The virtual power plant: why clean demand response is the next big thing for grid balancing

Intermittent renewables and carbon targets make green ways of balancing the grid increasingly important, writes Pieter-Jan Mermans, co-CEO of demand response provider Restore.

Every second of the day, electricity generated by producers (supply) must equal electricity used by consumers (demand). In Europe, transmission system operators (TSOs), such as the UK’s National Grid and France’s RTE, bear the ultimate responsibility for managing imbalances between supply and demand in real-time. But their job is growing increasingly difficult. So what are the challenges they face, and what are the possible solutions?

There are two main challenges: rapidly decreasing capacity from gas-fired peaker plants, and rapidly increasing intermittent renewables. In the early 2000s, TSOs mainly balanced their grids using gas-fired peak power plants. Whenever power demand threatened to outstrip power supply, TSOs ramped up hundreds of megawatts of gas-fired turbines within 15 minutes. But keeping gas-fired plants available in the reserves is an expensive, and CO2 intensive solution. On top of these concerns, an ever-increasing number of gas-fired peaker plants are being closed or mothballed as a consequence of the negative spark spread – the spread between the cost of burning gas and the value of the electricity it produces.

While gas-fired plants have been closing down, renewable energy sources have increased. Wind farms and solar parks now play a significant part in the generation mix. But because renewable energy is intermittent in nature, several hundred megawatts may drop off the grid in less than 10 minutes, as weather conditions fluctuate in real-time. Wind farms and solar parks increase the number – and magnitude of – imbalances between demand and supply. In practical terms, what this all means is that it’s increasingly difficult to keep the lights on.

One of the current challenges for European energy market players is deciding how to cope with the increase of real-time imbalances and the shortage in installed capacity. The choice is between ramping up gas turbines and diesel generators, or thinking about supply and demand in a radically different way.

Demand response might be a familiar term to some already. It involves reducing the power consumption on big industrial sites to ease pressure on the grid, and ‘subsidising’ the loss of the site’s power by running an on-site diesel generator. This is what we would call demand response 1.0. It’s a smart idea – reducing demand, not increasing supply – but it still relies on fossil fuel, which is a fundamental problem.

Clean demand response is the 2.0 upgrade. It’s the same principle of reducing demand, but it identifies where industrial energy usage can safely be curtailed without affecting business operations. This negates the need to rely on diesel back-up – making it a genuinely greener, cheaper option. We sometimes refer to clean demand response as a ‘virtual gas-fired plant’, because it can do everything a gas-fired plant can do, minus the emissions. We are now working with National Grid to increase their Short Term Operating Reserve from clean demand response by more than 35%. Our ‘virtual gas-fired plant’ can reduce demand by up to 100MW: the equivalent of taking 30,000 households off the grid.

Clean demand response is a disruptive model that makes a lot of economic and environmental sense, both as way of smoothing the transition from fossil fuels to renewables and as a long-term revaluation of the way we think about supply and demand.