The paper discusses the emerging technology that is Virtual Power Plants (VPPs) as a means for smart Power Management solutions. It discusses the features and functionalities of VPPs and the current projects being implemented.
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Virtual Power Plants: Decentralized and Efficient Power Distribution
1. Virtual Power Plants: Decentralized and Efficient
Power Distribution
Akshay Mahajan, Katarina Labuguen, Khalid Qureshi, Shafkat Chowdhury, Vincent Yeh
Department of Electrical and Computer Engineering
University of California, San Diego
La Jolla, CA, USA
a1mahaja@ucsd.edu, klabuguen@ieee.org, kmquresh@ucsd.edu, s6chowdh@ucsd.edu, vkyeh@ucsd.edu
Abstract—Virtual power plants (VPPs) may be used to integrate
distributed generation (DG) units into one unified solution for
decentralized power generation. As the penetration of DG increases
globally, the VPP becomes an essential control and distribution
system for the future. However, using this system gives rise to a
number of issues within the topic of security, and may possibly leave
the grid open to cyber attacks. This is due to VPP’s dependence on
Web-connected software and internet of things (IoT) technologies.
Other main concerns include cost efficiency, resource management,
as well as system integration and control.
Index Terms -- Virtual power plants, Decentralized power
distribution, Optimal energy management, Distributed control,
Cyber security, Smart grids
I. INTRODUCTION
Soaring energy prices and inefficient power flow issues have
pushed the electrical power industry to take innovative steps to
tackle these issues. Virtual power plants (VPPs) are a relatively
new and innovative approach to improving the inefficient
distribution and generation of energy resources and redefines the
energy flow topology in the existing market. This paper will
discuss the definition of a VPP, possible uses for them, as well
as how they can improve central grid resilience. In addition, this
paper will discuss the energy crisis in Australia and how VPPs
may be utilized to strengthen its power grid. Although VPPs are
an efficient means to accomplish generation and distribution of
energy resources, the network structure of a VPP leaves it prone
to cyber security issues and the possible fall-outs of the
implementation of a VPP. They also face challenges such as
competition with other large utility companies and integration
problems, particularly with software. Despite these challenges,
VPPs are already being implemented by technology providers
and grid operators across the globe, providing tangible benefits to
all parties involved.
II. WHAT IS A VIRTUAL POWER PLANT (VPP)?
A virtual power plant uses software and internet of things
(IoT) technologies with distributed generators to create one
decentralized power station, providing robustness and efficiency.
This means a VPP is essentially a group of geographically
dispersed generators and batteries, and these generators often
come in the form of intermittent and renewable energy resources
such as wind farms or home-based solar panels. All of these have
their own batteries which are connected to a central station which
monitors the entire grid and and controls them to optimize power
flow within the grid. For example, when certain areas of the grid
are experiencing power flow issues, the VPP can see which areas
have excess storage or generation and use them to lighten the
stress on the rest of the grid.
III. HOW DOES IT WORK?
A virtual power plant uses a secured network to interconnect
small, disparate energy resources to automatically dispatch and
optimize generation and storage of resources [1]. It employs
intricate planning, scheduling, and bidding of distributed energy
resources (DERs), which mainly contain micro-gas generators
(MGGs), wind generators (WGs), photovoltaic systems (PVs),
and batteries (BEs) to provide reliable power 24 hours a day
[2]-[3]. VPP comprises of an aggregation of customers (i.e.
residential, commercial, or industrial) segregated under type of
programs and locations in the distribution topology [4].
Figure 1. Illustration of a Virtual Power Plant
2. A. Grouping customers for improved forecasting
Participants (customers) with different socio-economic standing
and philosophies will respond differently to programs initiated by
the central VPP. Therefore, aggregating all of these customers
together into one forecast limits the ability for utilities to truly
understand which customers may be more reliable in program
participation compared to others. Segregation of customers under
different programs provide the utility with improved forecast and
analytical information about their contribution to the utility [4].
Grouping also enables the utility to assess the customer’s
capacity from the same program but a different group structure,
which improves the demand response rate. By assigning
attributes such as capacity limitation, program execution
constraint (where utility cannot shed customer’s usage), customer
payments (i.e cost of running the program), opt-out limits, the
utilities can therefore determine which VPPs should be called
upon the based on the utilities operation portfolio [4].
B. Interconnect of VPP with utility grid operations
Analytics of substation VPPs is relayed back to the utility for
producing forecast of each VPP within the distribution model.
This information can further assess the VPPs capacity and
demand responsiveness when linked with the Supervisory
Control and Data Acquisition (SCADA) or Distribution
Management System (DMS) operated by the utility [4]. The
utility can then assign a VPP to a feeder at real-time, hourly, or
daily depending on the availability of the VPP. When a power
flow issue occurs or an outage is located, the SCADA/DMS
system could designate the appropriate VPP to help stabilize the
load.[4]
Figure 2. VPP substations connected to the grid
C. Enhancing VPP and grid resilience using energy storage
Energy storage improves the VPPs responsivity to fluctuating
loads and helps provide a buffer to optimize DER. It is a critical
component of service delivery by providing load leveling
services and bulk storage in order to reduce transmission and
distribution losses. Common storage technologies for VPP-based
ancillary services include lithium-ion batteries and flywheels [5].
Lithium-ion batteries are installed for large scale storage that
improves the resilience of both VPPs and microgrids. Although
less flexible, flywheels have extremely long lifespans (i.e., the
number of times they can be charged and discharged before the
unit breaks down) and can provide the grid regulation services
instantaneously [5].
IV. CASE STUDY: AUSTRALIA
In recent years, Australia has been facing a number of
problems in their power grid such as unreliability, and scarce
energy supply. On September 28, the 2016 South Australian
blackout occurred when a particularly damaging storm caused
electrical infrastructure to fail. As a result, the entire state of
South Australia lost its electricity supply except for Kangaroo
Island, which had a self-sufficient grid apart from the main grid
[6]. This grid shutdown was caused by cascading failures where
one damaged element shifted load to another element. This
causes it to overload and fail and try to shift its load to yet
another element which creates a chain reaction of failures. While
the storm was described as a “once-in-50-year” storm, the fact
that the entire Australian state (which is over twice the
geographical size of California) except for Kangaroo Island lost
electrical access shows deep problems in the infrastructure of
Australia’s grid.
Since then, the state of Australia’s energy problems
have not improved by much. Early in May 2017, the
multinational mining giant Glencore stated that Australia is not
meeting its energy needs and will face demand destruction in
their energy market [7]. Because of a prolonged period of high
prices or constrained supply, Australia may receive a permanent
loss of demand for energy. For example, Rio Tinto, one of the
world’s largest metals and mining corporations, was forced to cut
output at the Boyne aluminum smelter by 14% because they were
unable to find enough affordable electricity. The company has its
own power station which was able to account for 85% of
Boyne’s energy consumption, and they had been buying the rest
of the energy they needed. However, Boyne stated in January
2017 that power prices have doubled since October 2014 which
incentivized them to simply cut production, costing over 100
employees their jobs, costing Rio Tinto over 80,000 tonnes of
3. aluminum exports per year, and costing Australia permanent loss
of energy demand [7].
For a country with a huge amount of natural resources
such as gas, coal, and uranium, it seems strange that Australia is
having such a difficult time being able to provide enough reliable
energy to its citizens. However, while Australia has plenty of
resources, too much of it is exported overseas to profit energy
companies instead of being used to ensure that there is enough
for domestic use [8]. On top of this, Australia has not had the
best renewable energy production in the past, with renewables
accounting for less than 4% of nationally generated electricity in
2006. Fortunately, Australia has been taking action on this front,
and by the end of 2015, Australia’s renewable sources accounted
for almost 15% of their national generation and they have a
renewable energy target set for 25% by the year 2020 [9].
Ultimately, some of the major issues that Australia is
facing in its energy crisis are the reliability and robustness of
their grid and being able to balance the supply and demand of
energy. Right now Australia’s infrastructure is not robust enough
as illustrated by the 2016 South Australian blackout, and they are
not able to provide enough affordable energy to supply their own
nation’s demand as illustrated by Rio Tinto’s decision to
downsize as a result of energy costs. Therefore, the goal now is
to improve the infrastructure of the grid to provide more
reliability and to increase energy supply by either drilling for
more raw resources, exporting less, or increasing renewable
energy production.
V. WHAT IS THE SOLUTION?
The VPP can provide reliability and stability to
Australia’s grid through various means. The VPP is a viable
solution to several of Australia’s energy issues due to its
reliability, cost reduction, as well as reduction in emissions and
consumption, thus leading to higher supply. One of the
advantages of implementing a VPP, is that it allows utilities to
aggregate customers into different segments which is usually
based on location or distribution. The ability to differentiate
customers based on location or distribution is useful in improving
the reliability of the grid infrastructure due to the fact that it
allows better forecast and analytical information about the
customers and groups [10]. Better forecasting allows greater
control of the grid in the sense that it gives utilities the ability to
optimize the grid network and determine when to reduce peak
loads, generation costs and reduce emissions[10]. In addition,
VPPs also have the ability to react quickly and concisely to
varying load conditions in real time which, along with
forecasting, provides strong support against the blackouts and
load problems in Australia [11]. This can be accomplished by
taking solar energy stored in batteries located in local
neighborhoods, when there is a demand during peak demand time
[12]. When there isn't a high demand, the VPP can instead take
solar energy and store it in the batteries [12]. Essentially, a VPP
supports the grid in times of instability and sends electricity to
homes in periods of peak demand [10]. As discussed previously,
Australia has faced cascading failures and consequently, there’s
has been several blackouts. In order to solve this issue, it is
important that the operation of the system is thoroughly
monitored so that when a certain junction is problematic, then the
that junction can be disconnected from other parts of the grid
[13]. Alternatively, a safety margin for the grid can be
implemented through computer software in order to ensure that
the operating levels are at a safe level [13]. A VPP is ideal in
regards to Australia's cascading problems due to it’s ability to
react quickly to load variations and ability to operate the grid and
distributed generators virtually.
Although reliability of the grid has been a consistent
issue for Australia, the high cost of electricity, as well as lack of
supply, have also played an important role in Australia’s energy
issues. A VPP is an ideal solution to Australia's problems due to
the fact that it uses solar battery systems in order to power
homes and business, which not only stabilizes the grid during
peak demand time, but it also reduces cost and provides a surplus
of electricity [12]. Furthermore, the VPPs main function is to
optimize energy that is being produced by renewable energy
sources such as solar panels, and to store that energy in batteries
[12]. This is advantageous due to the fact that it gives the option
to decide what happens to the stored energy. For instance, the
stored energy can be used to power homes efficiently through
the VPP and consequently the price of electricity is reduced for
the consumer [10] .On the other hand, the stored energy can also
be used to stabilize the grid in peak demand times. The VPP
allows efficient control of the power being produced and
consequently emissions, along with congestion and losses on the
line, are reduced. As line losses are reduced, the amount of power
loss decreases, which results in higher amounts of power
available to be used. Essentially, an implementation of VPPs
solves Australia's lack of power as well as high electricity costs.
VI. CHALLENGES AND ISSUES
Although VPPs have proved to be an effective means of
efficiently integrating a variety of DER into the grid, there
remains a few issues that may arise in the topics of cybersecurity,
regulation, and integration. Because of its reliance on software
systems that are connected to the Internet, this cloud-based
network of energy resources is especially susceptible to cyber
security breaches. In addition, VPPs must confront regulatory
issues and competition with larger utility companies. Finally,
because of the large network of DER that the VPP must integrate
4. with the grid, it may naturally face some issues with integration
On December 22, 2015, Ukraine experienced an
unprecedented cyber attack on the Ivano-Frankivsk region’s grid
control center in Prykarpattyaoblenergo. A total of roughly thirty
substations were taken offline, and two more power distribution
centers were attacked, taking down an even greater number of
substations [14]. In addition, the control centers’ backup power
was disabled by the attackers which left the grid operators in the
dark, and made it even more difficult to restore power back to its
residents. The attack left hundreds of thousands of Ukrainians
without power. Although power was eventually restored to the
residents of Ivano-Frankivsk within a few hours, not all the
control centers were fully operational even months after being
hacked. An investigation determined that the hackers rewrote the
firmware on 16 substations, and were no longer able to respond
to commands sent remotely from the control centers [14]. This
meant that the grid operators now had to control the breakers
manually. Although the attack offers insight into the security
issues that larger smart grids and virtual power plants in
particular may face, it is an example of just how vulnerable any
cloud connected power distribution system can be - as well as the
problems that may occur with poorly secured control systems.
Because VPPs are relatively new in the power industry,
some regulators are struggling with the same issues that affect
newer microgrids. Problems such as regulatory issues that deal
with the legal use of utility wires as well as payment
compensation for power exchange must be heavily discussed
with regulators [15]. Although some laws automatically give
VPPs access to the utility lines, others may not, which can add to
regulation challenges [15]. In addition, VPPs face competition
with other large utility companies who dominate the utilities
industry, which may further complicate the expansion of VPPs.
Finally one of the biggest obstacles that the VPP market
faces in pushing for expansion is its software. Because it’s
necessary for a number of energy resources to be integrated with
one another, the VPPs face issues with software that could handle
a large variety of these resources [16]. Unfortunately, current
software is not capable of integrating as many resources as
desired.
V. THE FUTURE OF VPPS
Since the 2016 blackout, Australia’s industry and
regulatory landscape has taken a favorable stance for virtual
power plant enablers. The beginning of 2017 marked the
beginning of Audrey Zibelman’s term as the CEO of the
Australian Energy Market Operator (AEMO), a testament to
Australia’s commitment to solving their energy crisis. Formerly
New York’s top utility regulator, and the founder of Viridity
Energy, the US-based VPP software provider, Audrey
Zibelman’s tenure is attracting many VPP software companies to
Australia [18]. A few such companies include San Francisco
based energy storage software provider, Geli, and established
German BEs manufacturer and installer, SonnenBatterie, into the
market in hopes of leveraging their well-tested technology in a
market ripe for innovation. Coordination between these
technology providers and Australian utilities and operators is
already bearing fruit, as demonstrated by AGL Energy Limited
and their current VPP pilot project.
In March 2017, AGL Energy Limited, a South
Australian utility company, announced the launch of a 5MW,
residential VPP in Adelaide, the capital city of South Australia.
Set to complete in 2018, AGL’s project is intended to become the
world’s largest commercial VPP to date. Through a partnership
with San Francisco based BEs control software provider,
Sunverge Energy, AGL aggregates 5MW of capacity offered by
60+ intelligently connected BEs, from 1000 homes equipped
with solar PV panels [11]. Split across three phases of
development, the first phase of developing software controls with
Sunverge has been completed as of March 2017. The VPP has
already produced more than 300kW of battery capacity, and
200kW of solar capacity, and delivered over 10,000kWh of
electricity- saving customers an estimated $500 AUD on their
yearly energy bill [17]. With the tangible benefit provided to both
AGL’s end users and AGL’s value chain, other electricity
providers in Australia are eager to reap similar benefit.
CONCLUSION
Australian Renewable Energy Agency (ARENA)’s chief
executive, Ivor Frischknecht, recently estimated that demand
management from VPP technology can potentially supply
anywhere from 20-50% of Australia’s current peak demand.
With the falling prices of solar and storage, and the global push
for renewables, there will be an ever increasing demand from
grid operators to gain control and visibility over these assets. It
will take the collective effort of grid operators, regulators,
technology providers, and prosumers in order to push VPP
technology to the forefront. While all parties are some way away
from being ready for such a new world, they can see the future
lies in that direction.
REFERENCES
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https://microgridknowledge.com/microgrids-virtual-power-plants/.
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Economic Dispatch of Virtual Power Plant under a Non-Ideal
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