Objectives of Virtual Power Plant Development

Objectives of Virtual Power Plant Development

Based on cloud computing, the Internet of Things, and advanced ICT technologies, a virtual power plant (VPP) is an effective model for the integrated management of distributed energy resources. For distributed energy, a VPP can act either as an intermediary or as an aggregator. It can be applied on the customer side, including residential and commercial/industrial users, as well as on the generation side, including combined cooling, heating and power (CCHP), small wind farms, and small hydropower stations. Externally, a VPP can operate like a single generating facility or a controllable load, optimized from a remote site and issued with operating schedules; it can also function like a self-balancing cell, achieving internal energy balance through proper dispatch and management. Internally, a VPP can integrate a wide variety of autonomous resources into the grid through sophisticated planning, dispatch, and bidding. Unlike microgrids, which focus on local application as their control objective, VPPs provide greater flexibility to distributed generation resources. Because distributed energy resources are small in scale, large in number, and highly diverse in generation characteristics, it is difficult for them to participate directly in electricity trading. From both the perspective of secure and economical operation of the overall power system and the perspective of enabling distributed resources to participate in market transactions, a VPP is an effective solution.

For the development of the Energy Internet, a VPP is an intelligent network linking retail and wholesale markets. Its primary objective is to ensure grid balance at the lowest economic and environmental cost while helping distributed energy asset owners maximize profits. By leveraging the existing power grid, a VPP provides supply-and-demand services for users, utilities, and grid operators, helping end users (or asset owners) and distribution networks maximize value. Supported by an energy cloud (or cloud energy management system), a VPP enables plug-and-play integration of distributed energy resources and highly flexible energy trading and consumption. While creating greater value for users through lower costs and additional revenue streams, a VPP also brings benefits to distribution utilities by avoiding investment in grid infrastructure and peaking plants, and it can provide reserve services for transmission system operators.

As a terminal example of the energy cloud, the services provided by a VPP include regulation services, voltage management, demand response, emergency reserve, peak load management, and renewable energy smoothing.

The four key characteristics of a VPP are forecasting and optimization, distributed resource management, resource control and dispatch, and market interaction.

1. A market interface for dynamic bidding: providing market forecasts, bidding functions, and operational network information.

2. Assessment of market participation opportunities and network service demand.

3. Real-time measurement, verification, and evaluation of energy.

4. Support for network service interfaces.

With the help of asset optimization and forecasting technologies, a VPP granularly aggregates and controls flexible distributed resources and integrates them seamlessly into wholesale energy markets and other market platforms. Through transactive energy (TE) exchange, a VPP helps aggregators, utilities, electricity retailers, renewable energy developers, and others capture greater value and supports the intelligent development of the Energy Internet. A VPP aims to create greater value for asset owners and grid operators while strengthening cooperation between them. Because customer acquisition costs are relatively high, utilities are often more competitive than small suppliers in VPP development.

Its application trends include the following aspects:

1. Supporting the integration of all distributed assets, including energy storage, existing demand-side resources, and distributed generation, and allowing energy service providers to aggregate and optimize their participants through an integrated and unified automation platform.

2. Supporting the joint optimization of local resources, regional distributed resources, and ancillary services.

3. Supporting connectivity across multiple wholesale markets.

4. Using advanced big data analytics and machine learning technologies to provide reliable and highly optimized planning and dispatch solutions.

One of the ultimate goals of a VPP is to serve as a collaborative and shared network of resources through which energy service providers can extract greater value, improve investment returns, and reduce asset costs. VPPs are expected to develop in parallel with transactive energy, using advanced big data technologies to analyze massive datasets and create new business models. The value conveyed by a VPP lies in the intelligent management of diverse distributed energy resources. It is a decentralized and complex system of systems (SoS), in which multiple distributed autonomous systems combine to form a larger and more complex whole. Its constituent elements interact with, relate to, and depend on one another, creating a unified complex system. Considering the role of the VPP, under an integrated power system model, distribution companies can participate in the overall operation and dispatch of the power system. Under a competitive wholesale electricity market model, a VPP can act as a load aggregator, and when it reaches sufficient scale, it can also serve as an independent ancillary service provider. Under a competitive retail electricity market model, a VPP can participate in the retail electricity market as both a retailer and a load aggregator.

The energy industry is moving toward a more dynamic and rapidly changing future, in which self-consumption and micro-trading within distribution networks are gradually becoming the norm. As a leading model of transactive energy, a VPP provides users with high-quality electricity at reasonable prices, creating greater value for them while also delivering greater benefits to utilities in distribution networks and transmission operators.