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Virtual power plants

Virtual power plants: how they work and how homeowners can benefit

Nowadays, your home can be electronically linked to the internet somehow. The ability to schedule energy use, make remote adjustments, and get alerts when something goes wrong makes these smart gadgets convenient for users. But for utilities, these tools provide a revolutionary new method to manage grids, deal with emergencies, and reduce costs for everyone.

Virtual power plants (VPPs), an efficient and sustainable replacement for conventional power systems, are transforming the way we produce and use energy. These power plants leverage smart devices and IoT technologies to combine diverse energy sources.

Energy suppliers employ batteries and connected smart devices from thousands of customers to pull power from batteries or turn off connected smart devices to lower power demand. That allows you to satisfy that need when grid utilization is high. In essence, these gadgets function as virtual power sources.

What Is A Virtual Power Plant?

A virtual power plant (VPP) is a network of small- and medium-sized generating, consumption, and storage devices that helps the grid meet the increasing demand. For over two decades, VPP has been a concept. It was first presented as a theoretical theory by authors of research papers that were disseminated by the Institute of Electrical and Electronics Engineers (IEEE).

Since then, always-on broadband Internet has expanded into almost every densely populated area of the developed world, transforming the VPP concept from an abstract notion into a real, concrete, digital reality.

How Does A Virtual Power Plant Work?

A virtual power plant will absorb the surplus energy generated by the DER and use a central control system to feed the energy into the grid. VPP power sources are typically renewable, including residential solar panels and backup generators. The electricity from these sources is stored in batteries. The battery must be compatible with his VPP software and meet the required performance specifications for use with VPP.

Energy sources in virtual power plants are typically independently owned. Owners choose to participate in VPP and are compensated by VPP aggregators for the amount of power consumed (which is significantly higher for Plico’s VPP participants).

 A VPP aggregator owns a central control system. Connect, manage, and distribute power throughout your system using specialized software. The software connects all power supplies to the distributed power supply. If the grid runs out of energy, it will report this to the central control system, supplying the necessary power. Electricity is provided to homes that require electricity within the grid. The network compensates the VPP aggregator for the consumed energy.

Benefits of Virtual Power Plants

Virtual Power Plants, or VPPs, have several advantages that have the potential to completely transform how we produce, distribute, and use energy. Here are some of the key advantages of implementing Virtual Power Plants:

  • Aggregation and Flexibility: Demand response technologies, wind turbines, solar panels, battery storage systems, and other distributed energy resources (DERs) can all be aggregated with the help of VPPs. The ability to manage and regulate this combined capacity as a single entity enables more effective resource utilization and improved grid demand response.
  • Grid Stability and Reliability: Virtual Power Plants (VPPs) have the potential to enhance grid stability and reliability through the astute coordination and management of energy resource generation and consumption. By modifying the output of individual VPP components in response to variations in supply and demand, they can help maintain grid balance and avert blackouts.
  • Renewable Energy Integration: VPPs can help make it easier to incorporate renewable energy sources into the grid. Since the production of renewable energy can be erratic and intermittent, virtual power plants (VPPs) can mitigate these swings by dispersing energy among multiple sources and modifying production in response to demand.
  • Optimized Energy Trading: By purchasing and selling power at favorable periods, VPPs can take part in the energy markets. In order to lower energy costs for the VPP operator and customers alike, they can buy energy when prices are low and sell excess energy back to the grid when prices are high.
  • Demand Response and Peak Shaving: VPPs can implement demand response strategies by adjusting energy consumption during peak demand periods. That helps reduce strain on the grid during high-demand times and can lower consumer electricity costs.
  • Energy Efficiency: VPPs enable better control and management of energy resources, leading to more efficient utilization of available energy. That contributes to overall energy efficiency and reduces wastage.
  • Decentralization and Resilience: VPPs promote decentralized energy infrastructure, making the grid resilient against disruptions. If one component of the VPP fails, others can compensate, ensuring a continuous energy supply.
  • Carbon Emission Reduction: By facilitating the integration of renewable energy sources and promoting energy efficiency, VPPs can reduce carbon emissions and support environmental sustainability goals.

Why Is VPP Becoming More Popular?

Traditional power grids tend to be unreliable during extreme weather and periods of high demand, and these situations are becoming more common. It is becoming increasingly clear that our power grid requires major infrastructure upgrades, including substation modernization. VPP has been successfully used as an alternative for such promotions, allowing you to defer some upgrades and work on others. The cost of renewable energy has never been lower. Ultimately, the necessity for gas and coal power plants during peak hours can be eliminated with the use of VPPs, which can also help stabilize large power grids and maximize the usage of these resources.


The ability to produce and consume energy has changed globally as an outcome of virtual power plants. Using this innovative approach may help houses become more financially independent, environmentally conscious, and energy independent. Virtual power plants offer an intriguing possibility for those looking for a more robust and sustainable energy future, despite several drawbacks. If homeowners understand how VPPs work and take care of the related issues, they may position themselves at the forefront of the renewable energy revolution.

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