One of the fastest-growing segments of the electric power industry is the aggregation of distribution systems and customer-side assets for use in supplying power and related services to the grid. BloombergNEF’s report of “Decentralized Energy Strategy Trends: 4Q 2021” revealed the largest amount of activity happening with demand response and virtual power plants.
Managing the New Wave of Distributed Energy
Utility operators have begun to expand their toolbox with grid flexibility management platforms to help balance the supply and demand for power with several successful cases. As these flexibility management tools–distributed energy resource management systems (DERMS) and virtual power plants (VPPs)–grow in the market, it’s essential to reflect on the different operational roles. It’s equally important to recognize the synergies and advantages these systems have when combined within the same platform.
What is a DERMS, and what is a VPP?
Distributed Energy and DERMS
For decades, utility companies could curtail electricity supply to specific customers participating with “interruptible rates” programs. These programs were initially intended to assist the utility in balancing demand with supply during emergencies. Still, the use of “demand response” grew into a wide-ranging, flexible tool to meet other needs, such as coincident peak mitigation and market position management. With the evolution of deregulated wholesale markets, which created real-time pricing for energy, many entities began to monetize the demand response capacity, which could be factored into planning and become a legitimate market risk management tool.
Concurrent with the market’s proliferation of demand response capacity was the rapid growth of behind-the-meter distributed generation technologies, including residential solar, backup thermal generators, energy storage, etc. This was in addition to traditional distribution system equipment such as load tap changers, capacitor banks, voltage regulators, etc. These individual components, combined with the demand response capability of individual customers on the distribution system, became known as Distributed Energy Resources (DERs).
These equipment types had implications during normal operations. Changes in the system’s state affected line flows, voltage stability, and reactive power. A platform was needed that could input the current state of individual circuits, then deploy or modulate the DERs and demand response customers to maintain the appropriately stable operating conditions of the separate circuits. A DERMS platform works hand in hand with the utility’s SCADA system, its GMS/OMS, and other software systems to help operate the distribution on a minute-by-minute basis.
A DERMS platform works hand in hand with the utility’s SCADA system, its GMS/OMS, and other software systems to help operate the distribution on a minute-by-minute basis.
Virtual Power Plants (VPPs)
While the DERMS address operational dynamics of individual circuits from a reliability point of view, it became apparent that some of the DERs could be deployed for their energy value and profitability into the broader electricity market if aggregated and controlled appropriately. For instance, backup generators, distribution and residential-level solar, and energy storage could be deployed when wholesale prices rose, creating a revenue stream. Demand Response assets (industrial processes, commercial programs such as HVAC, and even home thermostats and electric vehicle chargers) reduce energy use when deployed. From the market’s point of view, this load reduction is identical to the increase of generation from a power plant.
Learn More: What is a Virtual Power Plant?
… it became apparent that some of the DERs could be deployed for their energy value and profitability into the broader electricity market if aggregated and controlled appropriately.
What is the difference between DERMS and VPPs?
DERMS are focused on the smooth functioning of the distribution system for reliable operations and are very location-specific. On the contrary, the wholesale power market is as broad and interconnected as the whole grid. The aggregation and control of the multitude of heterogeneous assets to inject energy into or remove energy from the grid created the Virtual Power Plant or VPP. The focus is both at the distribution and transmission level and includes market services like voltage support, energy reserves, frequency control, and energy. VPP is the name of the aggregated asset and the name of the integrated platform that controls the individual components.
What are the advantages of having DERMS and VPPs management on the same platform?
- Interoperability – The same Demand Response asset could be deployed for peak shaving one day, circuit stability the next, and as part of a more significant energy transaction the third day. Having all the assets of the DERMS and VPP enables the operator to seamlessly deploy the same network of assets for different use cases.
- Simplicity – A new asset, say a behind-the-meter storage facility, can only be connected to the comprehensive platform once. Its operational parameters, meter data, and other telemetry are integrated into the system only once. Also, reporting results to the customer is the same, regardless of how the asset was used.
- Lower Costs – Procurement, telemetry, integration, training, and many other activities only have to happen once. Therefore, ongoing maintenance and software upgrades in a single system are simplified and less expensive than separate systems.
- User Interface – System operators have numerous complex systems to monitor and control as they go about the business of running the electric distribution system. Similarly, control room operators in the power plant dispatch center are taxed to ensure the energy supply is managed according to the ISO’s instructions. Having the DRMS, the DERMS, and the VPP in a single frame helps the control room manage precious screen real estate and consolidates data presentation for decision-makers.
Having the DERMS, and the VPP in a single frame helps the control room manage precious screen real estate, and consolidates data presentation for decision makers.
Optimal Grid Flexibility
It’s widely believed that the evolution of the electricity grid to a more distributed, greener position will center on networking customers’ equipment into systems that enable participation in the power market. Whether it’s simply reducing load during high-priced hours, dynamically managing electricity flows on specific circuits, or aggregating hundreds of small assets into large virtual plants, the need for reliable and flexible control systems is paramount. Having all these capabilities on the same platform makes sense operationally, practically, and economically.
Unlocking New Value Streams with Multi-Asset Virtual Power Plants