In our fast-changing world, virtual power plants will play a pivotal role in steering us toward more sustainable energy use. As societies worldwide struggle with pressing global issues like climate change and dwindling resources, the intricacies of energy production, distribution and balancing become even more important to understand.

Yet, diving into the world of energy isn’t easy. To grasp the concept and benefits of virtual power plants, we need to dig into the basics of the energy landscape. When that’s clear, it’s easier to understand and appreciate the smart solutions that virtual power plants offer companies looking to tackle today’s energy challenges.

 

Okay. Shall we start with the energy grid?

The energy grid is the backbone of our modern energy infrastructure, enabling the smooth transfer and distribution of electricity from sources to consumers. Traditionally, the grid operates on a centralized model, where large power plants produce electricity which is transmitted over long distances to meet consumers.

The rise of Distributed Energy Resources (DERs) such as solar panels, wind turbines, and battery storage is transforming the electrical grid from a centralized model to a more decentralized, flexible, and resilient system. 

This shift enables electricity to be generated closer to where it’s used, enhancing efficiency and reducing transmission losses. It also allows for greater integration of renewable energy, contributing to a more sustainable energy landscape. Furthermore, consumers are becoming ‘prosumers’ — both producers and consumers of electricity — gaining control over their energy use and costs, and even participating in the energy market. 

Within this complex system, energy flexibility stands out as a crucial element. Energy flexibility refers to the ability of the grid to adapt and respond to fluctuations in demand and supply, ensuring a balance between generation and consumption. This flexibility becomes even more essential as we integrate renewable energy into the grid, which is fairly unpredictable and requires support to keep the grid stable.

Understood. So what is the electricity flexibility market?

The energy market is where electricity is bought and sold among producers, resellers, and consumers. It operates on the principles of supply and demand, with prices fluctuating based on factors such as production costs, availability of resources, and consumption patterns. 

Within the energy market, is the lesser-known balancing market, sometimes referred to as the ancillary market. Unlike the traditional energy market, which primarily focuses on longer-term transactions (such as day-ahead and intraday trading), the ancillary market focuses on real-time energy balancing to manage discrepancies between supply and demand. Its main aim is to motivate market participants to offer flexible demand and enhance grid security by swiftly fixing any imbalances.

Any company that produces, stores or consumes energy can participate in the ancillary market which offers them higher revenue streams compared to conventional energy markets. For instance, in Finland, a 1MW battery park could potentially generate up to €220,000 annually by providing fast ancillary services to the grid operator.

Key terms

  • Ancillary Market: providing real-time balancing services to maintain grid stability and address imbalances in supply and demand and stabilise the frequency
  • Balancing Market: The same as the Ancillary market
  • Flexibility Market: The same as the Balancing Market

Got it. What is a Virtual Power Plant?

A Virtual Power Plant (VPP) is exactly that: a cloud-based software that acts as a more sophisticated version of a traditional power plant.

The main role of a VPP is to aggregate multiple Distributed Energy Resources (like, solar parks, small-scale generators or different electrical consumption units with smart thermostats) and manage them as a unified and flexible resource on the ancillary market.

A VPP leads the integration, management, and dispatch of these diverse energy assets to enhance grid stability and efficiency. Virtual Power Plants usually combines smaller assets into a bigger one and offer their flexibility to the ancillary market as a single unit. For example, if you have more than 100 households with rooftop solar panels, VPP software would manage them collectively as a single unit.

Importantly, VPPs also act as a path into the balancing market for asset owners.

How does a Virtual Power Plant work?

The operation of a cloud-based VPP like Fusebox’s, begins by connecting various energy sources to our central platform. This can be done in several ways, like creating an API connection with newer devices or connecting older equipment through our dedicated controller. 

Once connected the assets can be monitored and controlled through Fusebox’s VPP platform based on the criteria the asset owner sets. For example, if you have a 1 MW PV park but your connection point only allows 800 kW then you can update your output to suit these restrictions. There are plenty of different automation filters to choose from allowing every asset owner to find their fit. 

Our software is then integrated with the local energy grid operator (Transmission System Operator or TSO) to gain entry into the ancillary market. This integration is crucial for receiving balancing signals from the grid, dispatching flexibility back to it and later reporting. Before starting operations, all electrical assets must be prequalified to access the ancillary market, following strict criteria set by TSOs. Once this is done, the software automates all operations, making system management and operation easier.

Our platform uses advanced algorithms to monitor real-time energy consumption, considering factors like market prices and weather forecasts. By analysing these factors, the Fusebox VPP creates strategies to maximize efficiency and reliability.

Who can benefit from a Virtual Power Plant?

Numerous stakeholders across the energy market can benefit from a Virtual Power Plant (VPP). At Fusebox, the main types of business we support include:

  • Utility Companies: For utility companies, a VPP can help them achieve 4 key things:
    • Generate new income by offering services to the Transmission System Operator (TSO)
    • Balance their energy production and consumption better
    • Incorporate more renewable energy sources into their operations.
    • Provide innovative flexibility services to their clients, leveraging demand-side resources effectively.
  • Asset Aggregators: Companies that focus on combining and improving distributed energy resources (DERs) are called asset aggregators. They gather different assets like renewable energy setups and storage systems to create a unified portfolio. Using Fusebox’s VPP technology, these companies can become energy traders by gaining access to the ancillary markets and offering grid services.
  • Original Equipment Manufacturers: OEMs design, manufacture, and supply essential electrical assets such as solar panels, energy storage systems, etc. These assets must meet market regulations, including response times and bidirectional capability, to access ancillary markets. Remote control is vital for market balancing. Fusebox and our OEM partners simplify this by adapting assets like energy storage and heating systems for demand response. Integrating with Fusebox’s software ensures smooth operation, helping OEMs assist clients in accessing ancillary markets for extra revenue and enhancing competitiveness.
  • Energy Storage System Owners: Owners of Battery Energy Storage Systems (BESS) can maximize their investment returns by participating in VPPs. By providing grid services such as frequency regulation, voltage support, and capacity reserves, BESS owners can generate additional revenue streams through market participation and ancillary service provision.

Right, and how can utility companies benefit from Fusebox’s VPP?

Power utility companies are facing the tough task of needing to balance consumption and production from scattered resources and intermittent renewables. Fusebox’s VPP solution addresses a number of the pressing challenges utility companies are facing when it comes to energy production, management, and distribution.

Here are three ways Fusebox can focus its service to address the challenges at play:

  • Creating revenue streams through the provision of ancillary services to TSO

Fusebox allows energy companies to develop highly profitable revenue streams by providing ancillary services to TSO. The fully automated platform takes care of everything automatically, from setting prices and placing bids to managing operations and creating reports. It’s a complete solution for companies eager to find new ways to earn revenue and explore more market opportunities.

Key terms: Transmission System Operators (TSO): The companies responsible for transporting electrical power on a national or regional level and keeping the grid balanced.

  • Reducing the imbalance in a power utility’s production and consumption portfolio

Fusebox can help to reduce the imbalance in a power utility’s production and consumption portfolio by helping to manage unpredictable assets. The imbalance often comes from assets like prosumers, whose production and consumption are difficult to predict.

Key Term: A “prosumer” in the energy sector is someone or a group that both produces and uses energy. This includes creating electricity, usually from renewable sources, to meet personal or organizational energy requirements.]

  • Customer growth and retention

Utility companies can offer new services to their customers through Fusebox, such as generating additional income through energy arbitrage. The VPP system allows for the activation of energy arbitrage scheduling based on prices, with revenue sharing for asset owners. This can be done in two ways:

  1. Using the available assets that the utility owns, meaning they will get all the earnings.
  2. By offering the same service to their end customers, the owner of the asset will get either the total or a share of the earnings.

Most of the flexibility services can be offered to the end consumer. The result? Maximized earnings and happy customers.

Key term: Energy arbitrage: Buying electricity or energy when prices are low and storing it for use or selling it back to the grid when prices are high.

Can you give me an example?

After grasping the concept of a Virtual Power Plant, it helps to delve into real-life applications of the software.

Explore how Fusebox’s innovative approach has enabled utility companies to amplify revenue streams and foster business growth by integrating a Virtual Power Plant from our business cases below.

Check out more of what Fusebox’s VPP platform can do – just click here.

Let’s Summarise

Virtual Power Plants offer energy and utility companies a transformative way to tackle today’s energy challenges. By combining different energy sources and improving grid operations, VPP systems give these companies the tools to create a more sustainable future. As we navigate this energy shift, embracing Virtual Power Plants boosts efficiency, reliability, and sustainability, playing a vital role in creating a greener energy landscape for all.