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Webinars / Virtual Power Plant / VPP / Business Model

VPP Business Models

Tue., April 21 2020, 3:30 p.m. (UTC+2)

Virtual Power Plants aggregate distributed energy resources (DER) in almost all parts of the world. However, they take different forms depending on the market environment and addresses different challenges of the transitioning energy industry. The webinar presents different Business Models renewable energy companies can adopt and shows how the same technology fundamentals can deliver different value propositions for different types of assets and market actors.

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Business Model of a Power Aggregator
Energy Blog / Business Model / Flexibility / Virtual Power Plant / VPP

What’s the business model of a Virtual Power Plant (VPP)?

For a couple of years now, the role of the Virtual Power Plant has been established in the energy industry. Today, it is pretty clear what a Virtual Power Plant is and why it makes sense to network, forecast, optimize, and dispatch a fleet of coordinated distributed energy resources (DER) such as wind, solar, bioenergy, hydropower, batteries, electrolyzers, and many more. But how do you make money with a Virtual Power Plant? What’s the business case of a VPP operator, or to use a synonym, of an aggregator?

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Knowledge / Business Model / Decentralization / Knowledge / Virtual Power Plant / VPP

Virtual Power Plant

What is a Virtual Power Plant?Definition

In a Virtual Power Plant, decentralized units in a power network are linked and operated by a single, centralized control system. Those units can be either power producers (e.g. wind, biogas, solar, CHP, or hydro power plants), power storage units, power consumers or power-to-X plants (such as power-to-heat and power-to-gas). When integrated into a Virtual Power Plant, the power and flexibility of the aggregated assets can be traded collectively. Thus, even small units get access to the lucrative markets (like the market for balancing reserve) that they would not be able to enter individually. Any decentralized unit that consumes, stores, or produces electricity can become a part of a Virtual Power Plant. 

Additionally to operating every individual asset in the Virtual Power Plant, the central control system uses a special algorithm to adjust to balancing reserve commands from transmission system operators and to grid conditions – just as a larger, conventional power plant does. Furthermore, the Virtual Power Plant can react quickly and efficiently when it comes to trading electricity, thus adjusting plant operations according to price signals from the power exchanges.

The market changes, the powerplants have to follow: Global energy markets are facing major changes. We move from a model with centralized electricity generation in power plants operated by large utilities towards a mix of decentralized and often renewable energy production in small facilities. Those small scale plants are typically owned by small companies or households, who become ‘prosumers’: consumer and producer at the same time. 

We experience a true paradigm shift. The further penetration of renewable energy generation challenges the conventional way of operating our electricity system. Business models have to be reinvented and our grids redesigned. The variability of renewable sources like sun and wind do not necessarily endanger the system balance as long as they are dealt with appropriately. And that is exactly where a Virtual Power Plant (VPP) comes in.

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