Understanding the value of virtual power plants as grid resources

Balancing supply and demand is critical to maintain a reliable and robust electricity grid. Virtual Power Plants (VPPs) offer an alternative solution to traditional approaches, allowing local grid operators to use energy flexibility to ensure a more stable electricity supply.

The industry is focusing more on renewable forms of energy, including drawing on the energy in distributed energy resources (DER). VPPs are attracting more attention for this reason. Drawing on the capacities of these energy sources, from wind turbines and solar PVs to battery storage and even electric vehicles, the cost of implementing VPPs can be much lower when compared to traditional power sources but offer all the potential for enhanced grid reliability and efficiency. 

This provides better value for customers but also offers huge benefits to DER installers (such as solar panels), grid operators and utilities. 

Managed by grid operators or third-party aggregators, these energy resources can be monitored, forecasted, and optimised with bi-directional communications between components for a more efficient and resilient power grid. 

The good news is that according to industry reports, the VPP market is predicted to grow from $5.6 billion last year to $39.5 billion by 2035.  This growth is already evident in the growing capabilities of VPPs as grid resources.  

This is something that we are already seeing as a global alliance representing many utilities, device manufacturers, and renewables and EV charging infrastructure solutions members. It's clear that those entering or considering the VPP market are already focusing on the use of advanced technologies and open standards, helping to drive growth. 

Next generation

While first-generation implementations of VPPs have focused on rooftop solar and storage, we're now seeing more cross-DER integration, with VPPs aggregating a much wider range of energy resources than ever before. 

Much of this is being driven by companies innovating and developing technologies for solar system integration and AI-based predictive load balancing. While EV charging providers are also teaming up with – or being acquired by – rooftop solar aggregators and smart energy ecosystem providers

This further expands the definition of a VPP to include EV charging alongside other DER, the fast-growing Battery Energy Storage Systems (BESS) market and grid-connected residential heating and ventilation (HVAC).

In partnership

Partnerships will be key to this continued growth. Utilities and energy providers need to collaborate with others including technology companies, manufacturers, and platform and solutions providers to turn commercial and residential building, as well as communities into virtual power plants. Governments in turn need to facilitate change through regulation and legislation to realise the full potential for VPPs, which will help change the way we use and optimise energy. 

In action

We are already VPPs progams in action that offer value to both utilities and customers.

In the US, for example, in the wake of the compensation rule changes for Community Choice Aggregators (CCA) in California in 2023, a reorganisation of the VPP provider market is taking shape. A new VPP project funded by the Department of Energy is using its status as a CCA to demonstrate how they can use VPPs to create opportunities and value for the buildings they serve, while enhancing grid reliability. 

In terms of our membership, VPP companies are among the fastest growing segments to join. To see the evolution of VPPs is exciting as they transform from simple concepts for aggregating small-scale decentralised energy resources into something much bigger. The scope of resources will continue to develop - particularly in growth areas like intelligent building automation and building energy management systems, while the integration of AI, machine learning and advanced cloud-based platforms will further expand what constitutes a VPP.  

The virtual power plant market is definitely one to watch.

Rolf Bienert is Managing & Technical Director of the OpenADR Alliance, overseeing all aspects of the organisation, including strategy, technical development, and certification