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Virtual power plants offer new opportunities for Smart Grid

There are seismic changes coming about in the UK power generation and distribution markets.  Fossil-fuel reduction targets are driving new ideas and smart technologies are opening the market to new suppliers.

Under the Smart Grid vision, energy aggregators with modelling software and secure communications will balance demand and avoid blackouts using power from renewable energy sources and virtual power plants (VPPs).  


The UK Government’s Smart Grid Vision

The reduction in the use of fossil fuels for power generation will have major ramifications for the UK power generation industry for the next ten years.  The National Grid is already under considerable strain and the energy gap expected to worsen as existing plants reach the end of their serviceable life. Looking forward, pressure on the electrical distribution networks will intensify in the medium term as consumers switch to electricity for transportation and heating.

The UK Government is pushing industry for the deployment of low carbon power generation, but as with national governments across the world, they have come to the realisation that balancing demand and supply may not be possible.

In 2014 the Department of Energy and Climate Change published a paper called “Smart Grid Vision and Roadmap” in which it identifies a challenging future, but also one filled with opportunities.  It envisions a paradigm shift in the ways we generate power, shift demand and balance the power system. It calls for new ideas, new thinking and new products, and presents new opportunities for businesses not previously involved in power generation.

The National Grid (Grid) is responsible for distribution of power and historically, the network is based on energy flowing in one direction — from the power plant to the consumer; that fuel-based power generation is constant, and that the grid is centralistic, i.e. power generation takes place at fixed locations.


In the Smart Grid, the expectation is that the Grid operators become more involved in managing and balancing demand and generation to make use of new energy sources. This will require them to integrate new technologies and suppliers to and manage supply and demand at a local level.

Smart Grid

Smart grids have the potential to revolutionise the way we generate and use energy, enabling new forms of generation to connect and bringing customers into the heart of the supply chain: to shift demand and help balance the system by using information and communications technology to monitor and actively control generation and demand in near real-time.

The plan is to migrate from fixed power networks to modern fluid Smart Grids using communication technology. Smart Grid uses many Distributed Energy Resources (DER) like solar, wind and wave plants and these require balancing (turning on and off dependant on demand).  This is further complicated as most renewable energy sources are influenced by weather conditions or daylight, and are highly volatile and unpredictable.


Smart metering

The Government’s Smart Metering Implementation Programme aims to roll out fifty-three million smart gas and electricity meters to all domestic consumers and smaller non-domestic premises by the end of 2020. These devices and their associated communications and displays have the potential to be valuable smart network enablers through their capabilities as sensors and interface devices to homes and small businesses.

With smart meters providing near real-time energy use information, consumers can be more involved in demand side response (DSR), where they are incentivised to use energy away from peak times and take advantage of lower price periods.  The increased control over the network also enables a wider, more sophisticated range of smart methods to support renewable generation and storage.

Both supply and demand can then be managed at a local level, and the strategy recognises that in moving towards smarter energy management, communities can help pilot new approaches to balancing supply and demand, providing valuable learning that can be applied elsewhere.



When demand changes unexpectedly, the Grid must respond in a timely manner: with an increase in demand, additional power must be fed into the network, whereas a fall in demand means power sources can be removed.

Power balancing requires controlling the plants’ power generation in both directions, respectively completely turning them on/off. The faster the response, the lower the cost. Whereas conventional power stations do not respond well to rapid demand fluctuations, many other sources are more flexible.

Demand Response

Demand Response is an automated control mechanism in power grids, where the demand side adapts itself to the volatile generation capacity of renewable energies.

Demand Response (DR) is an emerging application to balance the power grid from fluctuating renewable energy sources like photovoltaic and wind power. If there is not enough generation capacity at one point in time due to weather conditions, a way to balance the grid is to reduce power consumption on the demand side. Through demand response, consumers are expected to play a more active role in helping to balance supply and demand.

Energy intensive industries like steel plants, paper mills or cement factories represent the largest electric loads in the power grid. These industries can offer the flexibility of their production processes and earn additional revenues from capacity markets through energy balancing services.

Short-Term Operating Reserve (STOR)

To accommodate demand at a local level, the National Grid uses a process called Short-Term Operating Reserve (STOR).  STOR is a manually instructed delivery of active power from low-level power generation.  Typically, the requirements to be a STOR provider are full available within four hours, and maintained for at least two hours; a minimum 3MW from a single plant or by an aggregated of smaller volumes; able to delivery at least 3 times a week, and having proper communication and monitoring tools.

By offering the use of their existing assets plant the owners benefit by being paid for both availabilities to respond, and through the delivery of power.

STOR offers a growing opportunity for aggregating many existing potential energy sources that are unable to commit to supplying 3MW. These can be from any permutation of wind, wave, photovoltaic, micro-CHP, biogas, small hydro sources, and standby generators which in combination act like Virtual Power Plants (VPPs).


Virtual Power Plants (VPP)

Virtual power plants are a novel solution for integrating renewable energy sources, intelligent consumers and innovative storage systems into the existing energy supply system. By intelligently controlling decentralised energy plants they offer a flexible way to provide reliable short-term power to the grid to cover peak load electricity demand.

Benefits offered by VPPs include: reliability of supply based on a portfolio of suppliers; relatively low capital costs by using existing infrastructure, cost savings for the grid.

Bringing online a cluster of small energy providers presents technical challenges. To integrate these sources into the local power supply may require upgrading them to provide a compatible communication interface for both monitoring and controlling.

The continued emergence of VPPs however, will depend upon significant changes to commercial and regulatory frameworks to enable smaller players to enter the market, and the simplification of market interactions regarding the provision of network services.

Network regulation – the RIIO model


The challenge is to ensure that regulatory and commercial frameworks facilitate the deployment of smart grid by incentivising innovation and efficiency and supporting new commercial arrangements.

RIIO is Ofgem’s framework for setting price controls for network companies. Over the next decade the power companies face an unprecedented challenge of securing significant investment to maintain a reliable and secure network, and dealing with the changes in demand and generation that will occur in a low carbon future.

Unlike previous initiative aimed largely at reducing costs, Ofgem developed RIIO (Revenue=Incentives + Innovation + Outputs), a new performance based model for setting the network companies’ price controls which will last eight years. It requires companies to plan earlier for different scenarios and to engage more with stakeholders when preparing business plans and throughout the price control period.

RIIO is designed to encourage network companies to:

  • Put stakeholders at the heart of their decision-making process
  • Invest efficiently to ensure continued safe and reliable services
  • Innovate to reduce network costs for current and future consumers
  • Play a full role in delivering a low carbon economy and wider environmental objectives.

Three price control reviews under the RIIO framework have been completed for: gas and electricity transmission; gas distribution, and most recently for electricity distribution.

Aggregators automate demand response

Using VPPs to support the Grid requires a decentralised energy management software to monitor demand and availability then remotely bringing online or shed the required resources. It is also necessary to handle the complex tariffs and billing that make the system viable.

By aggregating requirements on a local basis VPPs can manage the congestion in the national transmission system and enable system balancing to improve the utilisation of low carbon technology assets and renewable energy.

In the same way that the National Grid pays large energy users like steel and cement works to reduce their energy demands during peak times, the Smart Grid enables demand aggregators to offer a similar service to medium sized plant owners.

Provided the plant has a suitable control interface, the aggregator can then turn on generators or turn off lighting and air-con systems at short notice using agreed guidelines. The aggregator then pays the plant owner for both availability and use of their existing assets.  In many cases, the plant owner will not even know it has happened, until they receive their payment.

There are currently several aggregators operating successfully in the UK. Speed of response is an important factor for these aggregators, who are continually seeking more reserve power sources. It is estimated that contracting to an aggregator can provide earnings from £15k to £20 pa, dependent on the reserve accessed.


The VPP integration challenge-Real energy from a virtual source

Part of the rationale for VPPs is the use of existing plant and equipment to meet the demand identified by the demand response software.  This requires secure communications IEC compliant protocols recognised by the power industry.


Compliance, communications and security

For makers and users of automation equipment, control and monitoring of remotely based equipment presents few problems.  GSM, and increasingly UMTS and LTE are frequently used for direct connection, or to facilitate web-based connectivity to remote locations.  The challenge is that most of the remote power generation equipment with the potential for VPP aggregation does not have the required control interface to enable acceptable communications and must be upgraded.

Communication between the remote power plant and the control centre may be secured via VPN, with closed user group configuration, or an equivalent SSL/TLS connection to meet the requirements of both IT security and system response times. For this reason, the protocols IEC 60870-5-104 and IEC 61850-7-420 have been chosen, as remote energy plant will have to support at least one of these protocols.

The communications protocols used by the power generators are different from those found in industrial automation.  A special communication gateway with an appropriate interface for integration with virtual power plants may be required.


Communication Gateways

Gateways makes communication possible between different architectures and protocols. They repackage and convert data going from one network to another network so that it can understand the other’s application data.
A gateway repackages information to match the protocol requirements of the destination system.

Gateways can change the format of a message so that it will conform to the application program at the receiving end of the transfer. A gateway links two systems that might not use the same communication protocols and data formatting structures to provide bi-directional communications.

Across industry there are many communications protocols used in factory automation. The comapny HMS Industrial Networks offers the widest portfolio of field-proven industrial protocol stacks, products and solutions. Its integrated Anybus technology supports all major field buses and industrial Ethernet networks.

The new Anybus SG (Smart Grid) gateway is a remote terminal unit designed specifically to meet the requirements of the power industry in supporting Demand Response aggregators and virtual power plants.  SG-gateways support the communication protocols used in the energy sector, e.g. IEC60870-5-104, DNP3 and IEC61850; as well as protocols supported by the electric equipment in the field, e.g. Modbus or M-Bus.

The Anybus SG-gateways enable communication between industrial applications and energy protocols. This communication is the basis for the Smart Grid, where power plants and energy equipment are interacting with industrial applications.

The SG-gateways uses the Industrial Internet of Things (IIoT) to communicate with industrial fieldbus or industrial Ethernet networks such as Profibus, Profinet or any other industrial network.
Since the SG-gateways can act both as a master and slave, it is also possible to connect other intelligent electronic devices which communicate over IEC-standards to enable remote control and management of electrical equipment in power grids. Data is sent over Ethernet or the 3G cellular network using the remote control protocols, after which the data can be presented by a software application in the power plant control room.

The Anybus SG gateway uses the same web-based configuration tool where commands are dragged and dropped, allowing for a quick and easy installation. A standard web browser is used, and no additional engineering tools are needed.

The smart grid will provide a range of benefits and opportunities for consumers, businesses, network operators and the wider energy industry. It has the potential to revolutionise the way we generate and use energy, enabling new forms of generation to connect and bringing customers and suppliers into the heart of the low-carbon economy.

The Anybus SG gateway offers a substantial opportunity for new providers to access the UK power generation market. Using proven technology, it allows then to simply, reliably and quickly a remote connection between the complex IEC communications protocols and the industrial world.




  1. Smart Grid Vision and Routemap February 2014. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/285417/Smart_Grid_Vision_and_RoutemapFINAL.pdf
  2. “Virtual Power Plants with VHPready collaborative efforts for an international industry standard”. Industry Alliance VHPready e.V
  3. “UK Smart Grid Capabilities Development Programme”. https://ictomorrow.innovateuk.org/documents/2856395/3745741/UK+Smart+Grid+Capabilities+Development.pdf/b6f5ff03-5662-4119-83cd-8eefc924081b
  4. DNO Guide to Future Smart Management of Distribution Networks Summary Report. http://innovation.ukpowernetworks.co.uk/innovation/en/Projects/tier-2-projects/Low-Carbon-London-%28LCL%29/Project-Documents/LCL%20Learning%20Report%20-%20SR%20-%20Summary%20Report%20-%20DNO%20Guide%20to%20Future%20Smart%20Management%20of%20Distribution%20Networks.pdf