Virtual Power Stations

The concept of a virtual power station was developed as a way to overcome some of the limitations that existed for smaller companies wishing to operate in electricity markets. Electricity networks, traditionally the realm of the large utility company, distributed electricity through well established infrastructure where there were many buyers of electricity and only a small number of suppliers.

Through the advent of distributed electricity generation, there are now more suppliers on electricity networks than ever before. There are many ways that these suppliers can operate on energy markets; from merely meeting their own electricity needs to feed in tariffs and power purchase agreements but the best way for generators to profit from electricity generation is through direct competition on electricity markets.

Operating on these markets can present a problem for smaller generators because of the need to meet the conditions of market participation. Such conditions include guaranteed power output and large penalties for non compliance. On their own, small to mid sized generators can find it very difficult to meet these requirements. As a result, it can be extremely difficult for power generation plants with a capacity of under 10 megawatts (MW) to compete in electricity markets (for comparison, coal fired power stations generally have a capacity in the order of 300 to more than 1000 MW).

This is where the concept of a virtual power station comes in. By aggregating the power generation capacity of a number of smaller generators, the virtual power station can more effectively meet the requirements for market participation, without assuming an excessive level of risk.

Virtual power stations can also offer an effective means for variable renewable energy sources to participate in the electricity market. Because of the inherent variability of wind and solar energy, electricity market conditions which require guaranteed power delivery from a generator within a specified period of time can often rule out these electricity sources. By aggregating with consumers, renewable energy generators can meet a  market demand for more electricity with additional generation, or a commensurate scaling down in consumption if weather conditions are not favourable to renewable energy sources.

This sophisticated version of demand side management doesn’t actually require an electricity generator at all. Large electricity consumers can in theory form an aggregation of their own, and curtail their usage based on the demands of the market. The virtual power point in this instance can consume its electricity in off peak times, and receive a significant monetary reward for curtailing electricity consumption during periods of high load.