Virtual power plant

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Virtual Power Plant (VPP) is a cloud-based central or distributed control center that takes advantage of information and communication technologies (ICTs) and Internet of things (IoT) devices to aggregate the capacity of heterogeneous Distributed Energy Resources (DERs) including different types of dispatchable and non-dispatchable distributed generation (DG) units (e.g., CHPs, natural gas-fired reciprocating engines, small-scale wind power plants (WPPs), photovoltaics (PVs), run-of-river hydroelectricity plants, biomass, etc.), energy storage systems (ESS), and controllable or flexible loads (CL or FL) and form a coalition of heterogeneous DERs for the purpose of energy trading in the wholesale electricity markets and/or providing ancillary services for system operators on behalf of non-eligible individual DERs.[1][2][3][4][5]

In another definition, 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.[6] The sources are often a cluster of distributed generation systems, and are often orchestrated by a central authority.

The new paradigm of power system operation allows a multitude of DERs, including distributed generators, flexible/controllable loads, and energy storage facilities, to be coordinated under the umbrella of Virtual Power Plants (VPPs). A VPP acts as an intermediary between DERs and the wholesale market and trades energy on behalf of DER owners who are not able to participate in the electricity market alone. In fact, the VPP aggregates the capacity of DGs, ESSs, and FLs to form a coalition of heterogeneous technologies in the hope of trading in the wholesale electricity market.[4] The VPP behaves as a conventional dispatchable power plant in the viewpoint of other market participants, although it is indeed a cluster of many diverse DERs. Also, in the competitive electricity markets, a virtual power plant acts as an arbitrageur by exercising arbitrage between diverse energy trading floors (i.e., bilateral and PPA contracts, forward and futures markets, and the pool).[1][2][3][5]

So far, for risk management purposes, five different risk-hedging strategies (i.e., IGDT, RO, CVaR, FSD, and SSD) have been applied to the decision-making problems of VPPs in the research articles to measure the level of conservatism of VPPs’ decisions in diverse energy trading floors (e.g., day-ahead electricity market, derivatives exchange market, and bilateral contracts):

  1. IGDT : Information Gap Decision Theory[1]
  2. RO  : Robust optimization[2]
  3. CVaR : Conditional Value at Risk[3]
  4. FSD  : First-order Stochastic Dominance[4]
  5. SSD  : Second-order Stochastic Dominance[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.[7]

According to a 2014 report by Pike Research,[8] 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, completely from renewable sources.[9]

Virtual Power Station operators are also commonly referred to as aggregators. The largest provider in the UK is Flexitricity.[10]

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.[11]


An example of a real-world virtual power plant can be found on the Scottish Inner Hebrides island of Eigg.[12]


In August 2016 AGL Energy announced a 5 MW virtual power plant scheme for Adelaide, Australia. The company will supply battery and photovoltaic systems by Sunverge Energy of San Francisco 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.[13]

See also[edit]


  1. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (January 2015). "Decision Making Tool for Virtual Power Plants Considering Midterm Bilateral Contracts". 3rd Iranian Regional CIRED Conference and Exhibition on Electricity Distribution, at Niroo Research Institute (NRI), Tehran, Iran. 3 (3): 1–6. doi:10.13140/2.1.5086.4969. 
  2. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (October 2015). "The design of a risk-hedging tool for virtual power plants via robust optimization approach". Applied Energy. 155: 766–777. doi:10.1016/j.apenergy.2015.06.059. 
  3. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (May 2016). "A medium-term coalition-forming model of heterogeneous DERs for a commercial virtual power plant". Applied Energy. 169: 663–681. doi:10.1016/j.apenergy.2016.02.058. 
  4. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (January 2017). "Risk-based medium-term trading strategy for a virtual power plant with first-order stochastic dominance constraints". IET Generation, Transmission & Distribution. 11 (2): 520–529. doi:10.1049/iet-gtd.2016.1072. 
  5. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (April 2016). "Modeling the cooperation between neighboring VPPs: Cross-regional bilateral transactions". 2016 Iranian Conference on Renewable Energy & Distributed Generation (ICREDG). 11: 520–529. doi:10.1109/ICREDG.2016.7875909. 
  6. ^ Feasibility, beneficiality, and institutional compatibility of a micro-CHP virtual power plant in the Netherlands
  7. ^ Smart Grid - The New and Improved Power Grid: A Survey; IEEE Communications Surveys and Tutorials 2011; X. Fang, S. Misra, G. Xue, and D. Yang; doi:10.1109/SURV.2011.101911.00087.
  8. ^ [1]
  9. ^ "The Combined Power Plant: the first stage in providing 100% power from renewable energy". SolarServer. January 2008. Retrieved 2008-10-10. 
  10. ^
  11. ^ Methaanbrandstoffen op Ameland (in Dutch)
  12. ^ BBC Radio 4. Costing the Earth- Electric Island
  13. ^ Slezak, Michael (5 August 2016). "Adelaide charges ahead with world's largest 'virtual power plant'". The Guardian. Retrieved 2016-08-05. 

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