The energy system was created to be a centralised network with one way power flow: from traditional generation to grid distribution to consumers, according to Limejump, a UK Technology-Driven Utility.
However, in order to meet the ambitious renewable targets, the energy set up needs to be redefined to operate in a dynamic, circular way. The network must become a decentralised system where once inactive energy users are enabled to act as dynamic market players, recompensed for their flexibility whilst positively contributing towards carbon savings and security of supply.
Traditionally, industry has used a linear model of taking finite raw materials, making products to be consumed and disposed. There is now a compelling business case for manufacturing industries to move away from this ‘take, make, dispose’ model and towards a circular economy model, where sustainability is emphasized with readily available materials used where possible and products re-used and recycled. The value of implementing a circular business model for the energy sector has not yet been fully explored as often the detrimental impacts of keeping to a traditional business model are not visible: hefty carbon emissions, compromised security of supply and system inefficiency.
VPPs to help overcome energy model challenges
In this article we will explore the challenges that exist with the linear energy model and propose how implementing Virtual Power Plants (VPPs), enabled by smart technology, will allow the industry to overcome these and move towards a circular business model.
The current energy sector is heavily reliant on fossil fuels, a policy which has major environmental as well as economic implications. According to the UK Department of Energy and Climate Change (DECC), the combustion of fossil fuels in the UK energy sector accounts for a staggering 85% of total greenhouse emissions. This can be explained by a variety of factors, not least that coal power plants produce a large portion of the country’s baseload and are also called upon at peak times when there is grid stress.
The reliance on finite resources also poses a risk in terms of security of supply as the UK is reliant on its links with other countries to meet its gas and oil needs. Energy prices are linked to oil and gas prices and are therefore at the mercy of geo-political events and foreign currency trading prices, making energy a political driver instead of being an economic and social issue. Currently the main ‘clean’ alternative baseload supply has been nuclear power. However with the announcement of the delay in Hinckley C, alternative sources of generation need to be considered to meet energy requirements.
Distributed generation assets and flexible industrial demand are currently not fully leveraged for grid balancing nor are they optimised for customer revenue. Their financial and operational potential has not been fully explored due to market complexities and lack of data visibility. Although small generators and business users may be aware of their energy export and consumption information, they do not have the capability to participate or access to the business intelligence which turns that data into actionable information so they can maximise their earning potential and contribute to a lower carbon energy mix.
The move to a circular business model
By moving to a circular business model, the UK energy sector can deliver on the EU’s ambitious goal of having renewable generation account for 30% of overall generation by 2030. A critical step in achieving this is implementing VPPs, which are interconnected networks of distributed generation units and flexible demand that are aggregated and dispatched to alleviate network imbalance and take advantage of market prices. VPPs place an emphasis on the leveraging of readily available lower carbon and local generation sources, such as biogas, wind, solar and hydro.
The main stumbling blocks for integrating an increased amount of renewable generation into the electricity network thus far has been its intermittent nature coupled with an inability to efficiently and affordably store energy. When the wind blows and demand is low, the wind turbines are sent a signal to either switch off or ramp down, which results in power waste. This can be managed by the VPP, which is able to balance the network to accommodate the variable wind export.
The premise of a VPP is similar to that of Uber in that existing capacity is maximised to meet demand, driving asset efficiency and cost effectiveness, which can then be passed on to the customer. These assets would otherwise not be in use and additional revenue would not be generated for the asset owners. Limejump does the same for owners of distributed generation, allowing them to earn additional revenues without negatively impacting their operations. By calling upon these distributed assets in lieu of a carbon plant, significant carbon savings can be made.