How large is the European market for VPP related software?

The European energy system is undergoing a revolutionary shift from fossil fuels to renewable energy sources. However, the primary challenge facing energy systems with a significant proportion of wind and solar energy is the lack of flexibility needed to offset fluctuations in power production. The most effective solution to this challenge involves aggregating flexibilities from production, demand, and available power storage within a specific grid, and then trading this flexibility. The concept of a Virtual Power Plant (VPP) – a centrally controlled aggregate of flexibility – is widely regarded as the optimal approach to implement this strategy. But what are software tools supporting VPPs and how large is market for such tools?

The forthcoming ComTech Advisory study aims to analyze the landscape of Virtual Power Plant (VPP) software vendors, scrutinizing potential European customers, vendor differentiation, and overall market dynamics.

What insights have already we gained so far?

VPPs are usually considered in three distinct models:

• Production-oriented VPPs aggregating multiple renewable sources, possibly including batteries, into a singular, centrally managed virtual asset providing specific flexibility,
• Consumption-oriented VPPs consolidating flexible demand, serving the same purpose, with demand originating from energy-intensive industries or residential sectors,
• And the third category, mixed-asset VPPs, represents the most intricate blend, combining various assets on both demand and production side.

The flexibility aggregation is merely the first step in the VPP value chain. Following aggregation, the flexibility must be marketed, traded, the assets must be scheduled and dispatched according to traded volumes and finally settled. Examining the software tools underpinning these processes, we first find those closely linked to assets. Primarily these tools cater to production-oriented VPPs but may also be applied to demand flexibility coming from large industry. They are offering the aggregation of flexibilities, communication and post-trade scheduling and dispatch of the assets. The advantage of those tools consists in the standardization, absence of sophisticated analytics, barring perhaps forecasting, and using largely uniform system interfaces. This makes the software broadly applicable without a need for customizing. These tools, however, do not venture into the complexities of trading the flexibility.

Flexibility can be traded on multiple overlapping markets, from ancillary services to day-ahead, intraday auctions, and continuous intraday markets, each demanding near to real time decision-making and analytical support. Certain vendors offer AI methodologies to furnish real-time trading decision support, while others aim to combine both aggregation of flexibilities and analytics to cover the entire VPP value chain. A different set of companies proposes trading as a service for VPPs on profit sharing basis.  But what does the market actually need?

Identifying the customer base is crucial. Foremost are utilities managing renewable energy sites, already entrenched in relevant markets, and equipped with trading analytics, primarily seeking real-time information on VPP flexibilities and post-trade dispatch. Usually, utilities are looking for pure aggregation and dispatch software in the first place.  However, the evolving ancillary and short-term wholesale markets might pivot utilities towards a replacement of trading analytics from homemade or legacy tools to more advanced software.

Aggregators, collating flexibility from varied sources, emerge as another pivotal user group. Where they may lack direct market access, they often rely on utilities for trading or opt for trading-as-a-service offerings. Aggregators are probably the most rapidly growing customer segment working with energy intensive industry, batteries and small distributed production assets. In the case where communities with their roof top production would join the VPP market in the future, the number of aggregators is poised to surge. Here industrial and commercial prosumers, investors in power storage and other owners of behind-the-meter flexibility are adding to the potential customer base.  These market newcomers usually lack trading experience and that would necessitate comprehensive software solutions, extending even beyond VPP management and analytics, to include portfolio management, regulatory compliance, and communication tools for DSO/TSO interactions.

ComTech Advisory’s investigation into the VPP software market seeks to identify each segment’s needs, evaluate market size, and map out the competitive landscape. We continue to welcome potential sponsors interested in shaping the study’s focus and enhancing their market visibility through extended advertising within the study. Don’t hesitate to contact us under Contact – CTRM Center.

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