- This is the case of the first virtual power plant model implemented in Brazil. It was designed to leverage opportunities in the Brazilian Energy Market for C&I DERs (Distributed Energy Resources) by generating benefits due to their flexibility aggregation and their performance optimization in the short-term energy market. The main deliverables were the design and implementation of a methodology for particular application in the Brazilian energy market, considering its specificities, and the structuration of a business plan for the commercialization of the model.
- Virtual power plants are one of the most discussed topics currently in the power industry. In fact, according to a recent report by Navigant Research, by 2025, there will be accumulated global investments of the order of 68.8 billion dollars in the sector. Virtual power plants (VPP) are systems that virtually integrate DERs for commercial applications and grid support, such as power trading, load curve management, and intermittent management of renewables. These services may be provided directly to the final consumer, to energy producers, to energy and capacity markets, or as ancillary services to transmission and distribution system operators.
- In the VPP market context, the VPP operator is represented by the aggregator figure, and it is an essential player to provide and leverage flexibility, supporting the sale of that flexibility in various markets. The aggregator may or may not have the role of trader or utility. An aggregator is a service provider who operates a set of demand facilities in order to sell the flexibility available from pools of electric assets as single units in different markets. In most cases, consumers do not know their flexibility, so the aggregator can provide and leverage flexibility to them. Moreover, aggregators can guarantee the performance of generators. The aggregator is a consolidated figure in the USA, Australia, Austria, Belgium, Finland, France Ireland and Great Britain.
- In Brazil, the Retailer Energy Trader – a Free Market Agent created in 2016 – can partially represent the figure of a load aggregator in the energy market. This agent acts as a consumer and generator representative towards the market operator (CCEE), aggregating consumers and generators in the energy market, and helping CCEE to reduce its administrative and management expenses. It is expected that Retailer Energy Traders emulate the way utilities operate in the regulated market, but with greater flexibility, because the aggregator is able to manage and optimize load profiles and energy contracting for different customers.
- On the other hand, the growth of collaborative economy business models is evident in the current global economic scenario. In the electric sector, those models are represented by increasing opportunities in energy efficiency, as well as by increasing insertion of distributed generation and distributed storage. Among these business models of collaborative economy, one that stands out is asset aggregation, represented by virtual power plants. The case brought an opportunity of new business to the company, by leveraging flexibility through a new entity in the market. This new entity can be implemented within the Retailer Energy Trader, a figure that already exists in the Brazilian market.
- Therefore, driven by the growth trend of the VPP market, the case sought to seize the opportunities of a new market niche through the operation of an innovative platform of energy price and asset flexibility optimization, with a focus on the aggregation of company’s C&I clients. This platform will be operated, in the Brazilian energy market context, by the asset aggregator, represented by the figure of Retailer Energy Trader.
What is the impact of your case:
- Currently, there is a market gap, because there are no entities in the Brazilian market that promote and leverage DER flexibility. Even though the main way of promoting flexibility is through participation in markets that do not yet exist in Brazil, there are already niches in which it is possible. Furthermore, the developed case created evidence that encourages regulatory entities to create these new markets through our proof-of-concept results..
- Thus, in the Brazilian context, the solution developed sought to overcome the absence or insufficiency of proofs of concept related to the performance of demand response, aggregation of loads and provision of services to various system agents, such as distributors and/or system operators. These concepts are extremely important in the electric sector, as they ensure greater reliability and grid resilience. After the already finished implementation of the model, the case will have a later stage represented by six months of execution in a real context, aiming to create a database, which will create basing arguments for future changes in regulation. In the global context, the solution tends to supply the need for a tool that optimizes the purchase and sale of energy in short-term markets.
- In addition, the case contributes to the generation of new knowledge, through the proof-of-concepts about the value of load aggregation and demand response, new market dynamics, pricing of services for the operator and distributors, and subsidies for pricing the demand response.
- Regarding to socio-environmental concerns, these are promoted by the increased efficiency of the processes of C&I consumers, which is reflected in the incentive of energy conservation and, consequently, in the reduction of the emission of polluting gases.
- Finally, the case contributes to the diversification of the energy matrix, by leveraging the demand response, by working to influence sector regulation and by creating new market opportunities for consumer flexibility. The demand response resource can be used as a new source of virtual generation, inserting itself in the energy matrix in order to reduce the need for activation of expensive and polluting thermal generation to supply peak demand.
How is your case innovative:
- The platform allows the optimization of loads and generation to capture price benefits depending on the energy market price scenario. In addition, the application of the VPP concept allows to offer aggregate resources and to participate in external markets in the future, when they become a reality in the Brazilian electric sector. Hence, the case presented several innovations for the Brazilian market, by working with the application of an innovative concept such as the virtual power plant and by developing a platform to consider the dynamics of the energy market.
- Regarding the state-of-the-art, the case was the first one of this kind developed in Brazil. At the international level, there are several cases of consolidated virtual power plants. However, the Brazilian regulatory and market framework presents a series of particular characteristics that make it infeasible the direct application of international concepts and techniques. Therefore, the project is unique in seeking to apply this concept for the first time in the Brazilian market, aiming to create new market niches and to contribute to the development of the electric sector in general.
- Demand response is an important mechanism to guarantee greater reliability and security to the system, through the provision of such services through aggregators, which can also enable lower prices and greater competitiveness in energy markets. In Switzerland, the virtual power plants participate in capacity auctions and provide stability control to the system. In California, virtual power plant projects are seen as providers of systemic benefits and are funded through consumer fees paid to local distributors. In South Korea, virtual power plants participate in government planning and energy efficiency programs. In Brazil, the participation of the demand to provide services (reserve of operational power and peak shaving) to the National Operator of the Electric System – ONS is the object of study of their recently released pilot project. Virtual plants, with DERs aggregation, could provide these services.
- In addition, the gradual opening and diversification of the Brazilian energy market, especially the free contracting environment, with the increasing number of agents and diversification of their responsibilities, point to the need to develop tools that manage and optimize load and generation for those agents. In this context, the virtual power plants appear as new possibilities of innovation and system management improvement.