3. What market conditions are there in your country?
The market structure of the respective country or region provides the framework for determining which business cases are viable at all. In many countries, the electricity market is still not liberalized, what means that all activities in electricity generation, transmission and supply lays in the hands of one company. Therefore, no independent power producer or aggregation services can be created. Some markets, although liberalized, are managed by vertically integrated utilities that control electricity generation, grid operation, and supply, but allow activity of independent power producers and are interested in satisfying their end customers. They are interested in harnessing flexibility from different decentralized energy resources to avoid bottlenecks in the grid infrastructure they manage as well as to have precise information and control over electricity consumption and generation of their residential customers. Flexibility on the side of the consumer - for example in the form of demand response or peak shaving - is often a sought-after commodity. Especially when grids are older and a warm climate prevails, postponing or suspending consumption processes in the event of power shortages can effectively relieve the grid. In this case, transmission or distribution network operators would be potential buyers of the flexibility that a Virtual Power Plant can provide and manage.
And there are further perspectives: After all, renewable energies are also gaining ground in countries where liberalized markets do not yet exist - and the need to monitor the production of these systems is therefore growing. As the expansion of renewable energies continues, new ideas for their efficient use automatically emerge - and with them the need to bundle them in a Virtual Power Plant. Unfortunately, the existence of potential business cases does not automatically mean that the regulatory framework allows them. Checking this is vital when implementing a VPP solution.
In liberalized and unbundled energy systems, the market design is usually already highly differentiated. A good example is our home market in Germany, where there is not only a state subsidy system for renewables, but also short-term power exchanges and a balancing energy market. In this market design, all functions of a VPP solution - aggregation, monitoring and control - can be fully exploited, thus generating financial benefits both for the plant operator and the operator of the Virtual Power Plant.
4. Is there a win-win situation for the plant operator as well as the aggregator?
If the VPP operator wants to aggregate not only own power plants, but also units owned by third parties, he has to generate enough revenue for all involved actors to benefit. In Germany, for example, owners of renewable power plants receive a bonus if they integrate their plants into the market, usually through an aggregator or any other representative (in Germany called direct marketer). Their revenues can increase even further if their direct marketer is able to sell their flexibility in other markets, for example more lucrative market for balancing services. For each delivery of control energy the grid operator rewards the VPP operator who shares the profit with the owner or the technical units. As a result, the VPP operator and the owners of assets connected to VPP capitalize on supporting energy transition by protecting the grid against the fluctuations associated with volatile energy sources.
Looking at the costs, the VPP operator has expenses for market access and trading fees, personnel, marketing expenses, and short- and long-term price risks, to name a few. To cover these, a profit-sharing model between the operator and participants of the Virtual Power Plant is an option – another one would be a fixed marketing fee that comes with a more easily calculable income. The amount of this fee depends on the profitability of the system: In addition to plant size and type (flexible/volatile), the plant location is also relevant in the case of power exchange marketing. If, for example, a wind farm is located at a site where there are other numerous wind farms, it will generate less revenue on the markets. This is because its feed-in correlates in this case with the total wind feed-in of the market area - which leads to lower prices on the energy exchange.
5. How are the plants connected to the control system of the Virtual Power Plant?
It is worthwhile to first look at the plants to be networked. In some cases, these plants may already have protocol interfaces that enable a connection to the control system. Our VPP solution NEMOCS supports standard interfaces such as OPCDA, Modbus, Profibus, and IEC 104 and is therefore open to many different technologies. The data exchange with other systems on the side of the VPP operator - such as SAP databases, trading platforms or accounting systems - takes place via an API.
In most cases known to us, this setup is sufficient to establish a remote control for basic use cases, for example to align the networked systems to the price developments on the power exchanges. If the plant does not yet have its own plant control system to connect via an interface to the VPP control system, or if the provision of system services to the network operator is part of the use case, a separate remote terminal unit (RTU) must be installed. For this purpose, we use the Next Box, with which we establish a bidirectional, digital interface connection of the plant to our Virtual Power Plant. It enables us to control the production of the generation plants - or consumption processes on the part of larger electricity consumers - centrally, precisely and to the highest safety standards via M2M communication.
6. How does the country's grid code work?
Each country has specific grid requirements or guidelines for the operation of the grid (grid codes), which generation plants must meet (and provide a proof for it) in order to gain access to the grid. These include, for example, the required voltage that is to be maintained, mitigation plan in case a plant fails to perform, or the communication interfaces through which the grid operator can access the unit. In addition, the grid code defines the requirements necessary to provide system services. Plants in Germany, for example, must undergo a test procedure, known as prequalification, in order participate in the control energy market.
7. Which IT security guidelines apply?
Energy supply is part of a country's critical infrastructure - in the event of disruptions, the security of supply may be at risk. Therefore, most countries have strict regulations for companies operating in these critical infrastructures. In the case of digital solutions, IT security in particular comes into focus. Because if one central control system networks and controls a large number of decentralized plants, it is crucial that this structure is as safe as possible from cyber-attacks. Accordingly, before a Virtual Power Plant goes online, the required measures and certifications need checking. In Germany, TÜV Rheinland checks that the VPP meets the required standards. Our Virtual Power Plant and the VPP solution NEMOCS are certified according to ISO/IEC 27001 and ISO/IEC TR 27019.