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Virtual power plant

"Virtual power plants represent an 'Internet of Energy'", said senior analyst Peter Asmus of Pike Research. "These systems tap existing grid networks to tailor electricity supply and demand services for a customer. VPPs maximize value for both the end user and the distribution utility using a sophisticated set of software-based systems. They are dynamic, deliver value in real time, and can react quickly to changing customer load conditions."

A virtual power plant (VPP) is a system that integrates multiple, possibly heterogeneous, power sources to provide grid power.[1] A VPP typically sells its output to an electric utility.[2][3][4][5][6][7] VPPs allow energy resources that are individually too small to be of interest to a utility to aggregate and market their power.[6] As of 2024, VPPs operated in the United States, Europe, and Australia.

One study reported that VPPs during peak demand periods are up to 60% more cost effective than peaker plants.[8]

Distributed energy resources

VPPs typically aggregate large numbers of distributed energy resources (DER). Resources can be dispatchable or non-dispatchable, controllable or flexible load (CL or FL). Resources can include microCHPs, natural gas-fired reciprocating engines, small-scale wind power plants (WPP), photovoltaics (PV), run-of-river hydroelectricity plants, small hydro, biomass, backup generators, and energy storage systems such as home or vehicle batteries (ESS), and devices whose consumption is adjustable (such as water heaters, and appliances). The numbers and heterogeneity mean that system output is not dependent on any single resource, offering the potential for stable output even if the output of any single resource is not predictable.

Vehicle to Grid technology allows electric vehicles that are connected to the grid to participate in VPPs. The VPP then controls the rate at which each vehicle charges/discharges (accepts/delivers power). The VPP can slow or reverse the rate at which vehicles charge. Conversely, when the grid has surplus power, vehicles can charge freely.

The same principle applies to other systems, such as heat pumps or air conditioners that can lower their power demands to reduce demand.[9]

VPPs based on storage can ramp at higher rates than thermal generators (such as fossil fuel plants), which is especially valuable in grids that experience a duck curve and must satisfy high ramping requirements in the morning and evening.


Power delivery is controlled by a management system. The distributed nature of VPPs requires software to respond appropriately and securely to power requests, utility billing, payments to resource owners, etc.[10][11]


Typically, the VPP provides power (only) when requested by the utility.

Peak shaving

With the appropriate resources, a VPP can deliver incremental power on short notice, allowing it to help utilities manage peak loads that would otherwise require purchasing expensive power from a peaker plant (typically operating a simple cycle or combined cycle natural gas turbine).

Load following

Given sufficient scale, a VPP can operate as a load-following generator, supplying output dynamically as demand changes throughout the day/night cycle.

Ancillary services

Virtual power plants can provide ancillary services that help maintain grid stability such as frequency regulation and providing operating reserve. These services are primarily used to maintain the instantaneous balance of electrical supply and demand. These services must respond to signals to increase or decrease load on the order of seconds to minutes.

Energy trading

A VPP generates revenue that is distributed among the resources that supply the power, encouraging resource owners to join the enterprise.

Energy markets are wholesale commodity markets that deal specifically with electrical energy.[12][6] Market prices fluctuate with demand and when other resources fail (e.g., when the wind does not blow). The VPP behaves as a conventional dispatchable power plant from the point of view of other market participants. A VPP acts as an arbitrageur between diverse energy trading floors (i.e., bilateral and PPA contracts, forward and futures markets, and the pool).[3][4][5][7]

Five risk-hedging strategies have been applied to VPP decision-making problems to measure the level of conservatism of VPPs' decisions in energy trading floors (e.g., day-ahead electricity market, derivatives exchange market, and bilateral contracts):


United States

In the United States, virtual power plants deal with the supply side and help manage demand, and ensure reliability of grid functions through demand response (DR) and other load-shifting approaches, in real time.[14] In 2023 the Department of Energy estimated VPP capacity at around 30 to 60 gW, some 4% to 8% of peak electricity demand.[8]

Texas has two Tesla-operated VPPs. Eligible Tesla Electric members automatically join the Virtual Power Plant, made up of Tesla Powerwall batteries. As such the VPP takes power when the grid needs support. Tesla pays the owner a monthly fee in addition to payment per unit of energy delivered.[15]

California has two electric markets: private retail and wholesale. As of 2022 PG&E paid VPP providers $2/kWh during peak demand.[16] As of August/September 2022, SunRun VPP often delivered 80 MW at peak times,[17] and Tesla VPP supplied 68 MW.[18][19]

Vermont’s Green Mountain Power, works with Tesla to offer a Powerwall to participating customers at a discounted rate.[8]

Three Massachusetts utilities, National Grid, Eversource, and Cape Light Compact implemented a VPP.[8]


The Institute for Solar Energy Supply Technology of Germany's University of Kassel pilot-tested a VPP that linked solar, wind, biogas, and pumped-storage hydroelectricity to provide load-following power from renewable sources.[20] VPPs are commonly referred to as aggregators.

One VPP operated on the Scottish Inner Hebrides island of Eigg.[21][22]

Next Kraftwerke from Cologne, Germany operates a VPP in seven European countries providing peak-load resources, power trading and grid balancing services. The company aggregates energy from biogas, solar and wind as well as large-scale power consumers.[23]

Distribution network operator, UK Power Networks, and Powervault, a battery manufacturer and power aggregator, created London's first VPP in 2018, installing a fleet of battery systems at 40+ homes across the London Borough of Barnet, offering capacity of 0.32 MWh.[24] This scheme was expanded through a second contract in St Helier, London in 2020.[25]

In September 2019, SMS plc entered the VPP sector in the United Kingdom following the acquisition of Irish energy tech start-up, Solo Energy.[26]

In October 2020, Tesla launched its Tesla Energy Plan in the UK in partnership with Octopus Energy, allowing households to join its VPP. Participant homes are powered with renewable energy either from solar panels or from Octopus Energy.[27]


In August 2020, Tesla began installing a 5 kW rooftop solar system and 13.5 kWh Powerwall battery at each Housing SA premises, at no cost to the tenant. As South Australia's largest virtual power plant, the battery and solar systems were centrally managed, collectively delivering 20 MW of generation capacity and 54 MWh of energy storage.[28]

In August 2016, AGL Energy announced a 5 MW virtual-power-plant scheme for Adelaide, Australia. The company planned to supply battery and photovoltaic systems from Sunverge Energy, of San Francisco, to 1000 households and businesses. The systems cost consumers AUD $3500 and was expected to recoup the expense in 7 years under current distribution network tariffs. The scheme is worth AUD $20 million and is billed as the largest in the world.[29]

See also


  1. ^ Landsbergen, Patrick (17 June 2009). Feasibility, beneficiality, and institutional compatibility of a micro-CHP virtual power plant in the Netherlands (BSc thesis) – via
  2. ^ Zurborg, Aaron (2010). "Unlocking Customer Value: the Virtual Power Plant" (PDF). Retrieved 15 January 2023.
  3. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (January 2015). "Decision Making Tool for Virtual Power Plants Considering Midterm Bilateral Contracts". 3rd Iranian Regional CIRED Conference and Exhibition on Electricity Distribution, at Niroo Research Institute (NRI), Tehran, Iran. 3 (3): 1–6. doi:10.13140/2.1.5086.4969.
  4. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (October 2015). "The design of a risk-hedging tool for virtual power plants via robust optimization approach". Applied Energy. 155: 766–777. doi:10.1016/j.apenergy.2015.06.059.
  5. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (May 2016). "A medium-term coalition-forming model of heterogeneous DERs for a commercial virtual power plant". Applied Energy. 169: 663–681. doi:10.1016/j.apenergy.2016.02.058.
  6. ^ a b c d Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (January 2017). "Risk-based medium-term trading strategy for a virtual power plant with first-order stochastic dominance constraints". IET Generation, Transmission & Distribution. 11 (2): 520–529. doi:10.1049/iet-gtd.2016.1072. S2CID 114478127.
  7. ^ a b c Shabanzadeh M; Sheikh-El-Eslami, M-K; Haghifam, P; M-R (April 2016). "Modeling the cooperation between neighboring VPPS: Cross-regional bilateral transactions". 2016 Iranian Conference on Renewable Energy & Distributed Generation (ICREDG). Vol. 11. pp. 520–529. doi:10.1109/ICREDG.2016.7875909. ISBN 978-1-5090-0857-5. S2CID 16453458.
  8. ^ a b c d Kim, June (February 7, 2024). "How virtual power plants are shaping tomorrow's energy system". MIT Technology Review. Retrieved 2024-02-28.
  9. ^ Lee, Zachary E.; Sun, Qingxuan; Ma, Zhao; Wang, Jiangfeng; MacDonald, Jason S.; Zhang, K. Max (Feb 2020). "Providing Grid Services With Heat Pumps: A Review". Journal of Engineering for Sustainable Buildings and Cities. 1 (1). doi:10.1115/1.4045819. S2CID 213898377.
  10. ^ Fang, Xi; Misra, Satyajayant; Xue, Guoliang; Yang, Dejun (2012). "Smart Grid — The New and Improved Power Grid: A Survey". IEEE Communications Surveys & Tutorials. 14 (4): 944–980. doi:10.1109/SURV.2011.101911.00087. ISSN 1553-877X.
  11. ^ "Manage the Virtual Power and prevent a blackout!". Next Kraftwerke. Retrieved 2 December 2019.
  12. ^ JEAN-PHILIPPE TAILLON, CFA (2021-10-14). "Introduction to the World of Electricity Trading". Investopedia. Retrieved 2022-01-04.
  13. ^ Shabanzadeh, Morteza; Sheikh-El-Eslami, Mohammad-Kazem; Haghifam, Mahmoud-Reza (2017). "An interactive cooperation model for neighboring virtual power plants". Applied Energy. 200: 273–289. doi:10.1016/j.apenergy.2017.05.066. S2CID 157309706.
  14. ^ Aaron Zurborg (2010). "Unlocking Customer Value: The Virtual Power Plant". WorldPower 2010: 1–5.
  15. ^ "Tesla Electric Virtual Power Plant Beta with ERCOT". Retrieved February 29, 2024.
  16. ^ "PG&E, Tesla virtual power plant delivers 16.5 MW to California grid amid calls for energy conservation". Utility Dive. 23 August 2022.
  17. ^ Colthorpe, Andy (8 September 2022). "California's fleet of battery storage working to avert energy crisis". Energy Storage News.
  18. ^ Lambert, Fred (2022-09-02). "Tesla virtual power plant is rocketing up, reaches 50 MW". Electrek. Retrieved 2022-09-08.
  19. ^ "Tesla's Virtual Power Plant Tracker". Lastbulb. Retrieved 2022-09-08.
  20. ^ "The Combined Power Plant: the first stage in providing 100% power from renewable energy". SolarServer. January 2008. Archived from the original on 2008-10-14. Retrieved 2008-10-10.
  21. ^ Gardiner, Karen. "The small Scottish isle leading the world in electricity". Retrieved 2023-07-17.
  22. ^ BBC Radio 4. Costing the Earth- Electric Island
  23. ^ "Next Kraftwerk Reimagines & Redefines The Electrical Grid With Virtual Power Plants". Clean Technica. October 2016. Retrieved 2019-03-13.
  24. ^ "Electricity network plan to launch London's first virtual power station". UK Power Networks. 22 June 2018. Retrieved 15 October 2021.
  25. ^ "London pioneers first 'virtual power station'". GOV.UK. 6 March 2020. Retrieved 1 July 2021.
  26. ^ Grundy, Alice (27 March 2020). "Smart Metering Systems reveals Solo Energy acquisition as it enters VPP market". Current News. Retrieved 1 July 2021.
  27. ^ Lempriere, Molly (27 October 2020). "Tesla Energy Plan launched inviting homes to become part of Virtual Power Plant". Current News. Retrieved 1 July 2021.
  28. ^ "Social housing added to the Tesla virtual power plant - ARENAWIRE". Australian Renewable Energy Agency. 4 September 2020. Retrieved 2021-01-06.
  29. ^ Slezak, Michael (5 August 2016). "Adelaide charges ahead with world's largest 'virtual power plant'". The Guardian. Retrieved 2016-08-05.
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