Distribution Network Operator UK Power Networks (“UKPN”), which covers over eight million homes and businesses across London, the South East and East of England, has announced a virtual power plant (“VPP”) to be developed in London, to relieve pressure on the capital’s electricity network. The facility will consist of solar panels and batteries located in domestic properties, and will allow consumers to earn money from their solar and storage assets as well as saving on their electricity purchases.
A fleet of Powervault 8 kWh batteries will be installed in approximately 40 homes that already have solar panels, across the London Borough of Barnet. The batteries will be remotely controlled by UKPN using Powervault’s aggregation platform to combine the output from domestic solar panels and ensure they are fully charged and ready for the weekday evening peak demand. The agreement follows a successful trial of the technology in February 2018, where 45 Powervault batteries were installed in customer homes and were remotely controlled to minimise consumption during the evening peak. On average, household evening demand was reduced by 60% during the period.
“We are committed to harnessing new technology to deliver direct benefits to our customers. Our plans to create the capital’s first ever ‘virtual power station’ are paving the way for a smart, flexible electricity network that puts people in charge of their energy use. London is a world-leader in technology and projects like this are just the start as we move towards a decarbonised, decentralised and digitised network that will offer significant benefits to our customers. It will help to keep down electricity distribution costs by providing a viable alternative to the traditional approach of simply adding more cables and substations to increase capacity,”
– Barry Hatton, director of asset management at UK Power Networks
The project does not automatically require the installation of new two-way meters – export meters are not required in relation to FiT payments for small generation below 30 kW (most domestic solar installations are around 4 kW), and the boundary metering to measure the amount of electricity being exported to the grid from the Powervault systems will be carried out by sensors built into the batteries themselves. This is significant since the requirement for additional metering could threaten the economics of the scheme.
South Australia leads with ambitious plans for a grid-scale VPP
A similar scheme was launched in South Australia earlier this year which has the ambitious aim of combining the power supply of 50,000 households, to form the world’s largest virtual power plant, a 250 MW / 650 MWh facility capable of meeting around 20% of South Australia’s average daily energy requirements (or power approximately 75,000 homes). The scheme comes on the back of the world’s largest lithium-ion battery, the 100 MW / 129 MWh Hornsdale project that was developed by Tesla in the state last year.
The government of South Australia announced a plan in February to create a network of 50,000 home solar systems backed by Tesla Powerwall batteries, to form the world’s largest virtual power plant.
The project will begin with a trial on 1,100 public housing homes, with a 5 kW solar panel system and 13.5 kWh Tesla Powerwall 2 batteries installed at no charge to participating households. Smart meters and a smart control system will also be installed. The scheme will be funded through the sale of electricity, and by taxpayers through a A$ 2 million (US$ 1.6-million) government grant and a A$ 30-million loan from the state-government-funded Renewable Technology Fund.
Following the trial, which is already underway, the systems will be installed at a further 24,000 Housing Trust properties, and then a similar deal offered to all South Australian households, with a plan for at least 50,000 households to participate over the next four years.
The virtual power station will not belong to the South Australian Government, but will be privately owned – a new, independent generator that will increase competition in the electricity market, which currently suffers from high prices in part due to a lack of competition.
Analysis by Frontier Economics suggests the scheme will deliver a number of benefits:
- Reduced energy costs: wholesale energy costs are forecast to reduce by about A$ 3 /MWh for all customers with each additional 50 MW of capacity that is brought onto the system. This suggests that the Tesla proposal could reduce the wholesale price by around A$8 /MWh, or about A$90 million per annum across all South Australian customers if just the SA Housing Trust customers participated in the arrangement. The savings would be approximately double this if the project achieves its full scale of production of 250 MW;
- Security and reliability: the addition of 130 MW /330 GWh of distributed, dispatchable battery storage, to be managed as a portfolio could materially improve the security and reliability of the South Australian market, reducing the likelihood of the Value of Lost Load event, and increasing system stability.
“Comparing the average price currently being paid by customers in South Australia to the preliminary costs of the VPP, customers would reasonably expect a reduction in electricity tariffs of about 30% once all reasonable costs and benefits are taken into account,”
– Frontier Economics
There are however some questions about the efficiency of the South Australian scheme. The planned 5 kW solar panels would not generate enough electricity in winter to charge a Powerwall 2 – in June in Adelaide, 5 kW of north facing panels will only produce an average of 11.5 kWh a day, while a new Powerwall 2 can store 13.5 kWh and needs more than this to be fully charged due to losses. If the battery has a round-trip efficiency of 80% then 18 kWh would be needed to reach full charge.
A typical household with 5 kW of solar panels will self-consume an average of around 5 kWh of solar electricity each day, so in the winter it could take an average of almost 3 days to fully charge the battery using solar power alone, meaning the electricity grid may be needed to provide top-up power.
The other question is around the delivery of the project. The scheme information only references Tesla Powerwalls as the battery technology to be installed in all 50,000 homes it is hoped will participate, which is a large number of units that may pose some supply problems for Tesla.
However there are other battery suppliers that could step in should problems arise. German battery storage provider Sonnen is also developing similar projects, including a scheme involving EVs, and has been exploring different VPP models in the US and Australia as well as its domestic market where it launched the SonnenCommunity in 2015, a cloud-based community VPP. Once around 100 customers in a community sign up, Sonnen is able to start offering services to the grid.
It isn’t surprising to see virtual power plant trials such as these being undertaken in London and elsewhere. As the electricity system becomes more de-centralised, with more intermittent generation, different approaches to managing the challenges this poses will emerge. But it remains to be seen whether the combination of solar + storage will itself make a meaningful difference. There might be some benefits at the margin, but if there are doubts about schemes in sunny Australia then exactly how much could such projects contribute in (normally) not very sunny London, particularly in winter?