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Virtual Power Plants could be the Catalyst for a Power Revolution

Virtual power plant technology has become increasingly well known in the energy sector; a system that integrates several types of power sources so as to give a reliable overall power supply. A virtual power plant acts as an arbitrageur by exercising arbitrage between diverse energy trading floors, and can potentially remove the need for additional actual power plants by making a whole energy system more efficient, especially in competitive power markets. In the UK a two-year-old virtual power plant start-up, Limejump, is making waves in the power sector with their unique business model. They’re the first utility to combine energy aggregation, trading and supply services to provide their customers with full energy market optimisation. “Our technology is positively disrupting the energy industry by decreasing reliance on fossil fuel power stations, increasing the uptake of renewable generation, lowering carbon emissions and empowering small scale generators and businesses to become active market participants and thereby decreasing their […]

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Virtual power plant technology has become increasingly well known in the energy sector; a system that integrates several types of power sources so as to give a reliable overall power supply.

A virtual power plant acts as an arbitrageur by exercising arbitrage between diverse energy trading floors, and can potentially remove the need for additional actual power plants by making a whole energy system more efficient, especially in competitive power markets.

Virtual Power Plants

In the UK a two-year-old virtual power plant start-up, Limejump, is making waves in the power sector with their unique business model. They’re the first utility to combine energy aggregation, trading and supply services to provide their customers with full energy market optimisation.

“Our technology is positively disrupting the energy industry by decreasing reliance on fossil fuel power stations, increasing the uptake of renewable generation, lowering carbon emissions and empowering small scale generators and businesses to become active market participants and thereby decreasing their energy costs and increasing their revenues” said Limejump co-founder Erik Nygard.

Limejump was fortunate to be backed by some respected technology investors in Europe and has an advisory board with experience in energy trading, mergers & acquisitions and technology. They also received £1.4 million from Venture Capital, Passion Capital, JamJar Investments and Angel CoFund, as well as from several private investors, kick-starting their journey into the power sector.

Nydard along with Ning Zhang, joint co-founders at Limejump, worked together at Centrica where they first identified this gap in the market for a new, hybrid energy utility that uses technology to deliver value to customers. “We also noticed companies like Uber and AirBnB were tackling excess capacity in their respective markets and realised these principles could be applied to the energy market”, said Nygard.

In the most recent report from Memoori ‘Smart Buildings Meet the Smart Grid’, which explores the Software to facilitate the interface between Smart Buildings and Smart Grids, it was suggested that “instead of viewing the connection with the grid as the power supply to the premises, owners of distributed generation systems combined with distributed energy storage are beginning to see the potential for trading electricity at a profit, depending on the size of their installed capacity”.

So is the UK energy sector primed for an “Uber style” revolution? Well, the UK energy system is facing two serious challenges; an ever-narrowing margin between supply and demand and an over-reliance on carbon intensive and costly fossil fuel power stations. It is widely accepted that in order to meet these challenges the network must develop flexibility. The most logical way to achieve this is to incorporate existing and upcoming small scale power generating assets, as well as energy storage to iron-out inefficiencies and optimise electricity flow through the use of software – or virtual power.

However, while saving on large-scale energy generation, this system will need to generate vast quantities of data, which creates a new set of challenges. Limejump has estimated that the UK energy system currently produces 1GB of data per day. By 2030, if the UK is to achieve the National Grid ‘Gone Green’ scenario, they’ve estimated as much as 270,000GB of data will need to be processed per day!

Such a staggering increase in “Big Data” handling will need a completely new way of thinking for utilities who are infamous for being slow to change – or, as Limejump would have us think, we need a wholly new type of utility.

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So perhaps this revolution is not just a good approach moving forward, but a necessary element for a power sector that has environmentally based targets to achieve. Such a change would not only be challenging from a technical standpoint but would also, as in most “revolutions”, potentially change the flow of money in the sector. The current power oligarchy would have to ‘Adapt or Die’ as start-ups like Limejump are ready to take up slack in the sector.

The global utility industry already spends billions of dollars annually on IT software for back office services, customer engagement and meter data management. “The software required for the Smart Grid to Smart building interface will account for a significant portion of utility smart grid software investment over the next 5 years. Total market revenues are expected to nearly double between 2015 and 2020 growing from $1.1Bn to $1.94 over the period. This represents a healthy compound annual growth rate (CAGR) of 12%”, explains ‘Smart Buildings Meet the Smart Grid', Memoori’s recent report, which explores market sizing forecasts for different regions of the world.

Currently, Limejump operate exclusively in the UK but their goal is to expand into Europe and the USA within the next 3 to 5 years. Other similar firms exist, and no doubt many more will follow the Limejump model, which in turn will stimulate the increase in small-scale renewable power generation, in addition to energy storage. All signs suggest virtual power plants can be the catalyst for change in power sectors seeking to be greener, more efficient and more profitable.

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