Virtual Power Plants: smart, decentralized energy production

Transitioning towards a more environmentally sound and consumer-friendly energy system will require, among other things, a more extended use of renewable energy sources. However, despite advances in this field, renewables have significant constraints, such as intermittent output (for instance in the case of solar and wind power). This obstacle may be overcome by making energy networks enter the digital era, as suggested by Rudy Provoost in his book Energy 3.0; in this regard, virtual power plants (VPP) could be instrumental in rationalizing energy distribution.


VPPs are not, strictly speaking, production units, but rather webs of micro-power stations (for example one or several rooftop solar panels) made more efficient by their interconnection. Two kinds of networks can be implemented: centralized computer systems or decentralized production purchasing systems, on a basis similar to that of the 02/10/2000 bill on the obligation to purchase photovoltaic electricity.

energy efficiency, energy 3.0, smart grids

Source : Siemens

VPPs are decentralized energy generation systems connecting and managing small production units as a single resource in order to minimize energy loss, forecasting and adapting to load fluctuations and allowing for computer-based monitoring, thus enabling real-time optimization of energy resources.

Significant returns on investment are to be expected, according to Pike Research estimates made in 2012: by 2017 VPPs could represent a 5.3 billion-dollar industry. The market research firm expects VPP capacity to increase by 65% between 2011 and 2017, rising from 55.6 GW to 91.7 GW during that period.

The internet of energy

As many commentators (such as Jeremy Rifkin) have noted, VPPs represent “the internet of energy”. They are about “transforming the current centralized power network into a web of micro-players using information technology to sell and purchase electricity” (J. Rifkin in an interview with French daily Libération).

In his book Energy 3.0, Rudy Provoost takes the example of the firm RWE, which operates a VPP system designed by Siemens that takes into account weather forecasts, current energy prices (through a direct connection with the Leipzig-based European Energy Exchange (EEX) “and energy demand in order to plan and adapt production capacity, making optimal storage and network load decisions”.

A whole host of opportunities

Many experts see VPPs as a major breakthrough in energy systems, which up until now have been very centralized, causing sizable energy loss. For instance, on average, half of the electricity travelling through a 2,000 km-long high-voltage power line is lost on its way from production to consumption. According to an IEA study, around 7% of the energy produced in OECD countries is automatically lost because of flawed distribution networks.

At the crossroads between energy transition and digital technology, VPPs minimize energy loss by relying on locally produced energy and customized supply, adapting to consumer needs as well as weather-related hazards, thus making power networks smarter. Besides, combining VPPs with additional storage capacity could enable the sale of surplus energy and even the interconnection of various networks.

The Danish model

Denmark has become a pioneer in electric innovation, with 40% of total energy production coming from renewable sources, such as wind. Danish company DONG Energy implemented VPPs in the Faroe Islands as part of the Power Hub project, which involves operators in both the wind power industry and the electric vehicle sector, among other participants, with a view to pooling their resources in order to increase efficiency.

Power Hub is a software platform that transforms the existing network into a virtual power plant. The goal is to strengthen supply stability in the Faroe Islands’ micro-networks by finely adjusting production capacity to energy needs, thus avoiding both over- and underproduction scenarios. To that end, DONG Energy partnered with Schneider Electric, whose technical know-how helped design the virtual platform. In a December 2013 press release, DONG Energy Senior Vice-President Evert den Boer said that “involving Schneider Electric’s software platform in the energy and power network management will enable Power Hub to deliver a unique solution to the challenge of supplying secluded islands with electricity in a safe and affordable way, while taking full advantage of renewable energy sources, in our part of the world and all around the globe.”

The implementation of smart grids is an absolute precondition for a stable decentralized energy system. The growing number of positive-energy buildings as well as the increasing reliance on renewables and their connection to local grids have created new momentum as well as new demand, which VPPs aim at meeting.

The successful implementation of such a model requires consistent and coordinated investments in both the installation of smart consumption measurement systems and the creation of an adequate network environment for renewable energy sources.

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