The Role of Virtual Power Plants in Managing Renewable Energy Intermittency

Decarbonization and multilateral clean energy efforts to address climate change have created a shift toward an increasingly intelligent, resilient, and distributed energy ecosystem. According to the International Energy Agency, global electricity demand is set to rise 2.5 times by 2050, driven by a shift to EVs. Additionally, wind, solar, bioenergy, geothermal energy, and hydro energy are expected to account for two‐thirds of total energy supply by 2050. Solar will likely become the largest source, accounting for one‐fifth of energy supply. As the electric power generation industry is accelerating toward diverse generation sources and asset ownership, incremental research, and innovation, the share of intermittent renewable energy technology will likely require the electric grid to resolve the question of real-time supply and demand balancing.

Peaking plants across dispatchable power sources such as gas gensets, microturbines, and biomass deployments can help regulate the production and integration of solar and wind power sources on the grid. Guidehouse Insights defines virtual power plants (VPPs) as systems that rely on software and a smart grid to remotely and automatically dispatch distributed energy resources flexibility services to a distribution or wholesale market via an aggregation and optimization platform. VPPs can provide flexibility and optimization to the electric grid by harnessing the advantages of multi-unit distributed generation to participate in the electricity market.

VPPs Can Increase Resiliency During Extreme Weather and Peak Demand Periods

Growing renewable generation leading to intermittency can be effectively managed by VPP platforms. These platforms can accomplish this task by controlling unit production and commitments in response to price signals from the market and providing balancing power by integrating more renewables and minimizing fossil fuel for peak demand, without risk to grid stability and reliability. Extreme weather events around the globe—from wildfires in California to bushfires in Australia—are creating a critical application for the electric grid to prevent blackouts and strengthen resiliency.

VPPs, along with time-of-use tariffs and grid-edge optimization through microgrids, can exemplify mechanisms by which demand response can help to optimize the variety of distributed technologies operational as of mid-2021. San Francisco-based Leap helps electricity grids manage periods of peak demand by telling participants in its VPPs to reduce consumption. Such demand response services are paid for by electricity grids, and Leap passes the financial upside on to its customers. Energy stakeholders such as grid operators and utilities are increasingly looking for integrated solutions to address their evolving grid needs. Meanwhile, VPP providers are positioned to create value in this accelerating market by partnering with stakeholders to provide a comprehensive business model and service offerings.