Huglo team
October 4, 2021

What are virtual power plants?

What are virtual power plants?

The idea of a virtual power plant might sound a little strange. Because surely you need a physical power station in order to actually generate and supply electricity to real customers?

But by combining various renewable energy assets, storage systems, and some networked technological wizardry it’s possible to create a “virtual” power station that can efficiently supply electricity into the grid in the right quantities and at the right time.

The result is that virtual power plants provide system-wide benefits to asset owners, energy markets, and ultimately to end users.

What is a virtual power plant?

A virtual power plant is a series of separate renewable energy generators such as rooftop solar panels, wind farms, or hydropower that is linked together with load storage and control systems into a coordinated network. By combining these assets, it's possible to operate them as if they were one large generator like a traditional coal or gas fired power station even though each of the generating assets remains independently owned and operated.

The aim of creating a virtual power plant is to balance out electricity generation and usage loads by smartly distributing the power created by the various assets in the network. This maximises the amount of power that each asset can produce, enables the efficient trading of excess power on an energy exchange, and ensures a smooth supply of electricity that won’t overwhelm the transmission system.

How virtual power plants work

Each of the interconnected generation units are controlled by a central control system for the virtual plant. The central control system monitors real-time weather, electricity pricing, and operational data from each of the generators to maximise the utilisation of all the networked units.

The control system receives the operational data from the networked assets and feeds it into intelligent algorithms. It can then send control commands back out to each of the generators, storage systems, and any flexible power consumers to balance out power loads. The other benefit the central control system provides is that by tracking all consumption and supply data, it also generates precise forecasts so the entire system becomes more efficient over time.

In effect, a virtual power plant works in a similar way to a smart home controller that might link solar panels, home batteries, and power hungry devices like hot water systems and air conditioners. By monitoring real time electricity use, storage, and electricity prices, the amount of power used and stored can be optimised to lower overall power consumption, maximise the amount of renewable energy used, and decrease the overall cost of electricity usage.

What are the main benefits of a virtual power plant?

One of the challenges of supplying large amounts of renewable energy is that the generating assets tend to be much smaller than traditional power stations and in the case of wind and solar power, their output can be highly variable depending on the weather.

As more and more renewable assets are added, especially as more rooftop solar is installed, this can cause problems by sometimes generating too much electricity in the middle of a summer day and too little electricity at other times to meet the power demands of all users.

The effect of this is the overall electricity supply network can be impacted by high or fluctuating voltages, which makes the power system unstable. If this happens, some renewable assets essentially need to be switched off or the asset owners won’t receive income for power they feed into the grid. Over time, this provides a ceiling on the amount of renewable energy that can be installed in Australia.

Individual small generators like a single wind farm, generally cannot provide load balancing or offer much flexibility to benefit energy exchanges. Short term load balancing has traditionally been provided by natural gas powered peaking plants, which produce  greenhouse gases and are expensive to operate.

But with a virtual power plant, it can very accurately monitor, forecast, optimise, and allocate power generation and consumption to help balance the grid and make sure all power generators can be paid the highest rate possible for the power they supply.

Virtual power plants better enable overall energy production to meet demand. They can ramp power generation up or down precisely - right down to 15 minute windows and optimise the overall generation system so users get access to energy at the lowest price possible.

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