Jasper Shi is senior analyst, Energy and Natural Resource Ratings, for Morningstar DBRS.

Do You Know VPP?

The virtual power plant (VPP) is a revolutionary technology for the electric utility industry, but it’s difficult to define as it’s more of a platform or system composed of many different parts that can be very different in each VPP. In general, VPPs integrate and aggregate distributed energy resources (DERs) such as rooftop solar panels, small wind turbines and battery storage systems to operate as a single power plant.

“VPPs can play a crucial role for energy transition, contributing to a more sustainable and reliable power supply,” explains Shi, who helped write a public commentary on VPPs for Morningstar DBRS, the world’s fourth-largest credit rating agency.

A VPP also acts as an energy-delivery program that can manage and balance electricity loads through peaks and valleys to boost grid stability, affordability and sustainability. “For example, when your rooftop solar produces more energy than your home actually needs, a VPP can collect the electricity and feed the grid when demand is high,” adds Shi.

VPPs also can help reduce the volatility of energy prices and the frequency of unscheduled maintenance, reducing risk, improving stability and decreasing operating costs.

Consider the Limitations

Engineers helping to develop a VPP must consider the potential drawback and pitfalls. The utility industry is highly regulated, and current regulatory environments were designed for traditional and centralized power systems. They may not account for the unique attributes of DERs, and the policies across different regions could be very inconsistent, which can pose complex and uncertain scenarios for VPP operators.

There are also technical and operational hurdles, because integrating different types of DERs into a seamless VPP requires complicated software and control systems that can communicate effectively with various devices. “Different energy assets have their own operational characteristics and constraints,” explains Shi.

“Another challenge is market access and participation,” he adds. “A VPP needs access to the electricity market to sell their service, but current market rules may not be designed to accommodate their participation, especially when it comes to bidding and conversion mechanisms.”

Other difficulties include stakeholder coordination, customer acceptance and standardization of DER technologies.

The Engineer’s Role

According to Shi, engineers can help design VPPs by creating technology that can integrate different DERs into a single platform with general protocols that can accommodate different types of devices. They also can promote education to improve customer acceptance by letting them know the benefits for the grid and as well as themselves. And if they’re working for a traditional utility, engineers can help overcome conservative attitudes against change.

Although not required to create a VPP, Shi believes digital twins can provide significant advantages and benefits for developing them. “With digital twins, VPPs can provide deeper insights and enable more-precise real-time monitoring and control to improve overall efficiency and reliability,” he notes.

A Phased Approach

Shi believes a successful VPP can be built through four phases. Phase one is the planning and design, which includes the initial assessment and feasibility studies that identify and evaluate the available DERs and current infrastructure in addition to analyses of the technical, economic and regulatory viability of the VPP. After that, developers need to confirm stakeholder engagement and work closely with potential participants and utility companies. Then the system and architectures can be designed while securing the necessary permits and approvals from regulatory authorities.

Phase two consists of VPP deployment and integration, including procurement, site preparation, system integration and testing. Phase three is VPP operation and use, which includes developing operational protocols and procedures for VPP management, appropriate training, real-time monitoring and continuous optimization algorithms.

The final phase is maintenance and improvement: routine maintenance and performance analysis as well as system upgrades, scalability planning, and stakeholder feedback and communication. “Following this work plan, utilities could ensure a successful design, installation, operation and maintenance of a VPP,” concludes Shi.