Real Electricity Flows from Virtual Power Plants

From a computer screen in an office block in Dortmund, Germany, a power plant operator for utility giant RWE AG orchestrates the output of wind turbines, rooftop solar panels, and other renewable-energy devices scattered across the surrounding Rhine-Ruhr region, one of Germany's most densely populated. Using wireless links on the power equipment, and an energy management system designed with German engineering giant Siemens, RWE has found a way to weave together dozens of small green-energy sources into a steady flow of electricity and government subsidies.

RWE began operating the first commercial-scale "virtual power plant" this February. The system lets RWE digitally monitor renewable power sources and package them into a large supply of electricity it can sell on computerized exchanges. At full capacity, RWE says, its virtual power plant is now generating about 80 megawatts, which the company is offering to bidders on the European Energy Exchange in Leipzig, the continent's largest market for trading energy.

Selling power into the exchange is routine for RWE, Germany's second-largest generator of electricity. But for the owners of the renewable technologies it is a first, enabling them to compete head to head for power contracts with natural gas, coal, and nuclear-fired generating stations.

The ability to deliver utility-scale power from renewable sources may also prove critical to Germany's green-energy plans, which are the most ambitious among all the industrialized nations. Following a decision last year to move away from nuclear power, Germany now plans to get a third of its power from renewable sources by 2020 and has committed to reaching 80 percent by 2050.

To meet those goals, Germany will probably need technology to store massive amounts of power, since neither solar arrays and wind farms produce power evenly. However, market-based mechanisms like virtual power plants are also expected to help by providing detailed information about what power supplies are available, predicting them in advance, and helping utilities manage energy transmission across power lines.

RWE isn't the only company trying to develop such power supplies. In March, Berlin utility Vattenfall Europe announced plans to launch its own virtual power plants, and the trend is spreading beyond utilities: phone company Deutsche Telekom last week began selling small gas-fired boiler-generators to residential customers. They'll be connected to the Internet via DSL or wireless, allowing them to heat homes or be added together as a virtual power station utilities can call on.

Virtual power plants are part of the "smart grid," the plan toconnect all users and generators of electricity via information networks. Many countries, including the United States, Italy, and the United Kingdom, have begun installing smart electrical meters on residences, a step that could allow consumers to participate by getting discounts for saving energy—say, by shutting off air conditioners or heaters—when the power grid needs it most.

In Germany, it's not only managing demand that's the challenge. The government's heavy subsidies for renewable power—about $18 billion this year—have caused a rush to construct solar arrays and wind farms. The explosion in such far-flung and intermittent power sources has quickly raced ahead of anyone's ability to coordinate them, causing wayward electrical flows on Germany's grids and extra volatility in its energy market.