The term “virtual power plant” means different things to different people. The concept is really just creative way to imagine the variety of grid services that can be harvested from a plethora of distributed energy resources (DER) that are rapidly populating power grids worldwide.
I would argue that the VPP is the epitome of changes that are transforming relationships between utilities and customers, as well as a host of other market participants that are building real solutions to the pressing energy and environmental challenges facing the world today. Navigant has coined the term the Energy Cloud to describe the evolution of our collective energy future. VPPs are just one aspect of this shift toward smarter, cleaner and smaller power sources being aggregated into real-time solutions that benefit each individual asset owner, while also contributing to the sustainability of existing infrastructure.
Now that hardware assets such as solar PV panels, batteries and other DER are becoming commoditized due to increased market penetrations and creative business models, the key to unlocking greater value from both new and existing DER is software, the fundamental technology driver underlying the VPP market.
Software is a broad category. It includes systems that connect DER in order to optimize synergies between like and unlike resources, in addition to the interface mechanics of interacting with utilities and wholesale markets for ancillary service sales. Information Technology (IT) and related software is where the money is being made in the VPP market. According to Navigant Research’s Virtual Power Plant Enabling Technologies report, software spending is expected to represent nearly 90% of total implementation spending by 2025. The same report also provides an analysis of the energy storage systems being wrapped into VPPs,
Perhaps the most foretelling trend with VPPs is the sudden surge in energy storage deployments being aggregated into VPPs, tilting the market in dramatically new directions. It is how utilities—and wholesale transmission grid operators—treat energy storage as an asset that may be the most important technology-related development affecting near-term commercial VPP deployments.
I recently went out on a limb and ranked VPP software vendors. There is always an apples-to-apples comparison challenge with this Leaderboard format, but if one steps back and focuses less on each company’s score, and more on overall trends, some revealing insights bubble up to the surface.
Ranking software vendors active in the mixed asset VPP market is even more problematic than microgrid controls vendors given the lack of available transparent data on performance of software products. The lack of a universal definition for a VPP only adds another layer of issues in developing a ranking. These caveats aside, the rankings do reveal some market insights.
· Large technology firms (with the exception of Siemens) generally ranked lowest as a group among VPP software providers.
Some vendors claim vertically integrated utilities are the best near-term market for VPPs, since all ancillary services required to keep the grid physically in balance are purchased by one single entity. Others argue that deregulated markets open doors to new ways of monetizing value and harness the value of diversity and competition. I believe both opportunities will help build the VPPs of the future. It will be mix of pure-play software vendors, energy storage innovators and large global technology companies that will show the way.