Virtual Power Plants and the Role of Regulation - Revision history

Lisafeldmann at 09:45, 30 October 2025

2025-10-30T09:45:51Z

Lisafeldmann at 09:03, 2 April 2025

2025-04-02T09:03:49Z

Lisafeldmann: /* Next steps */

2025-03-31T09:38:20Z

Next steps

Lisafeldmann: /* What steps did the regulator take to enable VPPs and DER integration? */

2025-03-31T09:01:56Z

What steps did the regulator take to enable VPPs and DER integration?

Lisafeldmann: /* What steps did the regulator take to enable VPPs and DER integration? */

2025-03-31T07:44:14Z

What steps did the regulator take to enable VPPs and DER integration?

Lisafeldmann at 13:36, 26 March 2025

2025-03-26T13:36:30Z

Lisafeldmann at 13:28, 26 March 2025

2025-03-26T13:28:42Z

Lisafeldmann at 13:28, 26 March 2025

2025-03-26T13:28:19Z

Lisafeldmann at 13:25, 26 March 2025

2025-03-26T13:25:35Z

Lisafeldmann at 13:19, 26 March 2025

2025-03-26T13:19:02Z

← Older revision		Revision as of 09:45, 30 October 2025
Line 259:		Line 259:
	[[Category:Regulation]]		[[Category:Regulation]]
	[[Category:Western Balkans]]		[[Category:Western Balkans]]
		+	[[Category:Grid]]
		+	[[Category:Electricity]]

← Older revision		Revision as of 09:03, 2 April 2025
Line 191:		Line 191:

	A Digital Asset Register is under development to provide a comprehensive overview of distributed assets, which will help in coordination across various flexibility platforms. A consultation process took place from July to September 2024. Following this, decision was made in March 2025 that the Market Facilitator Elexon should also take on the role of Flexibility Market Asset Registration delivery body, responsible for the deployment, and operation of the new digital infrastructure. It will now develop the design of the digital infrastructure further. The register is expected to be launched between mid 2026 and mid 2027.<ref>Ofgem, 2025, [https://www.ofgem.gov.uk/sites/default/files/2025-03/Flexibility-Market-Asset-Registration-Decision.pdf Flexibility Market Asset Registration Decision]. </ref>		A Digital Asset Register is under development to provide a comprehensive overview of distributed assets, which will help in coordination across various flexibility platforms. A consultation process took place from July to September 2024. Following this, decision was made in March 2025 that the Market Facilitator Elexon should also take on the role of Flexibility Market Asset Registration delivery body, responsible for the deployment, and operation of the new digital infrastructure. It will now develop the design of the digital infrastructure further. The register is expected to be launched between mid 2026 and mid 2027.<ref>Ofgem, 2025, [https://www.ofgem.gov.uk/sites/default/files/2025-03/Flexibility-Market-Asset-Registration-Decision.pdf Flexibility Market Asset Registration Decision]. </ref>
−
−	~~==== Next steps ====~~
−	The Market-Wide Half-Hourly Settlement (MHHS) programme, to be fully implemented by the end of 2026, will see suppliers being charged based on close to real-time consumption of their domestic and small business customers (rather than a nominal profile), further incentivising the adoption of time-of-use tariffs and dynamic tariffs. This is expected to increase demand for flexibility services like VPPs.
−
−	Ofgem is exploring additional improvements to support VPP integration and to streamline rules across different markets (for example through creating a new Flexibility Market Facilitator role) to promote further flexibility and reduce barriers to flexibility including through lowering barriers to entry for VPPs.
−
−	The regulator is currently working closely with the government on a new regulatory system for ‘load control’. This system will include new standards for smart devices set by the government. Ofgem will be responsible for a new licensing system for companies that can remotely control electrical loads, such as VPPs, to ensure cyber security, grid stability and consumer protection.
−
−	~~A Digital Asset Register is under development to provide a comprehensive overview of distributed assets, which will help in coordination across various flexibility platforms.~~

	==== Challenges faced by the regulator ====		==== Challenges faced by the regulator ====

← Older revision		Revision as of 09:38, 31 March 2025
Line 182:		Line 182:

	Flexibility first principle: encourages DSOs to resolve network constraints using flexibility services, including VPPs, rather than expensive infrastructure expansions, where this is economically advantageous.		Flexibility first principle: encourages DSOs to resolve network constraints using flexibility services, including VPPs, rather than expensive infrastructure expansions, where this is economically advantageous.
		+
		+	==== Next steps ====
		+	The Market-Wide Half-Hourly Settlement (MHHS) programme, to be fully implemented by the end of 2026, will see suppliers being charged based on close to real-time consumption of their domestic and small business customers (rather than a nominal profile), further incentivising the adoption of time-of-use tariffs and dynamic tariffs. This is expected to increase demand for flexibility services like VPPs.
		+
		+	Ofgem is exploring additional improvements to support VPP integration and to streamline rules across different markets (for example through creating a new Flexibility Market Facilitator role) to promote further flexibility and reduce barriers to flexibility including through lowering barriers to entry for VPPs.
		+
		+	The regulator is currently working closely with the government on a new regulatory system for ‘load control’. This system will include new standards for smart devices set by the government. Ofgem will be responsible for a new licensing system for companies that can remotely control electrical loads, such as VPPs, to ensure cyber security, grid stability and consumer protection.
		+
		+	A Digital Asset Register is under development to provide a comprehensive overview of distributed assets, which will help in coordination across various flexibility platforms. A consultation process took place from July to September 2024. Following this, decision was made in March 2025 that the Market Facilitator Elexon should also take on the role of Flexibility Market Asset Registration delivery body, responsible for the deployment, and operation of the new digital infrastructure. It will now develop the design of the digital infrastructure further. The register is expected to be launched between mid 2026 and mid 2027.<ref>Ofgem, 2025, [https://www.ofgem.gov.uk/sites/default/files/2025-03/Flexibility-Market-Asset-Registration-Decision.pdf Flexibility Market Asset Registration Decision]. </ref>

	==== Next steps ====		==== Next steps ====

@@ Line 179: / Line 179: @@
 In 2019, Ofgem approved a code modification ([https://www.neso.energy/industry-information/codes/cusc/modifications/cmp295-contractual-arrangements-virtual-lead-parties-project-terre CMP295: Contractual Arrangements for Virtual Lead Parties]), which provided access for independent aggregators to participate in the energy market and balancing mechanism. The modification was mainly driven by a European Union directive. The modification defined Virtual Lead Parties (VLPs) as market participants and created a new bilateral agreement between the Electricity System Operator (ESO) and the Virtual Lead Parties (VLPs), to become CUSC (Connection and Use of System Code) parties. The agreement reflects the unique nature of the relationship between VLPs and generation units.
-Another modification, approved by Ofgem in 2023, allowed aggregators to access the wholesale market as “virtual trading partners.”
+Another modification, approved by Ofgem in 2023 ([https://www.ofgem.gov.uk/decision/ofgem-decision-p415-facilitating-access-wholesale-markets-flexibility-dispatched-vlps Balancing and Settlement Code (BSC) P415: Facilitating Access to Wholesale Markets for Flexibility Dispatched by VLPs]), allows aggregators to access the wholesale market as 'virtual trading partners'. It also includes the introduction of compensation arrangements to take account of the impact that VLP actions may have on the market. The modification allows VLPs to trade Deviation Volumes on wholesale electricity markets on behalf of consumers.<ref>Deviation Volumes represent the difference between what is forecast to be consumed or generated and what was actually consumed or generated.</ref> However, a supplier will face financial consequences if a VLP reduces consumer demand, as the supplier will have purchased energy based on the consumer’s expected usage, without considering any VLP intervention. Consequently, the supplier cannot sell the energy it has already bought, since the consumer is no longer consuming it. Ofgem thus decided that suppliers who have been commercially affected as a result of VLP action will be compensated. The cost of compensation will be shared between the suppliers. Ofgem expects this modification to increase levels of flexibility in both the balancing and wholesale markets. They also expect the changes to promote greater levels of competition in the market.<ref>Ofgem, 2023, [https://www.ofgem.gov.uk/sites/default/files/2023-10/Ofgem%20decision%20P415%20%27Facilitating%20Access%20to%20Wholesale%20Markets%20for%20Flexibility%20Dispatched%20by%20VLPs_0.pdf Balancing and Settlement Code (BSC) P415: Facilitating access to wholesale markets for flexibility dispatched by Virtual Lead Parties (P415)]. </ref>
 Flexibility first principle: encourages DSOs to resolve network constraints using flexibility services, including VPPs, rather than expensive infrastructure expansions, where this is economically advantageous.

@@ Line 171: / Line 171: @@
 === Ofgem, Great Britain ===
-This case study was published by RETA (2024), Virtual Power Plants: An Introductory Guide for Energy Regulators.<ref name=":0" />
+This case study was published by RETA (2024), Virtual Power Plants: An Introductory Guide for Energy Regulators <ref name=":0" />. A few more details have been added, links are provided.
 ==== Introduction ====
@@ Line 177: / Line 177: @@
 ==== What steps did the regulator take to enable VPPs and DER integration? ====
-In 2019, Ofgem approved a code modification, which provided access for independent aggregators to participate in the energy market and balancing mechanism. A modification mainly driven by a European Union directive.
+In 2019, Ofgem approved a code modification ([https://www.neso.energy/industry-information/codes/cusc/modifications/cmp295-contractual-arrangements-virtual-lead-parties-project-terre CMP295: Contractual Arrangements for Virtual Lead Parties]), which provided access for independent aggregators to participate in the energy market and balancing mechanism. The modification was mainly driven by a European Union directive. The modification defined Virtual Lead Parties (VLPs) as market participants and created a new bilateral agreement between the Electricity System Operator (ESO) and the Virtual Lead Parties (VLPs), to become CUSC (Connection and Use of System Code) parties. The agreement reflects the unique nature of the relationship between VLPs and generation units.
 Another modification, approved by Ofgem in 2023, allowed aggregators to access the wholesale market as “virtual trading partners.”
 Flexibility first principle: encourages DSOs to resolve network constraints using flexibility services, including VPPs, rather than expensive infrastructure expansions, where this is economically advantageous.

← Older revision		Revision as of 13:36, 26 March 2025
Line 258:		Line 258:
	[[Category:Virtual Power Plants]]		[[Category:Virtual Power Plants]]
	[[Category:Regulation]]		[[Category:Regulation]]
		+	[[Category:Western Balkans]]

@@ Line 232: / Line 232: @@
 [[File:Supportive regulator actions for VPP integration.png|550x550px]]
 == Further Information ==
 Please find here a list of literature and links on VPPs, both on regulatory issues and on VPPs in general.

@@ Line 26: / Line 26: @@
 VPPs offer both demand-side flexibility by aggregating demand-response and storage resources to act to grid requirements. Supply-side flexibility is provided by optimizing power generation from flexible resources like combined heat and power (CHP) plants, biogas plants, and using storage units. Operation optimization is based on historical and forecasted data on demand, generation, and prices.<ref name=":1" />
@@ Line 49: / Line 52: @@
 === Benefits to Utilities ===
 Setting up and running a VPP is a cost-effective way to build capacity compared to large-scale renewable generation and storage. In some markets, individual DERs may not meet minimum bid size requirements, so aggregating them through a VPP makes them more attractive for investment.<ref name=":0" />
 == Challenges and Barriers ==

@@ Line 99: / Line 99: @@
 * Defining rules for coordination between distribution and transmission system operators / DSOs and TSOs.
 == Regulatory Options to Support VPP – Detailed List ==
@@ Line 221: / Line 222: @@
 Consumer protection in the context of relationships between retailers, distributors and consumers with CER. There are various pieces of work examining consumer protection. The aim is to update the consumer protection framework to ensure that consumers can benefit from this type of innovation while being protected from negative impacts.
 === Case Studies from the US ===