<aside> 💡 A Virtual Power Plant (VPP) is a network of decentralized, medium-scale power generating units as well as flexible power consumers and storage systems. The network is managed via software-based control system efficiently monitors, coordinates and controls the output of each connected power generating unit.

</aside>

What is the Objective of a Virtual Power Plant?

Depending on the particular market environment, VPPs can accomplish a whole range of tasks. In general, the objective is to network distributed energy resources such as wind farms, solar parks, and Combined Heat and Power (CHP) units, in order to monitor, forecast, optimize and trade their power. This way, fluctuations in the generation of renewables can be balanced by ramping up and down power generation and power consumption of controllable units.

But the VPP not only helps stabilizing the power grids. It also creates the preconditions for integrating renewable energies into the markets. Individual small plants can in general not provide balancing services or offer their flexibility on the power exchanges. This is because their generation profile varies too strongly or they simply do not meet the minimum bid size of the markets. By aggregating the power of several units, a VPP can deliver the same service and redundancy and subsequently trade on the same markets as large central power plants or industrial consumers.

In other words, a VPP is to a traditional power plant what a bunch of internet-connected desktop computers is to a mainframe computer. Both can perform complex computing tasks, but one makes use of the distributed IT infrastructure that’s already out there.

A key feature of VPPs is that they can aggregate flexible capacity to address peaks in electricity demand. In this respect, they can emulate or replace natural-gas-fired peakers and help address distribution network bottlenecks — but usually without the same capital outlay.

What’s the difference between a virtual power plant and a microgrid?

Microgrids (and minigrids) also often involve a mix of distributed renewables, storage, flexible demand and fossil-fuel plants. But there are important differences, as well:

• VPPs are integrated into the grid. Microgrids are often off-grid, and in an on-grid setting, they are designed to be islanded so they can carry on working independently if the grid goes down.
• VPPs can be assembled using assets connected to any part of the grid, whereas microgrids are usually restricted to a particular location, such as an island or a neighborhood.
• The two concepts use different systems for control and operation. VPPs are managed via aggregation software, offering functions meant to mimic those of a traditional power plant control room. Microgrids rely on additional hardware-based inverters and switches for islanding, on-site power flow and power quality management.
• Another difference concerns markets and regulation. VPPs are aimed at wholesale markets and do not usually require specific regulation. Microgrids, on the other hand, are more focused on end-user power supply.

How DER has sparked a need for the virtual power plant