Maximizing VPP Efficiency in BTM Distributed Generation Management

By Xin-En Wu

Internationally, 24/7 green energy supply has become a growing trend. Major tech companies such as Google, Facebook, Apple, and Tesla have already begun purchasing green energy through P2P (Peer to Peer Lending) models in Europe, utilizing blockchain technology to ensure transparency and reliability in power transactions. These companies aim to eliminate greenwashing practices, ensuring that all energy used is genuinely green. This shift towards more flexible and creative energy dispatch methods has already become a global trend in power scheduling markets.

Globally, as AI and IoT technologies continue to mature, distribution regulations are gradually being revised, allowing Behind the Meter (BTM) resources to be integrated into Integrated Resource Planning (IRP). A White Paper from the U.S. Department of Energy (DOE) points out that by 2030, Virtual Power Plants (VPPs) will replace 10% to 20% of peak power generation infrastructure. This indicates that VPPs have matured to the point where they can delay or even replace traditional peak power generation facilities.

Jason Liao, Chairman of HAMAK Solar

HAMAK Solar is the first professional team in Taiwan to have core technology in photovoltaic systems, product development, and system planning and implementation. The company's market extends to Japan, Europe, the Philippines, and Vietnam. "Looking at the markets in Vietnam, the Philippines, and Indonesia, their smart meters are predominantly Digital Multi Meters (DMM) or Advanced Metering Infrastructure (AMI). These meters effectively reduce human error and time in meter reading, primarily because these countries have well-established PPA markets. However, Taiwan is still lagging behind in adopting smart meters, with many traditional mechanical meters still in use. This poses challenges for distribution energy management and the overall control of the power system," said Jason Liao, Chairman of HAMAK Solar.

The widespread adoption of smart meters means that Taipower can accurately measure and manage users' electricity consumption, which helps promote the liberalization and consumerization of green energy trading platforms. Liao believes this will help manage peak electricity demand and reduce the power system's stress. "The widespread adoption of AMI meters can enable VPP functionalities, thereby solving peak electricity demand issues, requiring only the cooperation of ESS or the maintenance of baseload power plants," Liao said.

The Untapped Potential of Distributed Generation (DG) and Virtual Power Plant (VPP) in Taiwan's Power System

Another key issue facing Taiwan's power market is that Taipower focuses primarily on the high-voltage traditional power system. This system is mainly controlled by a few large companies, such as GE, Westinghouse, and Siemens, who dominate the high-voltage grid, making it difficult to fully exploit the potential of Distributed Generation (DG) and Virtual Power Plants (VPP).

"Currently, there is a divergence in goals between Taipower and the public regarding electricity demand. Taipower aims to control power usage, while the public desires autonomy in their electricity consumption. This also means that the public will increasingly accept the energy storage market," Liao explained.

In his observation, many people are currently concerned about the stability of Battery Energy Storage Systems (BESS). However, with advancements in solid-state battery (SSB) technology, it is expected that by the second half of 2025 or 2026, these batteries will enter the market and resolve the existing fire risk issues, making home energy storage systems more reliable.

"However, the promotion of Energy Storage Systems (ESS) currently faces several challenges. First, insurance companies do not provide coverage for ESS. Secondly, the demand for Automatic Frequency Control (AFC), Dynamic Regulation Reserve (dReg), and Enhanced Dynamic Regulation (E-dReg) is controlled by Taipower, lacking a reasonable market mechanism," Liao said.

The solar-powered seawater desalination system on Palawan Island, Philippines, can produce 2.5 tons of reverse osmosis (RO) water
daily using only sunlight and without any external power supply. This system primarily serves as an emergency water source for the area.

Taiwan has Adequate Electricity but Insufficient Green Energy

"I am often asked whether Taiwan faces an electricity shortage. In reality, Taiwan's real shortage is in green energy," Liao explained. With domestic manufacturers being pressured by international supply chain requirements, many companies strive to achieve the RE100 (100% Renewable Energy) goal, especially as demand for green energy from downstream suppliers grows. However, purchasing green energy at night time is nearly impossible, as aside from wind power, other energy storage capacities cannot effectively be converted into green energy supply.

"In an meeting with Energy Administration, we discussed the current inability to clearly define whether power stored at noon and released in the evening qualifies as green energy. If this definition could be refined, it would greatly enhance the entire green energy system's operation. The current challenge is how to provide green energy in the evening. Many existing storage stations rely solely on solar photovoltaics. We should consider whether it is possible to directly transfer green energy from other photovoltaic projects to the required locations. For example, transferring stored energy from point A to point B would classify B's energy as green energy, satisfying nighttime peak hour demand. However, pricing and definition issues for power transfer in different regions persist." Liao noted.

The Distributed Renewable Energy Advanced Management System (DREAMS) being promoted by Taipower, which mandates monitoring for every 500 KW project, is a significant step forward. However, the current system is limited to monitoring and lacks actual control. If DREAMS could be further developed, this issue could be resolved, allowing better management of cross-location transfers, such as from point A to point B.

"In a meeting, we discussed the issue of green energy transfers. The current concept is immediate hedging, where green energy from point A is transferred instantly to point B. However, should we consider cumulative hedging? This would mean hedging weekly or monthly to avoid wasting green energy resources," Liao explained.

The current power system's requirement for 1 or 2 allocations makes it difficult to accurately predict and manage power demand, leading to wasted green energy. For instance, on a day with exceptionally high solar power generation, Taipower purchases excess electricity at the FIT price, adding to their burden, while consumers in need of green energy are unable to purchase it.

Taipower has proposed a solution involving a secondary allocation every month, which is unique globally, as only Taiwan allows green energy retail. These issues could be resolved if Taipower's DREAMS system could be further refined, similar to international Distributed Energy Resources Management Systems (DERMS). Taiwan's distribution system is relatively small with few management layers, making it feasible to achieve this goal. It would only require delegating the management and control of power flow and data sharing to the 21 distribution dispatch centers and control centers.

A large-scale factory in Lukang, Changhua, has installed a solar power system with a capacity of 1,733 kWp.
The primary purpose of this installation is to supply green electricity for internal use.

Green Energy Demand and the Future of Industry

Liao further pointed out that domestic companies face increasing pressure to meet the RE100 standard, and downstream suppliers will also face greater green energy demand.

"In conversations with many clients, I found that they generally prefer to lease green energy facilities first, with the option to repurchase usage rights after 2 or 3 years. This reflects the urgency of the demand for green energy in factories. The underlying reason for this demand is that, aside from the semiconductor industry, other industries have generally experienced poor business performance over the past year, particularly in the machinery and hand tool sectors in Taichung and Changhua. Revenues in these industries have dropped from 100% to 40%, leading to slow capital recovery and making it difficult for companies to build their own green energy facilities immediately," Liao observed.

Companies are preparing for a surge in future demand in anticipation of upstream customers in the supply chain demanding green energy by 2026. Consequently, they are opting to lease equipment initially and then repurchase it for self-use when the economic situation improves. According to Liao, roughly 60% to 70% of companies are embracing this model, signaling a significant trend toward self-generated green energy. This also indicates that the public's perspective on electricity and their demand patterns is shifting toward a more lifestyle-oriented and commercialized approach.

"Our charging stations have different time slots, such as morning, noon, and evening. The general public may not understand the concept of 'peak hours,' so we explain it by likening it to dining out. Our charging stations have breakfast, lunch, dinner, late-night, and holiday prices. We inform customers that dinner is more expensive, so it's better to avoid that time (referring to the evening peak hours when electricity prices are higher), but it's cheaper at midnight. When we explain it this way, the general public understands," Liao said.

The global demand for green energy is an irreversible trend. Although Taiwan currently faces many challenges in green energy development and power market reform, there are also many potential opportunities for VPP in BTM distributed generation that have yet to be fully exploited. With technological advancements and policy adjustments, Taiwan is poised to achieve a more efficient and sustainable power system.

Reference:
[1] P2P (peer-to-peer lending): Peer-to-peer (P2P) lending is a form of financial technology that allows people to lend or borrow money from one another without going through a bank.
Central Bank: https://efaidnbmnnnibpcajpcglclefindmkaj/https://www.cbc.gov.tw/Public/Attachment/892717204371.pdf