Virtual power plant

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A virtual power plant (VPP) is a system that integrates several types of power sources, (such as microCHP, wind-turbines, small hydro, photovoltaics, back-up gensets, and batteries) so as to give a reliable overall power supply.[1] The sources are often a cluster of distributed generation systems, and are often orchestrated by a central authority.

In the competitive electricity markets, a virtual power plant acts as an arbitrageur by exercising arbitrage between diverse energy trading floors.[2][3][4]

An example of a real-world virtual power plant can be found on the Scottish Inner Hebrides island of Eigg.[5]


The concerted operational mode delivers extra benefits such as the ability to deliver peak load electricity or load-aware power generation at short notice. Such a VPP can replace a conventional power plant while providing higher efficiency and more flexibility. Note that more flexibility allows the system to react better to fluctuations. However, a VPP is also a complex system requiring a complicated optimization, control, and secure communication methodology.[6]

According to a 2014 report by Pike Research,[7] the VPP market will continue its steady growth over the next several years, increasing from $5.2 billion in worldwide revenue in 2010 to nearly $7.4 billion by 2015, under a base case scenario. In a more aggressive forecast scenario, the clean tech market intelligence firm forecasts that global VPP revenues could reach as high as $12.7 billion during the same period.

"Virtual power plants represent an ‘Internet of Energy,’" says senior analyst Peter Asmus of Pike Research. "These systems tap existing grid networks to tailor electricity supply and demand services for a customer. VPPs maximize value for both the end user and the distribution utility using a sophisticated set of software-based systems. They are dynamic, deliver value in real time, and can react quickly to changing customer load conditions."

The concerted operational mode delivers extra benefits such as to the ability to deliver peak load electricity or load-following power at short notice.

United States[edit]

An often-reported energy crisis in America has opened up the door for government subsidized companies to enter an arena that has only been available for utilities/multinational billion dollar companies until now. With the deregulation of markets around the United States, the wholesale market pricing used to be the exclusive domain of large retail suppliers; however local and federal legislation along with large end-users are beginning to recognize the advantages of wholesale activities.

Energy markets are those commodities markets that deal specifically with the trade and supply of energy. In California there are two markets: Private Retail Electrical Market & Wholesale Electrical Market. California is the leader in green technology with governmental bodies subsidizing and pushing an agenda that is not shared by much of the rest of the United States. Senate Bill 2X passed California Legislature March 30, 2011, mandates 33% renewable by 2020 without any particular method to get there.

In the United States, Virtual Power Plants not only deal with the supply side, but also help manage demand and ensure reliability of grid functions through demand response (DR) and other load shifting approaches, in real time.


The Institute for Solar Energy Supply Technology of the University of Kassel in Germany pilot-tested a combined power plant linking solar, wind, biogas and hydrostorage to provide load-following power around the clock, totally from renewable sources.[8]

Virtual Power Station operators are also commonly referred to as aggregators. The largest provider in the UK is Flexitricity.[9]

To test the effects of micro combined heat and power on a smart grid, 45 natural gas SOFC units (each 1.5 kW) from Republiq Power (Ceramic Fuel Cells) will be placed in 2013 on Ameland to function as a virtual power plant.[10]


In August 2016 AGL Energy announced a 5 MW virtual power plant scheme for Adelaide, Australia. The company will supply battery and photovoltaic systems to 1000 households and businesses. The systems will cost consumers AUD $3500 and are expected to pay back in 7 years under current distribution network tariffs. The scheme itself is worth AUD $20 million and is being billed as the largest in the world.[11]

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