Auckland Miami SILICON VALLEY Bahrain Milan 331 E. Evelyn Ave., Suite 100 Bangkok Moscow Mountain View, CA 94041 Beijing Mountain View Tel 650.475.4500 Bengaluru Mumbai Fax 650.475.1570 Buenos Aires Oxford Cape Town Paris SAN ANTONIO Chennai Pune 7550 West Interstate 10, Dammam Rockville Centre Suite 400 Delhi San Antonio Detroit São Paulo San Antonio, TX 78229 Dubai Seoul Tel 210.348.1000 Frankfurt Shanghai Fax 210.348.1003 Herzliya Shenzhen Houston Singapore LONDON Irvine Sydney 4 Grosvenor Gardens Iskander Malaysia/Johor Bahru Taipei London SW1W 0DH Istanbul Tokyo Tel +44 (0)20 7343 8383 Jakarta Toronto Fax +44 (0)20 7730 3343 Kolkata Valbonne Kotte Colombo Warsaw 877.GoFrost Kuala Lumpur [email protected] London www.frost.com Manhattan Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Virtual Power Plants For information regarding permission, write: (VPPs) for Smart Energy Frost & Sullivan 331 E. Evelyn Ave., Suite 100 Mountain View, CA 94041 A 4-step approach towards successful VPPs A Frost & Sullivan white paper with contributions from Bosch Software Innovations 2 3 Table of content Introduction The energy sector, relatively unperturbed for decades, is in the midst of disruptive innovation, accelerating the pace of change as the “new normal”. Smart Energy Technology disruption is driving new business models in both Introduction 3 Smart Energy infrastructure overlays supply and demand sides. The need to adapt to disruptions to real-time information on the existing Transformation of Energy Value Chain to an Energy Web 4-5 the status quo is evident in the rise of distributed energy network to make it more self-generation that continues to increase in affordability and flexible, efficient, reliable and resilient. Smart Energy Landscape of the Virtual and Interconnected Energy Web 6 Solar PV, Energy Storage, Virtual Power deployed on a larger scale, mounting pressure on conventional Plants, Micro-Grids, Internet of Things grid-supplied energy. Type of VPP Services 7 (IoT) and Analytics, are some typical building blocks of the Smart Energy New market entrants are also challenging major incumbents Functionalities of VPPs 8 Infrastructure. with smart technologies enabling the consumer to gain better VPP and Distributed Energy Resource Management (DERMS) 9 control of their demand and supply needs. In addition, Virtual Power Plant (VPP) regulators are grappling with the challenges facing Smart Energy Landscape in Asia Pacific 10-14 A VPP is a platform to virtualize and traditionally protected linear, close-knit supply chain. While balance dispersed power supply democratisation of energy is introducing uncertainties in the Case for VPPs 15 resources, multiple distribution routes, long-term planning and short-term supply of energy, it is also and various demand centres. presenting immense opportunity. Challenges for VPPs 16 4-step approach towards successful VPP projects 17-21 Internet of Things (IoT) IoT in Smart Energy covers intelligent Future of VPP 22-23 energy assets that are connected, virtualized, and imbued with data VPP Use Cases 24-27 measurement capabilities. The IoT facilitates efficient decision-making for an optimised energy market. 4 5 Transformation of the Energy Value Chain to Generation Grid Consumers/ Micro-Grid Electricity Information Prosumers Flow Flow an Energy Web Ancient Past: Recent Past: Now: Touching Distance: Disconnected Vertical Energy Bi-directional Interconnected Energy Value Chain Value Chain Energy Value Chain Energy Web Virtual and Interconnected Innovations in the field of Smart Energy infrastructure, particularly IoT capabilities within energy resources, are shaping the vision of an interconnected web of energy in the future. The Energy Web is envisioned to lead to near real-time optimised consumption and supply of energy. 6 7 Smart Energy Types of VPP Services Landscape of the Virtual and Interconnected VPPs can potentially offer a wide Energy Web Resource Aggregation range of services, ranging from full commercial ones like wholesale Using distributed energy trading and arbitrage to reliability resources like RE, ESS, EV, services such as fast frequency CHPs, and load centres, VPPs response and black start. can create real-time aggregated load centres and offer services Regulators and utilities may Associated Associated to retailers. consider reliability services, Market Smart Energy Services Market which come from virtual Ancillary | Energy Efficiency | Trading assets, as risky. Regulation Services Demand Response VPPs can work with various small and large resources in providing Power Purchase/Trading Energy Wholesale Market Demand Response services such Smart Energy Infrastructure as load reduction and peak shift. DER | ESS | EV | LCD Generation Licence Weather Forecasting RE Intermittency Retail Licence Virtual Platform Grid Network Operation VPPs can provide RE VPP Solution Builder | intermittency control services VPP Platform Developer | System Operations Smart Meter by using ESS or aggregating VPP Platform Operator | VPP Users geographically distributed RE power sources. Network Operations … Services Commercial Communication Infrastructure Smart Meters | AMI | Telecom Non-critical Reserve … VPPs can participate in the non-critical reserve market where response time for providing services like interruptible load, ESS-driven Virtual Power Plants (VPPs) enable the virtualization of infrastruc- brown start, and spinnng reserve is ture and services by providing functionalities such as distributed more than 10 minutes. asset monitoring and control, renewable energy management, energy storage management, electric vehicle charging asset management, and demand side management. Regulation Services The key enablers for VPPs include: VPPs are also able to participate (1) a strong regulatory framework, in the critical reserve market to (2) associated Smart Energy infrastructure; provide frequency regulation (3) active consumer participation; and and black start. (4) an innovation ecosystem. Network Reliability Services 8 9 VPP and Distributed Energy Resource Management (DERMS) The pervasive transformation of the energy infrastructure is giving rise to several competing and complementing concepts. Distributed Energy Resource Management (DERMS) is one such concept. DERMS is a software solution that serves to balance the requirements of the utilities with the energy generated by distributed energy resources (DERs) at the distribution end. As shown in the table below, VPPs and DERMs have several Functionalities of VPPs competing aspects on how they manage DERs. One key difference is that VPPs focus on the consumer whereas DERMS target network utility. Distributed Asset Monitoring Centralised monitoring of the distributed demand, power generation, energy storage, and measurement assets. Distributed Energy Asset Analytics Monitoring and data analytics (condition monitoring and Virtual Power Plant Resource Management predictive maintenance, e.g., in the building energy management, are possible) [Frost recommends removing this Distribution Substation Management from VPP as such functionalities are typically a part of Enterprise Asset Management systems.] Distribution Network Management Distributed Asset Control Simple remote management of the distributed demand, power Distributed Generation Management generation, energy storage, and measurement assets. End-Consumer Market Interface Renewable Energy Management Provision of additional functions such as intermittency control, forecasting, and dispatch to handle and promote Renewable Distributed Asset Management Energy Sources (RES) integration to the wider grid. Virtualize Distributed Assets Energy Storage Management Integration of storage assets through direct or indirect controls. T&D Utility Interface Electric Vehicle (EV) Charging Management of EV charging assets to allow optimised energy Asset Management consumption. Demand Response/Demand Assets’ participation of ancillary services through the Side Management management of consumption and/or generation Full Capability Partial Potential for No Capability Capability Future Developments 10 11 2020 Solar Power The solar PV market is forecast to grow by 50% Smart Energy driven by increasing requirements for power from China and India. Landscape $104B in the Asia-Pacific Energy Growth of Smart Energy solutions 2016 Storage are key enablers for VPPs The Asia-Pacific region is estimated to have more than 500 million installed Smart $66B Meters. Decreasing investments indicate greater spending on replacement. China, Japan, and Australia lead the installed base of smart meters. 2016 Demand 2020 AMI Micro-Grids Response The solar PV market is The solar PV market is $11B forecast to grow by 50% Demand Response forecast to grow by 50% $8B driven by increasing services in Australia, driven by increasing requirements for power New Zealand, and Japan requirements for power from China and India. are expected to from China and India. stimulate