Virtual Power Plants: why are they key for the energy system of the future?

Our climate is changing around us faster than predicted. From the winter storms of Texas to the recent unprecedented heatwaves in India and Pakistan, it is clear that we will be increasingly affected by the impacts of the climate crisis.

In order to mitigate global warming, countries worldwide must act now to considerably reduce the emissions linked to human activities and meet the 1.5C warming target. To achieve our net zero goals, we must develop new methods for more renewable energy to power our economies and decarbonise our energy supply. However, one of the biggest challenges of adding more clean energy to the grid is the intermittency of most renewable energy sources.

The importance of flexibility

For a country to be completely reliant on renewable sources for electricity, we would need an energy system that could overcome the problem of intermittency and meet the demand for power consumption on a 24/7 basis. This is where flexibility and virtual power plants (VPPs) come into play.

Flexibility is defined by the UK’s regulator Ofgem as “modifying generation and/or consumption patterns in reaction to an external signal… to provide a service within the energy system”, and it is the key to a greener energy future. Finding ways to produce flexibility on the grid is crucial to decarbonising our electricity supply while also helping to balance supply and demand through virtual power plants.

Virtual power plants (VPPs): a definition

According to Next Kraftwerke, one of the pioneers of modern virtual power plants, a VPP is “a network of decentralised, medium-scale power generating units such as wind farms, solar parks and combined-heat-and-power units, as well as storage systems. These units are dispatched through the central control room of the VPP but nonetheless remain independent in their operation and ownership”.

As the global residential energy storage systems market is gaining momentum, flexibility markets with residential participation are also becoming more established, with customers playing an active role in these VPPs.

Virtual power plants with residential participation as a key part of the evolving grid

By using smart technology solutions such as Moixa’s GridShare software, distributed energy resources (like smart batteries in people’s homes) can be aggregated into virtual power plants (VPPs) to deliver grid services and address fluctuations in energy demand. These VPP-provided services can emulate and eventually replace the fossil fuel plants that have historically provided these services and help address distribution network bottlenecks.

Before distributed energy storage like smart batteries, when energy demand was low and there was a surplus of renewable energy on the grid, the only way to prevent it from being overloaded was to control the supply side by turning off wind turbines. This meant the grid would miss out on potential clean energy and continue to depend on polluting energy sources such as gas and coal. Furthermore, unless all clean energy produced is consumed or stored, the grid could become overloaded, with the potential to cause blackouts.

As we transition from passive Distribution Network Operators (DNOs) to proactive Distribution System Operators (DSOs), it is vital to be able to support the grid by providing flexibility services. Through new smart technologies and AI, intelligent batteries can now be grouped into VPPs to allow the grid to rely on those devices to store this surplus clean energy, allowing it to be stored until it is needed rather than wasted.

The opposite example is when there is a high demand for energy across the network but not enough power being generated, such as on a still, winter evening when there is a low amount of renewable energy being produced but many people want to use electricity.

Previously, the only way for the grid to meet the high energy demands across the UK was to rely on a range of traditional energy sources, which often involved the process of burning fossil fuels.

However, VPPs of intelligent batteries can now provide a more sustainable option to take the pressure off the grid while decarbonising the energy supply. This is where a VPP of smart batteries working together to distribute energy assets has enormous potential.

VPPs with residential participation in the UK

Grid services with residential participation are already a reality in the UK, where PV and battery ​​installation growth rates are soaring. Residential energy storage systems can be grouped in VPPs and support the network through distribution level flexibility services to take pressure off the grid in constraint areas and other tools such as the Balancing Mechanism (BM).

At Moixa, we are thrilled to be at the forefront of this innovation. We are involved in several projects to support the grid in collaboration with UK Power Networks, a Distribution Networks Operator serving London, the South East and East of England. Our partnership aims to provide local grid services in a few different constraint areas across the UK, such as in the Worthing and Littlehampton areas. Read our latest blog post to find out more.

In Japan, since 2018, we have also partnered with ITOCHU, a leading Japanese trading house with business interests and holdings worldwide, to deploy their Smart Star ESS to customers in tandem with Moixa’s GridShare software. By leveraging our technology, ITOCHU has been able to deploy arguably the largest connected battery fleet globally, reaching the milestone of more than 30,000 residential batteries connected to Moixa’s GridShare platform.

Moixa and ITOCHU are ready to open the way for grid management through VPPs of residential assets once the Japanese market allows it and to generate value for the grid and consumers.

According to our founder, Simon Daniel, “Households and businesses can become active participants in the energy landscape, rather than passive consumers. By creating millions of “home power stations”, we can create bi-directional energy flows, rather than just a top to bottom energy system. As a result, VPPs make the transition to renewable energy on the grid a more viable and reliable option”.