Within five to 10 years, the virtual power plant (VPP) will become mainstream in most electricity markets, predicts a study by IDC Energy Insights. As such, the research company urges utilities to take VPPs into consideration when approaching their business processes, enterprise architecture, and control systems.

VPPs aggregate energy output from many “microgenerator” sources – solar panels and wind turbines, for example – that do not have a steady output of energy. When aggregated properly, VPP output is pretty steady, allowing it to be treated as one would a regular, large power plant.

"The Virtual Power Plant has emerged as a way to aggregate distributed energy resources and demand response as if they were a single power plant," said IDC Energy Insights’ practice director, Jill Feblowitz. "We believe utilities will see the most innovation and development in the enterprise and real-time service bus, analytics for pricing and resource optimization, and on the far horizon in the decentralization of processing and optimization with the introduction of microgrids."

The study by IDC Energy Insights, which provides research-based advisory and consulting services focused on market and technology developments in the energy and utility industries, predicts that as VPPs start to appear on the grid with greater frequency, they will enable a more flexible and streamlined process for electricity distribution. The emergence of new information technologies to monitor, control, and dispatch VPPs will allow for a much more precise balancing of electricity demand and supply.

The study not only examines what it will take for utilities to enable Virtual Power Plants, but it also provides guidance on what infrastructure utilities may already have in place, what needs to be modified, and what needs to be added to make this a reality and stay ahead of the competition.

Once VPPs permeate the grid, to realize their promise they will need to provide a more efficient and cost-effective service than the traditional power delivery system. As such, IDC Energy Insights believes that the real-time requirements of VPPs will introduce new complexities. The control infrastructure to support VPPs will need to address flexible and scalable integration and control new distributed resources and the development of standards to support interoperability.

Today, few utilities are able to support a fully functional VPP that relies on real-time communications to all points in the distribution grid – i.e., substation to meter (and appliance). IDC Energy Insights believes that the companies and standards bodies that are working on finalizing such a system today will be the winners tomorrow when the other obstacles diminish.

Once the financial and regulatory barriers to VPPs are overcome, the market must decide on the most cost-effective and efficient business model for the VPP operational ecosystem. The rewards of a utility adopting a new VPP model would include maintaining the traditional monopoly over electricity distribution, while updating the control mechanism to a model that is more flexible and, potentially, more profitable. This is a business issue that utilities need to act upon soon to remain competitive.

"The danger of a utility's taking a slow approach to developing VPPs is that another non-utility actor will take on the role of VPP operator," Feblowitz said. "Once a technology leader attains first-mover status, it will be extremely difficult for the utility to dislodge them from their perch."