Energy Management Research Journal (EMRJ)

Research Article

The Marginal Economic Benefits of Centrally Controlled and Maintained Virtual Power Plants

Kurt Walkom¹ and Mark Diesendorf ²

¹Division of Enterprise, UNSW Sydney, Sydney, NSW, 2052, Australia.

²Co-operative Research Center for Low Carbon Living, UNSW Sydney, Sydney, NSW,2052, Australia.

Submitted: November 9, 2018; Accepted: December 30, 2018.

Abstract

Virtual power plants are expected to be integral components of nascent intelligent large-scale electricity systems, as they enable the integration of distributed energy resources (DERs) to form a coalition to trade in wholesale markets in a profit-maximising, system-stabilising and sustainable way. This investigation develops a new internationally replicable model to estimate the economic outcome when a central body, such as an electricity retailer, community organisation or utility, owns, deploys, co-ordinates and maintains many DERs in a specific market. Australia’s National Electricity Market is used as a case study to analyse the marginal economic benefit a retailer receives when DER systems – including a solar array, battery, smart inverter and smart meter – are deployed across each of the six wholesale markets within the National Electricity Market. From the analysis, eight out of the ten locations have long-term commercial potential, as the estimated internal rate of return (IRR) significantly exceeds the benchmark industry return on investment. The system’s ability to conduct daily arbitrages in the wholesale market by centrally charging DERs during price troughs and discharging DERs during price peaks accounts for most of the estimated economic benefit. Wholesale price profiles, wholesale price projections, capital expenditure projections and solar data sets are the inputs with greatest impact on the expected IRR. The maximum IRR that can be attributed to renewable support schemes was very small, indicating that virtual power plant returns are likely to surpass industry benchmarks even in the absence of direct legislative support in this case.

Keywords

Virtual power plant; Renewable energy; Scenario analysis; Distributed energy resource; Demand response.

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