An energy revolution is underway, thanks to technology. This revolution will change both the way in which energy is generated as well as the way it is distributed. The change in energy distribution models is due largely in part to virtual power plants (VPPs). According to Pike Research, a market research and consulting firm, VPPs refer to systems that rely upon software to remotely and automatically dispatch and optimize generation, demand-side or storage resources in a single, secure web-connected platform. Peter Asmus, principal research analyst, Navigant Research, discussed the organization’s latest report about the growth opportunities the VPP market represents.
Navigant Research’s report predicts that the capacity of VPPs will quintuple by 2023. This rapid acceleration will be caused by a greater reliance upon distributed energy resources (DERs). DERs are energy resources that are deployed at the home or office, instead of coming from a power plant. A DER could be an alternative energy source, such as a solar panel. Without software that gives them visibility into DERs, utility companies have no control over them and cannot make money off of them.
“There are three kinds of VPPs,” Asmus explained. There are supply-side, demand-side and mixed asset. Supply-side VPPs, as the name suggests, control resources from energy suppliers. Asmus gave the example of Siemens. In Germany, that company is tying together renewable energy sources to provide constant power to the German people. Demand-side VPPs operate on the consumer side of the equation; they reduce energy consumption of certain devices and shift it to other devices during peak usage hours. Mixed asset VPPs control either supply or demand.
If the capacity of VPPs is set to quintuple in the next nine years, who stands to gain? Software companies, Asmus replied. “Software companies have to be aware of it,” he commented. “They have to recognize that this is happening. The growth of all of these technologies is forecasted to explode.” Asmus offered the example of solar power. Advances in technology have made solar power an inexpensive power source. However, it is only available when the sun is up or the sky is not overcast. In order to maximize the efficiency of energy from solar power, software must manage and control how it is stored and distributed.
Customers for VPP software are businesses, utility companies and aggregator firms, which negotiate for optimal energy prices for groups of customers. Asmus added that other companies are beginning to enter the energy market, such as cable providers. What criteria should these organizations be looking for when selecting software for a VPP? “The main thing is the ability to optimize both power generation and customer demand in near real time, and then be able to track all transactions to settle revenue allocations from the diverse participants in the VPP,” Asmus commented. Software providers seeking to enter the VPP market should provide cloud-based solutions that meet both vendor and customer needs in order to take advantage of the explosive growth potential this opportunity can bring them.