• COVID-19
  • Virtual Power Plant
  • DER
  • Climate Change

Europe's COVID-19 Recovery Plan Can Advance Virtual Power Plants

Dan Power
Aug 29, 2022

Guidehouse Insights

The European Union’s Recovery and Resilience Facility is part of the region’s recovery plan for the COVID-19 pandemic. The initiative went into effect in February 2021 and will distribute more than €723 billion in grants and loans between now and the end of 2026 to EU member states to support reforms and investments in the countries. In addition to helping member state economies recover from the pandemic, the Recovery and Resilience Facility aims to push the EU closer to its goal of climate neutrality by 2050 and hopes to facilitate the digital transition. Member states in the EU, on average, have allocated almost 40% of their planned spending to climate measures and more than 26% to the digital transition. 

Planned Climate Investments Include Supply and Demand Side Measures

The specifics of planned climate initiatives vary by country but, many have plans to increase grid scale renewable energy generation and energy storage capacity, expand behind the meter renewable energy generation and energy storage capacity, and decarbonize their industrial and transportation sectors. While increasing grid scale renewable energy and energy storage capacity is essential to transitioning to net-zero, it can also lead to grid congestion if not managed properly. Additionally, installing more renewable energy generation and energy storage capacity behind the meter at residential, commercial, and industrial sites allows customers to reduce indirect emissions from their operations but can create two-way power flows when excess capacity is sent back into the grid. In Europe, almost 60 GW of new distributed energy resources (DER) capacity is expected to come online this year, with that number growing to over 218 GW in 2031. The resulting two-way power flows can cause grid stability issues without adequate visibility. Decarbonizing the industrial sector can mean electrifying end uses and processes to reduce direct greenhouse gas emissions from the facility and in the transportation sector it can mean increasing the number of EV charging stations. These changes will increase the electric demand in a region but, if effectively controlled, can also provide demand side resources that can be used to serve the grid. 

Climate Neutrality Is Linked to the Digital Transition

In addition to climate measures, EU members plan to invest in things like next generation cloud infrastructure, cybersecurity enhancements, AI, and improvements to fast broadband networks to address digital challenges in their respective countries. Digital infrastructure is critical to the energy transition as it enables the deployment of sophisticated software platforms like virtual power plants. Virtual power plants (VPPs) represent a way to optimize, manage, aggregate, and control hundreds or thousands of supply side and demand side energy resources to best serve the grid. VPPs give grid operators and utilities increased visibility and control over assets both in front of and behind the meter. Utilizing VPPs to control and aggregate various energy resources can also allow grid operators to defer or avoid the need for grid upgrades. As the energy transition continues to develop, power grids across Europe and the rest of the world will require infrastructural and digital upgrades to maintain their operations. Optimizing the use of renewable generation, energy storage, and electrified load resources already connected to the grid can alleviate the burden of performing all required traditional grid infrastructure upgrades. With increased investment in green and digital technologies, EU grid operators can achieve climate neutrality while providing customers with reliable power regardless of weather conditions.