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Virtual Power Plants: When your solar assets reach a certain number, grid operators will demand you start behaving like a full sized power plant, or pay the price. This is how to make them pay you, instead.
- I was on the subway when the phone suddenly rang. It was one of our customers. He sounded a bit surprised.
-The grid company had called, threatening to send them a hefty bill for the imbalance they were creating, if they didn’t fix the problem. They were producing more solar power than expected.
The problem was not the amount of energy, but that it was different than expected. An unpredictability grid companies work hard to avoid.
- These calls happen from time to time. Our customers operate in a market where they don't realize what problems are coming their way.
- Imbalance is simply the difference between the electricity that is scheduled to be produced and the electricity that is actually produced. Supply and demand in the market have to match. The utility company makes its best guess as to how much electricity will be used and purchases electricity accordingly, says Christian Blom.
Supply and demand both vary, making it quite complicated to calculate. The problem arises when the guesswork doesn't add up. Especially when the weather wants a say.
- Suddenly it's very sunny in July, everyone’s on summer vacation and no one’s using air conditioning. High production, low demand. Then the imbalance costs skyrocket, and the solar power producers sitting around making power for empty buildings - well, they're the ones to get blamed for the imbalance. In other words, unpredictability has a price. And someone has to pay.
- And it's not the end users who get that bill?
- No, that's the grid company's problem. You don't get a bill for the imbalance because you took a quick shower on a Thursday morning. But if you are a solar power producer, of a certain size, the grid company will pass on the expense to you if you have generated too little or too much. All deviations, both up and down, have a cost.
In other words, balancing the grid is a job. And if you - the solar power producer - make that job harder for the grid company, they will send you a bill for the privilege to do so. Especially when you are producing a different amount than expected or agreed upon.
- What kind of size are we talking about?
- There are no hard and fast rules, it's up to each individual grid company to decide. But if you exceed about 50 MW of power production, they start billing you. And when that bill comes, it's of such a size that it will affect the profitability of your investment.
If you are a solar power producer in Norway, for example, and you have a hundred rooftops with solar power plants, you start to approach the tipping point of 50MW.
This scenario - and the need for panicked phone calls at eight in the morning - is not unique for one solar power owner. In fact, we're going to see more of these calls in the coming years.
The reason is simple: more and more people are producing electricity. The number of solar power plants is increasing. They are growing. And when they get to a certain size, problems arise.
In other words, there is an emerging situation that is not critical here and now. But it will become so, as solar power growth takes place in the hundreds of MW.
- Solar power producers are growing fast, says Christian Blom.
- But why don't people realize that problems are coming?
- You won’t know this if solar power is a roof top side hustle for your sporting goods warehouse. If you own a large hydroelectric plant, for example, you don’t have this problem. If you generate electricity from the weather, however, this problem only increases with size. You’re investing in solar power here and there, maybe, it's small potatoes in comparison. A hodgepodge of small plants. And so it's natural that people don't realize the challenges. And even if they are aware of them, they may not realize that they are manageable. They may not know that the problem can be solved.
One thing is the cost of unpredictability and imbalance. The other is a much bigger issue, according to Christian Blom.
- You have two problems, he says. - As a solar power producer, you've made an investment - and you end up with a portfolio of plants. You make what you thought you were going to make. But there's money on the table that you are not picking up.
- Yeah?
- There are two things: First, there are new revenue streams. What you didn't realize you could sell. When you built the plant, you thought you were going to sell electricity. But it turns out you can sell more than just electricity. Second, you often produce more than you use and get paid little for the surplus power.
Blom says that this is the nature of solar power plants: They produce a lot in the middle of the day, and it's rare that the people connected to the solar power plant use up all that electricity. What happens to the rest? Well, it often goes into the grid and is billed, so you get paid, but often very little. Your problem is that you can't solve this without aggregating your plants.
- Perhaps few people realize they can sell more than electricity?
- That's true. Predictability of production at hourly resolution is the first point of imbalance. If you can have predictability in even shorter time periods, then suddenly you’re talking about regulating services. They are products that can regulate the impact on the grid in the short term. You can make money by offering these services.
- But it's not enough to have one solar plant?
- No, you can't do it one plant at a time. The problem for the solar power owner is that you don't make as much as you could. Because one solar plant is too small to effectively bid into markets, like the regulated electricity markets. And because the predictability of one plant is not enough to be able to sell the energy in the markets.
What constitutes a regulated power market varies from country to country. In Germany, there are 900 companies, each with its own market. In Norway, there are fewer.
- For example, Large aluminium producers may have an agreement with the grid operator, says Christian Blom. They ask:"Can you please not melt aluminium between 5pm and 9pm on Christmas Eve because everyone are roasting ribs?" "Yes," says the aluminium producers, and then grid operator has to pay for this service.
Another example is that you can make an agreement with a company that owns fast charging stations for electric cars.
- You can ask such a company to turn down the power on all their fast chargers for five seconds. Again, for a fee. These are two extremes - and then there are a lot of options in between.
- And this is too complicated for one site owner to handle?
- Yes, it is.
- What if you had an army of caretakers who could travel out to each solar plant?
- Yes, but you don’t. In the US, Skyfri has customers with large solar installations. We realize that if someone has more than 20 sites, it doesn't matter how many caretakers you have. It's too much to keep track of.
In other words, getting the most out of your assets requires scale. And size brings challenges in the form of balancing costs and predictability. The solution to both is called a virtual power plant (VPP).
- VPP is actually a buzzword for an aggregated portfolio, says Christian Blom, meaning that you take a lot of small solar power plants and connect them together so that they count as one larger plant. It's really very simple.
- If I own a hundred solar power plants, can I do this myself?
- No, you can't. You can shop around. You can Google solutions from different companies. There are a lot of people who do operational monitoring of solar PV systems, and there are a lot of people who do VPP. But there are none that offer both in the same package. Except Skyfri.
Christian Blom emphasizes again that VPPs is new territory for the vast majority of solar power producers. In fact, only the very largest and most advanced customers of Skyfri understand the landscape. For most people it is uncharted territory. They may not hear about it until that day they get a call from their grid company.
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A virtual solar power plant solves challenges - and opens up opportunities.
This is about highly profitable revenue stacking of solar power assets: Participating in a Virtual Power Plant allows solar plant operators to access additional revenue opportunities. You can sell excess electricity generated during peak sunlight hours to the grid at higher prices. Also, participating in demand response programs can provide financial incentives, compensating operators for adjusting their energy output as needed to balance supply and demand on the grid. In other words, you can get paid not to make electricity as well.
You don’t know how much the sun will shine. Virtual Power Plants further improve the predictability of solar power delivery, reducing the risk of imbalance charges from grid companies. This ensures a more stable and reliable energy supply. With the advanced forecasting systems this implies, you know more about the amount of electricity your combined assets will be able to produce in the next 24 hours.
When the sun shines continuously on a holiday with low power consumption, excess power is typically billed as imbalance, resulting in lower returns. Being part of a Virtual Power Plant allows direct sales to third parties, such as a neighborhood gas station with electric car chargers, maximizing the value of excess power.
Virtual Power Plants can aggregate the energy produced by multiple smaller-scale solar plants, creating a more significant and more consistent power source that meets minimum requirements for taking part in day-ahead-markets. This aggregation allows solar plant operators to participate in energy markets and sell their electricity at competitive prices, which might not be possible for smaller operators on their own.
Virtual Power Plants ensure that solar power producers get the most out of their investment by efficiently managing and utilizing the energy produced and reducing the loss of excess power. The increased revenue will make solar power more profitable for your company, and make it easier to scale more and faster.
Know which panel is underperforming without having to check each one. For virtual power plants to work, you cannot walk into the field to check manually which panels have leaves on them. A Virtual Power Plant offers this operational support. It provides solar plant operators with access to a network of resources and support, including advanced data analytics, forecasting, and management tools. This can help operators make informed decisions and optimize their plant's performance.
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By providing services such as demand response and load shifting, VPPs contribute significantly to the overall stability and efficiency of the electric grid, benefiting the entire energy community. Offering flexibility and regulation services has a positive financial impact, but it also contributes to the growth of renewable energy sources, as it helps to balance problems related to grid stability. In turn it becomes easier to turn off the predictable but dirty coal power.
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