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Virtual Power Plants and the Role of Regulation
Introduction to Virtual Power Plants
Definitions
Distributed Energy Resources (DER) – small and medium-sized power resources that are connected to the distribution network.
They include:[1]
- distributed generation (such as solar panels and other variable renewable resources, but also non-renewable generation such as diesel generators)
- energy storage (such as small scale batteries, hot water systems or electric vehicle batteries)
- technology enabling demand response, such as smart thermostats, appliances or electric vehicle supply equipment
DERs are usually “behind the meter”. This means that many DERs are not visible to distribution grid operators and are not separately metered. However, larger DERs can be distribution connected and sub-metering of DERs may exist behind the meter. To work within a VPP, the DER must have a certain possibility to be remotely controlled.[1]
Consumer Energy Resources (CER) – distributed energy resources owned by the consumer.[2]
Aggregators – new market players who bundle DERs to engage as a single entity (a virtual power plant) in power or service markets.[3] They can optimise the use of DERs. Aggregators can then sell electricity or ancillary services via an electricity exchange, in the wholesale market, or through procurement by the system operator.[4]
Aggregators use a centralised IT system to remotely control the DERs and optimise their operation. They can provide:
- Load shifting
- Balancing services to TSOs
- Local flexibility to DSOs
Virtual Power Plant (VPP) - VPPs aggregate dispersed DERs/CERs to enable these small energy sources to support the grid.[4] VPP behave similar to a traditional power plant, with standard attributes, including minimum and maximum capacity, and ramp up and ramp down capabilities.[1]
A central IT system controls the VPP, processing data like weather forecasts, electricity prices, and power trends to optimize dispatchable DER operations.[4]
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.[4]
Benefits of VPP
Benefits For Decarbonisation
VPPs can combine renewable generation, like solar, and energy storage to address the variability of renewable resources. By grouping different DERs and operating them as a VPP, this variability is managed more effectively. Aggregating DERs and enabling market participation can boost their return on investment and speed up deployment. If they reduce fossil fuel use, VPPs can help accelerate decarbonisation.[1]
References
- ↑ 1.0 1.1 1.2 1.3 RETA (2024), Virtual Power Plants: an Introductory Guide for Energy Regulators.
- ↑ Integrate to Zero (I2Z), Blunomy (2025): Virtual Power Plant (VPP) Readiness Index.
- ↑ The term “aggregators” is often used synonymously with VPP.
- ↑ 4.0 4.1 4.2 4.3 IRENA (2019), Innovation landscape brief: Aggregators.
