we aim to connect businesses with the very latest technologies and developments.

With this article, we’ll explore the emerging concept of virtual power plants, why they could represent a significant stride in the right direction, and how you and your business can get involved at the ground floor.

 

What Is A Virtual Power Plant?

A virtual power plant (VPP) is an interconnected network of smaller devices that store or produce energy and serve the electricity grid during times of high demand. They’re also often referred to as a “cloud-based” power solution, as they use sophisticated software to determine when and how to deliver this power.

This is all done with the prior permission of the owners of those devices, in exchange for a small sliver of profits or an agreed-upon fee. These owners might also choose to trade or sell their aggregated power on the open electricity market, which can act as a secondary stream of income, or as a way to support smaller or struggling businesses.

VPPs usually consist of a connected web of various energy sources called distributed energy resources (DERs). These include (but aren’t limited to):

• Small-scale wind farms and turbines
• Solar panelling (also known as photovoltaics)
• Hydroelectricity plants
• Biomass generators
• Energy storage systems (such as batteries and stored biofuels)

One thing to note from all of the above is that they’re completely renewable energy sources – virtual power plants are constructed with the future in mind, and fossil fuels have proven time and again that they have no place in a sustainable future.

Their predominant use is for supporting and augmenting the National Grid, and offering a more robust and sustainable solution for people whose access to power isn’t as strong as it could be, such as in remote communities, or during high periods of demand.

The “virtual” aspect of these accumulated energy resources stems from its reliance on software and digital solutions. This automates the whole process – the software determines where there’s a need for that stored energy to be deployed, and uses it accordingly.

Virtual power plants, while still a technology in its infancy, has the potential to truly make a massive difference, especially for those who are more rural, or that have intermittent access to reliable power sources.

But why else are VPPs fast becoming an area of investment and focus for those at the cutting edge of technology? Let’s break down their importance in the changing energy market, and their practical applications.

 

Why Are Virtual Power Plants Important?

Now that we’ve firmly established what virtual power plants are and how they work, it’s important to recognise why they’re as pivotal as they are. We’ll break down just a few of the key reasons why VPPs are gaining traction in the modern energy market.

 

1. They Can Provide Increased Reliability

As the planet gradually starts to show the signs of climatological change, and extreme weather events become all too commonplace, it’s natural that our normally stable energy grids and distribution systems will be less than reliable.

Whether that’s through increased demand during soaring temperatures or cold snaps, or infrastructural damage due to strong winds, our current methods of providing power can (and do) struggle at times.

With VPPs, these risks are mitigated. Given its usage on cloud-based technologies, there’s less opportunity for the physical machinations of the process to be interrupted, and therefore much more reliability in the long run.

Plus, because virtual power plants generally combine a multitude of different sources for the power they provide, there’s less likely to be continued or sustained disruption, which further compounds their reliability.

 

2. VPPs Are A Step Along The Road To Net Zero

Net-zero is a looming yet necessary deadline on the horizon, and the more preparation and positive steps we can take towards that ultimate goal, the better it’ll ultimately prepare us for the future. VPPs are an ideal way to get prepared for that change, with minimal disruption.

At their core, VPPs act as both a way to push net-zero schemes, as well as highlight the continued need for further and sustained development and investment into the infrastructure that allows these to come to fruition.

Thanks to the cleaner and greener sources that virtual power plants prioritise, they can often form the building blocks of any future net-zero initiatives, as well as better gear up your processes and your business for a brighter future.

VPPs also prompt further investment and focus on the technologies that better facilitate the move over to cleaner sources of energy like wind and solar. That’s become abundantly clear with their boom in popularity – as virtual power plants become more and more commonplace, so too will investment in those renewable energy initiatives.

 

3. The Stability Of VPPs Breeds Affordability

We’ve already touched on how virtual power plants can offer increased reliability and sustainability for the energy market in rural or remote communities, but there’s actually much more benefits outside of that.

By decentralising electricity and power networks, there’s much more scope to make prices more stable, costs lower, and wholesale prices much more affordable for both smaller and larger businesses and households.

That’s set to continue for the future, too. We’ve done a deep dive on why energy prices are so high, but the core issues stem from significantly rising natural gas and fossil fuel prices, as well as a volatile global political climate.

Each of these factors, along with a range of others, means that more conventional fossil fuel energy sources are seeing increased scarcity and, as a result, higher prices. Virtual power plants seek to buck that trend.

By solely utilising greener and cleaner sources of energy and energy storage options, this circumvents the problems that are facing the future of unsustainable, dwindling fossil fuel resources, and allows for a more stable price point.

Plus, with levies and surcharges set to make more conventional sources of energy even more expensive, VPPs offer a cheaper, more viable alternative to the energy sources we’ve become accustomed to.

 

4. Virtual Power Plants Can Improve Planetary Health

The negative and global impacts of fossil fuels are well-documented. We’ve addressed this further in our comprehensive article on the topic, but suffice it to say that continued usage of fossil fuels and the planet’s natural resources irrefutably leads to a bleak future.

That was one of the key drivers behind the agreements made at the recent COP26. While grandiose in its scope, saving the planet can only really be accomplished by eschewing fossil fuels in favour of cleaner energy sources, and more sustainable practices when it comes home and business electricity and gas.

Virtual power plants are a key step in making that change. We’ve talked extensively about how these only utilise green energy sources, and that’s a key stipulation from the UN’s agreements – net-zero by 2050 is only possible with greener and cleaner energy.

This in turn helps the planet recover from the sustained human pressures its undergone, and that it continues to undergo. As we make the titanic move away from fossil fuels and non-renewable energy sources, we’ll start to see the global benefits of that, ranging from more stable temperatures, steadying ocean levels, and less extreme weather events.

 

5. VPPs Offer Unparalleled Scalability

Perhaps one of the most understated benefits of virtual power plants is their ability to be scaled indefinitely, and with relative ease compared to the efforts needed to mine more coal or extract more natural gas.

VPPs are, as we’ve discussed, a collection of smaller energy-producing resources (such as wind turbines or photovoltaic panels) that can “pool” together the power they generate. This can then be distributed as and when necessary.

Their nature means they can be expanded upon and made more robust wherever that’s needed. That could be because of an increase in demand, a change to the circumstances of the area they serve, or simply because their success has meant they become more viable for neighbouring areas.

Plus, as the technology continues its rapid and constant development, virtual power plants can be equipped with more advanced software, which in turn allows for a smarter and more economic approach to the distribution of that power.

 

Where Are Virtual Power Plants Used?

While virtual power plants are fast becoming a huge development in the energy industry, they’re still as yet a nascent technology, and one that’ll undoubtedly require further development and testing before it can truly be done on a global scale.

However, their current applications have had untold benefits for certain areas. Countries where remote communities are quite common, such as in the Australian outback or the far northern reaches of Canada and Alaska, are beginning to see a much greater uptake in the use of VPPs. This is only set to grow, too.

Their first recorded use was way back in 2008, but it’s only as technology has moved and developed to become the sturdier and higher capacity offerings we see today that it’s seen real-world, practical usage.

A great example of this comes from the remote island of Eigg, off the coast of Scotland. As this BBC Future article explores, the remote Scottish community has become entirely self-sufficient thanks to its intelligent virtual power plant system.

Thanks to investment from the European Regional Development Fund, alongside contributions from locals and national investors alike, Eigg now exists as a shining example of what can achieved through the innovative and well-planned usage of virtual energy solutions.

It’s quickly become the blueprint for what remote and smaller communities can achieve with the right levels of investment, focus and forward-thinking. Plus, with Eigg already providing the proof that projects of this nature can succeed, we’re poised for a future that involves many more.

What Does The Future Hold For VPPs?

As promising a development as virtual power plants are, their future is still as yet unclear. Whether they can be scaled to fit larger or more demanding communities remains to be seen, but their applications for those in remote areas has already been proven.

That’s begun to take shape, too. We’ve just looked at how the Scottish island of Eigg has acted as the early pioneer of these schemes, and researchers from across the globe have begun to take note, taking ideas back as far as Brazil, Canada and Malawi.

Conservative estimates from Our World In Data place the current number of people without access to electricity, often a basic necessity we don’t even consider, at 940 million. As VPPs become more accessible and widespread, that will only decrease.

Looking more in terms of practicality, we’re already starting to see the roots of new projects take hold. Electric car manufacturer Tesla have recently implemented plans that take advantage of Southern Australia sunshine to harness solar energy to facilitate a huge VPP that powers over 50,000 homes.

That follows the 2016 plans from AGL and the Australian Renewable Energy Agency (Arena), whereby Adelaide became home to one of the world’s largest virtual power plants in a project that was worth an estimated $20 million AUD.

All of these underscore the idea that VPPs have the potential, and the financial backing, to develop exponentially, and offer cleaner, greener and more reliable energy to homes and businesses across a huge cross-section of areas.

And, as more and more businesses and enterprises get on board with renewable and green energy initiatives, the technology is only set to become stronger, more versatile and higher capacity. That’s the next step, and with Tariff, it’s easier than it’s ever been before.

 

Revolutionising Energy With Tariff

At Tariff, our commitment is, and always has been, to provide businesses with a simple and effective way to adopt cleaner and more environmentally friendly energy sources. It’s a key part of our focus on facilitating net-zero futures for businesses from all sectors.

We’re constantly up-to-date with the very latest in developments across the energy sector, and we’ll use our extensive knowledge and expertise to provide your business with a complete overhaul of the energy it uses, and where its sourced from.

As one of the UK’s leaders in providing a tailormade energy switching service, we’ll take every aspect of your enterprise into account, making careful and measured considerations on how we can prepare your business for the future of energy.

We’re fully dedicated to a future that’s both sustainable and achievable, and with Tariff, that all begins with understanding your unique circumstances, and what they mean for how we can customise the service we provide.

From your initial consultation with our expert team, to the switch over to a greener and more future-focused energy provider, and into the future beyond, Tariff will take care of every step along the way to a cleaner and more sustainable future.

Get in touch with our experienced operatives today to get started on your journey to net-zero, and to a brighter future.