Building virtual power plant capabilities within large energy companies: a case study in the Nordics

Abstract

Electricity production is shifting from dispatchable sources to variable renewable energy sources, while demand peaks are becoming more pronounced due to the electrification of heating and transportation. These shifts increase price volatility, which, in turn, encourages prosumerism and drives the decentralisation of the energy sector. Virtual Power Plants (VPPs), which centrally control and optimise decentralised energy resources (DERs), are emerging as a promising solution in this evolving energy landscape. This study analyses the VPP concept and market and evaluates the feasibility of creating such capabilities within large Nordic energy companies. It uses a mixed-method research design and combines a literature review, a quantitative analysis, and an interview study. The literature review is used to determine the status quo of the VPP concept and to find the general market trends. The quantitative analysis uses GAMS mixed integer linear programming (MILP) to determine the potential financial performance of a VPP in the Nordic market. Lastly, the interview study examines the suitability of existing organisational structures within large energy companies for developing VPP capabilities. The study finds that VPP operation on the Nordic market is both legally possible and financially attractive. However, the interview study reveals several barriers to such operations within large energy companies.

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