Because renewable energies (RE) boast a host of obvious assets, most countries worldwide are looking to increase their production from sources such as solar, wind, and hydroelectric power.
Although increasingly cost-effective, safe and sustainable, they do have one pitfall: their fluctuating nature, as neither the sun nor wind is constantly available. Hence the growing reliance on virtual power plants (VPP), mechanisms that offer real flexibility when it comes to electricity, making it possible to adjust production in line with supply and demand.
Under the Hungarian Sun
Facing a serious risk of energy dependence due to aging nuclear and gas-fired plants and a drop in their competitiveness, the Hungarian government has made energy security a priority pillar in the country’s strategy. However, the power grid operator (MAVIR) forecasts that out of the 8,500 MW currently installed, only 4,887 MW will still be operational in 2030. In light of this, Hungary is relying on solar energy to cover a large share of its annual electricity needs, around 40 TWh (2016 peak).
“Given the efficiency of the photovoltaic panels already installed, the government is looking to achieve a solar power production capacity of between 3,000 and 7,000 MW by 2030,” states Ferenc Fernezelyi, Commercial and Marketing Director for Veolia in Hungary. “In late 2019, our country’s solar facilities produced a total of 600 MW, which rose to 800 MW in early March 2020 and will continue to increase…”
This success allows the government to reconcile the constraints associated the fluctuating RE supply with the everyday electricity needs. This is where VPP comes in. This “control energy” offering represents an alternative to traditional facilities, which often consume fossil fuel, in order to meet consumption peaks.
If necessary, VPPs can increase electricity production or, on the contrary, reduce or momentarily stop it altogether. Their strength lies in balancing electricity production and consumption that is managed by decentralized high-efficiency gas engines burning natural gas and producing electricity and heat at the same time. The electricity is used for balancing purposes and the heat for heating, mainly in district heating networks.
Flexibility: the Smart Unit’s watchword
The watchword for Veolia in Hungary’s Smart Unit is flexibility. Firstly, in terms of the teams, who in barely a year have successfully shifted from running a heat production network to managing an electricity-producing network. Everyone demonstrated their open-mindedness and ability to adapt to the new methods and technologies without hesitating to ask for help. “All across the company, the network’s management requires only 18 staff members,” states Ferenc Fernezelyi. Secondly, in terms of the process, which is fully automated with the use of cogeneration units whose operation is driven by the needs of the power market rather than the heat market to maximize profitability. This power plant, which produces and accumulates electricity, must therefore guarantee the flexibility of all its decentralized facilities on the electricity market. The virtual power plant (VPP) makes it possible to provide fast, balanced and multifaceted production: the Smart Unit quickly adapts by injecting the amount of electricity required in real time into the grid. It can also optimally monitor prices on the electricity exchange and offer the electricity that it produces as effectively as possible.
A favourable context
In this context, for both supply security and financial reasons, Veolia decided to create its own portfolio of virtual power plants in Hungary. A strategic partner for the government, the Group thus helps disseminate technologies and innovative solutions, and strengthen the country’s energy supply security.
“Since the Second World War, Hungary has created around one hundred district heating networks powered by “gas” powered by gas engines,” explains Ferenc Fernezelyi.
Veolia runs twelve of them and produces heat in fifteen towns.
“However, after the financial crisis that hit Hungary, the government reduced the subsidies for cogeneration from 2010, which resulted in a drop in the prices of electricity and heat, making cogeneration less profitable1. That is how our Smart Unit solution was born.”
In 2018, Veolia acquired a 51% share in the virtual power plant CHP-EROMU Kft. — the owner of three combined heat and power plants, with a combined capacity of 30 MW — and turned this platform into its Smart Unit. It joined the Group’s suite of power plants across the country (Nyíregyháza and Debrecen combined heat and power plants, gas-fired plants, and small producers with gas engines). Its Smart Unit now serves as a springboard for Veolia’s entrance onto the regulated national energy market. Thanks to this acquisition, along with the renovation and restarting of old units, the Group will more than double its production capacity in two years, reaching 100 MW. Its activities now cover the entire value chain for the Hungarian energy market: the sale of gas and biomass, heat production and services, and, first and foremost, electricity production and sale.
The Energy Internet
Veolia is one of the pioneers in the remote control of small power generation units. The Group has successfully incorporated the Internet of things into traditional gas engines to automate the processes and manage the whole system by developing its Smart Unit. Its control center, located in Budapest, is directly connected via the Internet to 28 gas engines spread all across the country. It can thus quickly activate one or more engines if the grid needs extra capacity, all this without any human intervention. In most cases, the system itself has the necessary intelligence to optimize electricity sales in line with market demand. However, the operators can take over in the event of a system malfunction, or if there is an opportunity to sell surplus energy to the market.
A balanced grid
“Veolia in Hungary’s Smart Unit delivers high performance because the average efficiency of the gas-based cogeneration units is more than 80%,” continues Ferenc Fernezelyi. “It is also the best way to balance the needs of a power grid that uses renewable electricity. Another important point — it is extremely profitable.”
In his view, although other balancing techniques exist, Veolia in Hungary’s Smart Unit is much more advanced than most of them thanks to its high level of smart automation.
“I’m convinced that our solution will be used everywhere in the long term,” he adds.
At a time when Hungary and other countries are increasingly investing in renewable energy sources such as solar, wind, and small-scale hydroelectric power, the need to balance the grid is becoming apparent. Veolia in Hungary’s Smart Unit is an innovative and profitable way of achieving this. For Ferenc Fernezelyi, this tool could well prove to be a “win-win” choice.
1. With the cancellation of government support, it has become more profitable for public utility companies to use the existing cogeneration capacity to produce electricity with the help of VPP. These companies thus deliver additional capacity to the Hungarian grid (applying higher prices), rather than providing a conventional district heating offer with a low market value.
8,500 MW of electricity production capacity installed in Hungary Including 800 MW from solar power
51 MW capacity of Veolia’s VPP (capacity to be doubled to 100 MW by 2022)
121,181 MWh of electricity produced by Veolia’s VPP under license Veolia’s 28 gas engines contribute to the balance of the grid
18 employees manage the Smart Unit’s entire virtual network