Virtual power plants (VPPs) and the future of the smart grid

1223-Modern-factory-and-communication-network-concept Header Image 820x410

By Jeremy Cook

Most conversations about the transition from fossil fuel power generation to solar and wind lean toward replacing existing power plants with renewable power plants. However, the modular nature of renewable generation—plus new options for energy storage systems—means there’s another option: the Virtual Power Plant, or VPP.

What is a virtual power plant?

The virtual power plant concept aggregates distributed energy resources (DER) to act as a coordinated power supply, supplementing or even replacing traditional centralized generation. Solar and wind production from residential and commercial generators can become the primary or supplemental energy provider for a network of users.

Traditionally, electric power is supplied to homes and businesses by centralized power plants, distributed through the electrical grid. While there are many twists and turns along the way, it’s ultimately a plant-to-user affair. Emerging smart grid technology and infrastructure, including two-way metering equipment, means that consumers can sell power back to the grid, lightening the load for dedicated power producers while earning monetary rebates. Consumers can also store power on-site to purchase and sell when expedient. On the remote Isle of Eigg in Scotland, VPP smart grid systems are already in use with homes and businesses coordinating their usage to avoid strain on the grid.

Why do we need virtual power plants?

When you consider home solar and battery backup, one ideal is total energy independence, with a $0 monthly bill. In extreme cases, you might envision being disconnected from the grid entirely, living off the land—or, more accurately, the sun’s rays.

The cost for such an off-grid setup can be extreme, and if your personal equipment breaks you have to fix it to restore power. From a user perspective, VPPs offer most of the personal benefits of such an off-grid setup at a potentially much lower price as well as backup power from the grid. VPPs also present several benefits on a societal level versus a centralized fuel-fired or even solar-powered facility.

Consider the VPP concept’s modularity and that generation can take place near consumption. In the traditional grid model if there is a problem with power transmission in one area, it can easily affect another geographic location. The VPP concept provides more localized options for re-routing power to keep the lights on, and it could even result in lower transmission losses as power is typically consumed closer to where it’s produced.

On a personal level, if your equipment malfunctions the grid and other DER can provide backup power, enabling a very robust energy supply.

Physical power plants (coal-fired, solar, nuclear, or otherwise) take up land that could otherwise be used for managed forests, farms, and parks. However, VPPs take advantage of otherwise unused rooftop space for solar panels. Solar can also be installed over existing parking areas creating the dual benefit of power production, plus shaded automobile storage. Adding in EV energy storage systems and charging in such a scenario further sweetens the parking/DER scenario.


The virtual power plant concept can replace peaking power plants, which are initialized when grid loads are higher than normal. These peaking power plants are generally expensive and inefficient to operate with respect to generation that handles a constant base load. Distributed battery storage is one answer for “chopping off” these energy demand peaks, along with utilizing whatever distributed energy is available. A somewhat less obvious but important technique is to perform an automated reduction in energy usage.

For example, Duke Energy’s EnergyWise program can turn off hot water heating, pool pumps, and HVAC systems when overall power loads are high in exchange for a small bill credit. While the monetary savings are typically small, the system’s operation is virtually unnoticeable. This could also be considered a form of energy storage as already-heated water is still available for use, and your home’s temperature state stays (virtually) the same for quite some time without HVAC intervention.

Virtual power plants: Coordinating resources

In a VPP scenario consider that coordination between sources is also needed on a very low level, down to ensuring that line frequencies match up properly. Long-range transmission and overall grid maintenance are also necessary, which is beyond the scope of individual homeowners.

Efficiency will be paramount for this future VPP concept to work well, potentially taking advantage of SiC transistors, current sensors, and power-line communication to keep everything coordinated. Given future requirements it’s safe to say that power companies aren’t going anywhere soon, they may simply take on a different form in the coming decades.

See related product



See related product

See related product


STMicroelectronics Communication Misc View

Are you on the list?
Sign up to receive exclusive offers, product announcements, and the latest industry news.

Related news articles

Latest News

Sorry, your filter selection returned no results.

We've updated our privacy policy. Please take a moment to review these changes. By clicking I Agree to Arrow Electronics Terms Of Use  and have read and understand the Privacy Policy and Cookie Policy.

Our website places cookies on your device to improve your experience and to improve our site. Read more about the cookies we use and how to disable them here. Cookies and tracking technologies may be used for marketing purposes.
By clicking “Accept”, you are consenting to placement of cookies on your device and to our use of tracking technologies. Click “Read More” below for more information and instructions on how to disable cookies and tracking technologies. While acceptance of cookies and tracking technologies is voluntary, disabling them may result in the website not working properly, and certain advertisements may be less relevant to you.
We respect your privacy. Read our privacy policy here