Virtual power plants: How they work and who can benefit from extra income

Virtual power plants, aggregators, and flexibility are gaining increasing attention, and not just within the energy sector. The growth and volatility of electricity prices have forced many businesses and institutions to install solar panels to cut costs. Virtual power plants – set up by aggregators to provide flexibility services – can generate additional income for new electricity producers and consumers capable of reducing or increasing consumption or storing energy.

The deployment of solar panels across Europe, including the Western Balkans, is experiencing remarkable growth, bringing numerous benefits to all who choose to produce electricity for self-consumption and become prosumers. Two of the four D’s of the energy transition are already underway – democratization and decentralization – resulting in increasing numbers of small energy producers and growing amounts of distributed (decentralized) production from renewable energy sources.

This has led to the emergence of aggregators – firms that connect multiple small producers, or even large-scale solar power plants or wind farms, with energy consumers capable of reducing or increasing consumption on demand, and with energy storage systems. The result is the virtual power plant, which functions like a real power plant thanks to software that connects and harmonizes all these actors.

Such a system can “iron out” the variability of renewable energy sources – solar or wind, and offer a more predictable energy delivery to the market as well as auxiliary services and on-demand flexibility to the system.

Naturally, this brings revenue, which is distributed among the members. For all this to work in practice, a lot of regulation is needed, and it is slowly being adopted in this region. Although they have not yet reached their full potential, there are already virtual power plants and aggregators in Bosnia and Herzegovina, Croatia, Hungary… But how does it all look in practice?

Energy Institute Hrvoje Požar joins virtual power plant KOER

By concluding an aggregation agreement, Energy Institute Hrvoje Požar (EIHP) has joined the KOER virtual power plant. Specifically, EIHP made available its 50 kW solar power plant, installed on the roof of its office building, to KOER, an aggregator on the Croatian electricity market.

Minea Skok, head of the Scientific Council and senior researcher at EHIP, explains to Balkan Green Energy News that KOER has conducted preparations for including the EIHP solar power plant in the virtual power plant.

The aggregator has installed control and metering equipment that enables the reading of electricity production from the existing electricity meter, along with software that enables data aggregation and forwarding to the transmission system operator, real-time 24/7 monitoring and alerting, reporting to the operator and the owner, and cost calculation.

It also conducted internal tests of the EIHP solar power plant’s balancing energy.

KOER provides services to Croatia’s transmission system operator HOPS

KOER’s virtual power plant, along with eight other providers on the Croatian market (aggregators and network users), provides services to the Croatian Transmission System Operator (HOPS), which is responsible for organizing the balancing market throughout Croatia, Skok explains.

Currently, the service involves balancing through the activation of balancing energy from a contracted mFRR (manual frequency restoration reserve), and soon also from aFRR (automatic frequency restoration reserve), according to her.

These system services are essential for any country’s transmission system operator to maintain power system balance, ensuring that all consumers have enough electricity at all times. These services also provide flexibility, which is increasingly in demand due to the growing share of solar power plants and wind farms – energy sources that are not flexible, since they only generate electricity when the sun is shining or the wind is blowing.

KOER and EIHP split the earnings 50-50

As for EHIP’s compensation for providing these services, Skok revealed that the contract defines the compensation received by KOER, as the aggregator, is split 50-50 with EHIP.

For the provision of these services, HOPS organizes tenders in which KOER competes with other service providers.

Skok emphasizes that EHIP’s solar power plant is profitable on its own, as it brings savings through lower electricity bills, which means the service fee is additional income.

On top of all that, gaining practical experience is an added value for EIHP, says Skok.

EIHP will also install a heat pump and a battery

The 50 kW photovoltaic power plant, matching the maximum available roof space of the EIHP building, was put into operation nearly a year ago.

Its average annual output is about 50,000 kWh. The EIHP building’s electricity consumption used to be 186,539 kWh, but thanks to energy renovation and the option of working from home, it was reduced. As a result, in the first ten months of operation, the power plant covered 53% of EIHP’s electricity consumption.

Following the energy renovation and the installation of solar panels, EHIP now plans to install a heat pump and a battery.

With its solar power plant, EIHP makes an additional contribution to power system balancing. By adding flexibility on the consumption side through the planned installation of a battery system and a heat pump, and in cooperation with KOER, the aggregator, EIHP contributes to system stability and the integration of new renewable energy sources, according to Skok.