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Supply and demand resources can work together rather than against each other in the modern energy system. New technologies and greater intelligence are redefining the supply – demand relationship; increasing efficiency, enabling distributed generation and reducing overall consumption. At the forefront of this evolution is the Virtual Power Plant (VPP).

VPPs take advantage of information and communication technologies (ICT) to bring together multiple forms of distributed electricity generation, typically small-scale renewables. VPPs also utilize artificial intelligence to take greater control over demand, by continuously re-prioritizing and re-scheduling demand activities to optimize the overall system. These dynamic systems are providing benefits to all stakeholders, from the utility to the end user, and represent a new era for energy.

“Virtual power plants represent an ‘Internet of Energy’” said research analyst Peter Asmus back in 2011. “These systems tap existing grid networks to tailor electricity supply and demand services for a customer. VPPs maximize value for both the end user and the distribution utility using a sophisticated set of software-based systems. They are dynamic, deliver value in real time, and can react quickly to changing customer load conditions.”

By bringing supply and demand together under one intelligent system we are able to optimize load to such an extent that we can do without additional, or even current, power stations. We have been hearing about the potential of VPPs for many years, we have seen a variety of trials, but now we are finally seeing substantial projects take shape – representing a turning point for the technology and for our modern power system.

In California, energy storage pioneer Stem, has created grid response systems for many high-profile businesses and their buildings, such as the InterContinental hotel chain and Whole Foods.

It has had notable success helping companies in San Francisco and Los Angeles — cities where it’s challenging to construct new generating capacity due to space constraints, fossil fuels restrictions or air quality concerns — manage their power system more effectively.

“Businesses and utilities each face the burdens of high energy costs, but what they’ve lacked is a practical, mutually-beneficial solution to address these challenges,” said Stem CEO John Carrington in a statement. Stem was able to make this possible by participating in the California independent system operator market (ISO).

Regulators will play a significant role in making VPPs a common reality. A fair framework must be drawn up to allow for the establishment and operation of these dynamic new systems. Such frameworks should account for distributed generation and storage, as well as demand monitoring and response, in order to truly encourage the development of VPPs. Unsurprisingly, California has been a pioneering force in this regard.

On the other side of the continent, New York’s energy sector refuses to be left behind. ConEd’s $15 million residential projects in Brooklyn and Queens make up the largest VPP initiative in the United States. The program combines 1.8 megawatts in leased solar generating resources, from SunPower, and an equivalent capacity of batteries, from Sunverge. They hope to rely on this community of resources for excess capacity during peak usage periods in the densely populated metropolis.

Energy storage is by no means a prerequisite to the creation of a VPP, but can greatly enhance the flexibility, as well as the underlying value, of generation and load assets. Energy storage adds flexibility by increasing the speed of response time when shifting load up or down. Rather than simply providing a buffer to optimize distributed energy, storage can become a critical component of service delivery by providing bulk storage and load leveling services, for example, in order to reduce transmission and distribution losses.

In Adelaide, Australia, meanwhile, Sunverge is also involved in what could become an even larger project – in collaboration with Australian energy company AGL and the federal government’s renewable energy agency. The VPP will use cloud software to orchestrate rooftop solar and store energy resources, so that they can be considered as a whole and in relation to demand.

Sunverge co-founder and CEO Ken Munson expects such projects will become even more common over the next five years. “By helping to build a stronger, more efficient and more reliable grid, VPPs deliver tremendous value to utilities, their customers and the environment,” he said when the project was launched last August.

Our energy future is distributed, efficient and intelligent, this is epitomized by the Virtual Power Plant. The success of these and other projects mark a turning point for our energy system, redefining the supply – demand relationship, and we should expect to see many more VPPs in the coming years.

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