Decentralized Energy Production Shakes Up Traditional Grids
Source: Haley Zaremba | · OIL PRICE MAGAZINE · | September 29, 2023
Power grids must adapt to challenges such as increased electricity demand, variable energy sources, and a more decentralized model.
Virtual Power Plants, formed by prosumers, are emerging as a resilient solution for managing power production and storage.
Significant financial investments are needed to upgrade energy infrastructure, with the US Department of Energy already allocating $100 million for VPPs.
The renewable revolution is forcing a major evolution in the way our power grids operate, as well as the way utilities regulate energy flow. While a major retooling of the system will be required to support the scale of the change brought on by the green energy transition, evolution has so far been slow and piecemeal. But that won’t be the case for long, as grids will be forced to update themselves to keep up with a more intensive and flexible energy flow – or risk collapse.
Grids will be faced with three major challenges as a result of the massive growth of renewable energy: a much higher demand for electricity, more variable energy sources, and a more decentralized grid. As more and more services become electrified and plug-in electric vehicles proliferate, the amount of demand on the energy grid will skyrocket. The renewable energy sources that will be expected to meet this demand, primarily wind and solar energy, are variable – meaning that, unlike fossil fuels, they don’t produce energy on demand. Instead, they depend on the weather and the seasons, and peak production times are often at odds with peak demand times. This will require a high degree of grid flexibility, as well as long-term energy storage capabilities. Finally, as energy markets become more and more diversified with new forms of energy production and new forms of energy producers (especially now that any home or business can produce solar power to sell back to the grid), the grid is becoming more and more decentralized.
As solar panels and home batteries become increasingly accessible and more widely adopted, the newly decentralized nature of power production will change the way grids and utilities work at a profound level. While this could cause some destabilizing shifts to an industry that was only prepared for a one-way flow of energy, from producer to consumer, it could also represent a crucial source of grid resilience. This is where Virtual Power Plants (VPPs) come in.