Growing investments in distributed energy resources – renewable distributed energy generation, demand response, energy storage, and plug-in electric vehicles – will require new business and technology platforms to manage the increased level of diversity and complexity in the delivery of electricity to customers. The increasing variability of both generation (from solar and wind) and loads (due to DR and PEVs) will also require more sophisticated and decentralized decision making. As a result of all of these factors, interest in virtual power plants (VPPs) is gaining significant momentum within the industry. According to a new report from Pike Research, VPP capacity will increase by 65% between 2011 and 2017, rising from 55.6 GW to 91.7 GW worldwide during that period. A more aggressive growth forecast scenario contemplates that, under certain conditions, the capacity growth could be as high as 126% during the same forecast horizon.

“Virtual power plants essentially represent an ‘Internet of Energy’, tapping existing grid networks to tailor electricity supply and demand services for a customer,” says Senior Analyst Peter Asmus. “They maximize value for both the end user and distribution utility, primarily through software innovations.”

Asmus adds that VPPs can stretch supplies from existing generators and utility demand reduction programs, without requiring any large-scale infrastructure upgrades. This approach enables utilities and grid operators to react quickly to changing customer load conditions and deliver tangible value in real time. Unlike some other frameworks for management of distributed energy resources, such as microgrids, Asmus says that utilities will play a major role in the evolution of the VPP market since it is closely intertwined with transmission and distribution infrastructure as well as customer information systems.

Pike Research’s analysis indicated that DR-based VPPs, which are prominent in the United States, will represent the largest segment of the market, with significant capacity already in place and strong growth anticipated over the next six years. Wholesale auction VPPs, which are unique to Europe, will also continue to be a major factor in the world market. And supply-side and mixed asset VPPs, though they are smaller segments than the first two categories, will each more than double in capacity during the 2011-2017 timeframe, according to Pike Research’s base case scenario forecasts.