Virtual power plants (VPP) are among the most innovative emerging technologies in the electricity industry. They challenge a business model that has existed for more than a century, where power plants are large facilities with concentrated generation capacity. In a virtual power plant, generation capacity is spread among multiple homes and businesses, and information technologies connect and coordinate these small systems to simulate the performance of a large power plant.
The lower cost of solar power in recent years has contributed to making virtual power plants feasible. Solar photovoltaic systems provide the simplest way to install distributed generation capacity in thousands of buildings, and each individual solar array can be sized according to the building where it is located. Energy storage can be added to compensate the variable energy output of solar panels, allowing the virtual power plant to deliver electricity even at night. Of course, other renewable generation systems can also be integrated with a virtual power plant, but the flexibility of solar power is unmatched.
Currently, the largest and most ambitious virtual power plant in the world is being developed in South Australia, using 5-kilowatt solar arrays with Tesla Powerwall 2 batteries, which can store 13.5 kWh and can provide an instantaneous power of 5 kW each. Considering that the project spans 50,000 households, the available power output is 250 MW, with an effective storage capacity of 650,000 kWh.
The first stage of the virtual power plant has already been completed and tested, and it covers 100 housing units managed by the South Australian Housing Authority (Housing SA). The project is still small, adding up 500 kW and 1,350 kWh, but it has already demonstrated a key advantage of virtual power plants: they can start providing electricity when they are still small, unlike normal power plants that can only start operations after their full capacity has been installed.
The Hornsdale Power Reserve is another project that uses Tesla storage technology, and it complements the output of 315-MW wind farm with a 100-MW and 129-MWh utility-scale battery. Although the system started operations recently in December 2017, it has demonstrated its capabilities by saving over $35 million in grid stability services during its first four months of operation. Considering the that Hornsdale Power Reserve had a cost of around $50 million, its financial performance has been remarkable.
After its first trial, the South Australia VPP has already demonstrated it can provide the same grid services as the Hornsdale Power Reserve, while using distributed energy resources instead of a single large-scale battery.
The second stage of the VPP project is 10 times larger than the first, covering 1,000 households, and increasing capacity from 500 kW and 1,350 kWh to 5.5 MW and 14,850 kWh (14.85 MWh). The estimated power bill savings will be up to 30 percent for participating homes, and the local grid will become more stable and reliable in the process. The third phase is dependent on the success of the first two, but the outlook is very favorable after the positive results of the first trial.