Smart 101: Virtual power plants and demand management

The next step in the evolution of electricity is no sci-fi dream

October 01, 2011

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Demand response manages peak electrical demand by providing incentives to utilities and power consumers to reduce their electrical load when demand is high. To be clear, demand response refers to changes in electricity usage by end-use customers in response to changing prices or in response to incentive payments designed to lower electricity use when the electrical grid’s capacity is stretched and reliability is jeopardized.

The incentives used for customers in demand response can either be informal (you turn your dryer on in the middle of the night when demand is low and electricity will be cheaper) or formal (such as a machine shop being paid to use less electricity during times of peak demand).

Retail electricity prices are based on the average cost of electricity over the month while wholesale electricity prices fluctuate on an hourly basis. Currently, Alberta lacks the price signals that would tell customers to reduce electricity use during periods of high demand when wholesale electricity prices are high.

With as much as 20 per cent of electricity transmission infrastructure built to meet periods of peak demand that happen less than one per cent of the time, demand response gives utilities and grid operators another way to address grid reliability. By reducing uncertainty, increasing grid reliability, spreading out demand and optimizing energy consumption, demand response is an intriguing future add-on to the electrical grid.

From a smarter grid to a virtual power plant

A virtual power plant groups several distributed energy systems together with intelligent demand response capabilities and aggregates those systems into an asset that acts like a centralized power plant. A virtual power plant would rely on software systems to remotely dispatch electrical generation and could tap existing grid networks to tailor electricity supply and demand services for a customer.

Before that takes shape, a number of smart grid upgrades like smart meters and real-time pricing are needed. The best example of a virtual power plant currently running is in Germany. The facility is called the Regenerative Combined Power Plant.

It combines three wind farms totaling 12.6 megawatts (MW), 20 solar photovoltaic plants worth 5.5 MW, four biogas systems equaling four MW and a pumped storage system with 8.4 gigawatt hours of storage. These assets are all monitored and aggregated via an intelligent controlling system that allows operators to quickly adapt to changing power needs.

Find out how Alberta is progressing on smart infrastructure here.

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