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The total worldwide capacity of virtual power plants (VPPs) will grow from 3.8 GW this year to 15.4 GW in 2020 - a nearly five-fold increase, according to a new report from Pike Research.

The report says that VPPs, which rely upon software systems to remotely and automatically dispatch and optimize generation, demand-side or storage resources, can provide extraordinary value and services to transmission and distribution grid infrastructure, as well as revenue streams to myriad stakeholders engaged in the delivery of electric power.

While the concept of a VPP is hardly new, the report notes that it is only over the course of the last decade that technology and market designs have enabled a growing list of pilot projects to test and validate this smart grid platform concept.

“VPPs represent an ‘Internet of energy,’ tapping existing grid networks to tailor electricity supply and demand services for a customer, utility or grid operator,” says principal research analyst Peter Asmus. “By stretching supplies from existing generators and utility demand reduction programs, they deliver greater value to the customer while also creating benefits for the host distribution utility and the transmission grid operator.”

According to Pike Research, the VPP market can be broken down into four distinct segments, based on the types of resources aggregated: demand-response-based VPPs (the largest commercial segment in the U.S.), supply-side VPPs, mixed asset VPPs (which bring together distributed generation, energy storage, demand response and other distributed energy resources), and wholesale auction VPPs, which are unique to Europe.

Because utilities and grid operators are leading the development of smart grid projects, the report says that they will almost certainly have to play a role in future deployments of VPPs.

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