Virtual Power Plants — The Future of Energy

Piotr Jurowiec
6 min readMay 24, 2020


Over the years, we have seen a rising interest in renewable energy and the production of heat and electricity, combined with efforts to store this and manage energy’s demand.

What would you get if you combine the energy generating capacity of multiple dispersed resources such as hydroelectricity, wind and solar power, and without having to invest in large scale complexes and power plants for their management and distribution to the grid?

That is the exact question answered by the concept and application of Virtual Power Plants!

What Is A Virtual Power Plant?

Virtual Power Plants (VPP) are a revolutionary approach to energy production, collection and trading that combine the power generating capacity of multiple geographically dispersed renewable energy resources such as small solar or wind power units by utilizing the cloud infrastructure and information technology architecture to connect and direct their shared production to consumers or for energy storage. This way, VPP can combine the power output of hundreds of small-scale renewable energy resources and funnel this collective output to the electricity market.

Through this system, each of the power generation sources remain independent on their own accord while sharing their production and data with a central control room that directs and distributes excess energy produced by the units to a connected system of consumers or flexible microgrids.

This approach provides an added layer of flexibility as well as an aspect of energy security as the system is better able to handle peak-load demands and is more resilient towards fluctuations and shortages as opposed to the traditional energy infrastructure by adding the energy production of independent and dispersed units to the central grid, thereby decreasing its load and reducing costs to consumers as well.

How Does A VPP Work?

A VPP connects multiple dispersed energy generating units to a central control room via a secure and encrypted digital internet connection. The central control room is basically a server that monitors, coordinates, and controls the energy being shared to the VPP by the individual units, and not the variables of the independent units themselves.

The VPP only works with what the individual units share and distributes or collects this excess production to deliver to the central grid at regular intervals or to sell to consumers directly.

The continuous connection allows the collection of real-time data and direct optimization of the variables with intelligent management of the systems through complex and sophisticated automatic algorithms.

This allows the VPP system to balance the production capacity and the energy demands of each of the units and consumers connected to the microgrid efficiently.

The Role of Prosumers

A prosumer is such an individual that not only consumes a product but also takes part in its production. It is a system of collaborative socio-economic activities that seek to lessen the economic burden on the individuals that take part in the per-productive effort. The VPP can be rightly said to be a collaborative, peer-based prosumer activity that allows people to give back to the system while at the same time benefitting from it both in terms of their consumptive needs and economically in terms of generated revenue of savings.

In the VPP model, this prosumer approach helps to counter the effects of uncertain intermittent renewable energy output by connecting higher-level prosumers, which donate more resources with lower-level prosumers, which can donate lesser resources, which leads to balancing out of the supply and demand equation for the overall grid.

The prosumer model also proves the efficiency of the VPP approach as it enables units with different production capabilities to be paired, aggregated, and optimized to serve a larger set of consumers efficiently.

Applications of VPP

It is predicted that the Virtual Power Plant market may achieve a share of around $4.5 billion by the year 2024. These ambitious predictions are based on the fact that the VPP architecture is easily deployable, highly applicable at any scale, and provides greater efficiency in terms of distribution, management and marketability. At present, the leading market is North America with the fastest-growing region being Middle East in terms of VPP market share.

Imagine the solar energy capacity of a hundred houses feeding their excess production to the community grid or an industrial PV plant feeding all the energy requirements of a factory while being accessible securely through the cloud allowing for constant monitoring and reporting. That is the concept that drives the VPP approach.

Applications of the VPP strategy are arising across many countries around the world. A recent collaboration between Centrica, a British energy company, and Sonnen, a German storage firm, installed a network of 100 domestic batteries to form what they claim is the UK’s most advanced virtual power plant.

Centrica said the collaboration with Sonnen “demonstrates how networks of home batteries can work hand in hand with large-scale batteries and other flexible industrial equipment to build a VPP that maximizes the value of its component parts, without sacrificing other benefits of the equipment or causing excessive utilization”.

Another effort by German virtual power plant operator Next Kraftwerke has provided balancing energy in Italy, which provided the flexibility of 4.5MW to the transmission grid operator Terna to regulate the consumption of a concrete plant.

Italy has, in fact, developed a country-wide system of 15 aggregation zones which are leased to contracting Energy companies through bidding to manage and contribute to the national grid.

Such applications of the Virtual Power Plant concept can be seen springing up across the world as a testament to its growing popularity and effectiveness.

Integration and Flexibility through VPP

Integrating renewable energy resources with the already available national grids in a flexible manner is an important objective of the Virtual Power Plant concept. Combined with raw data from each of the producing resources such as production output and data regarding market prices, consumer demands, weather conditions, and market forecasts, the whole system provides an aspect of analysis and metrics that is unrivaled in the traditional energy infrastructure. This data can then be used for further optimization of resources, management of load and output, corrections in price according to the market, and better handling of fluctuations and increased demand.

Furthermore, it is also easier to incorporate new resources into the system without having to flush out extra investment and make unnecessary additions to the infrastructure. Any new asset can simply be onboarded by using the already existing system and can be managed by the central system efficiently. This system allows the collective production of all the dispersed energy resources to be traded as a single unit and provides a balance between efficient energy production and profitability.

The Future of Energy

VPPs, in a broader form, are still at an early and evolving stage with many challenges ahead related to aspects like regulations, technology, and business environment of the already well-established distribution system operators and transmission system operators.

By being about to masterfully combine business and technology innovations, virtual power plants are able to pioneer business concepts based on the harmony existing between markets and consumers.

VPP brings better communication and better management to the renewable energy infrastructure and departs from the centralized power plant model by combining dispersed assets into a single framework that acts effectively as a single unit for the purpose of trading and sale of energy.

This approach can not only meet energy deficits, but it is also more efficient in terms of its own energy consumptions and investment requirements as it uses existing resources to provide for a much larger integrated grid.

Furthermore, by incorporating other allied technologies such as microgrids and industrial plants, the VPP model can be applied to virtually any existing infrastructure and energy architecture, offering unprecedented stability and scalability for renewable energy resources.



Piotr Jurowiec

Business adviser and senior manager fascinated by how new technologies, like blockchain and AI, revolutionize the economy and create new business models.