The Norwegian hydro giant Statkraft is looking to a virtual power plant model for expansion across Europe. This month the company confirmed plans for 2 gigawatts of VPP capacity in the U.K. later this year, alongside 12 gigawatts in Germany.

State-owned Statkraft said it already manages more than 1 gigawatt of U.K. VPP capacity, made up of wind and solar power along with battery storage and flexible gas engines.

Duncan Dale, vice president of sales and new products for Statkraft in the U.K., said the VPP model would be important in helping to optimize power trading in the British energy market as the proportion of intermittent renewables increases on the grid.

“The increasing share of renewable energy in the U.K. will require a maximum of flexibility in the British power grid,” he said in a press note. “By integrating batteries and engines into the virtual power plant and optimizing their operations, we can provide this flexibility reliably.”

The U.K. plant has more than 37 times the power of what U.S. energy storage player AMS claimed was the world’s biggest VPP earlier this month. And the U.K. plant is tiny compared to the virtual capacity that Statkraft operates in Germany.

Statkraft’s German VPP, said to be the biggest in Europe, has been running since 2011 and comprises around 1,300 wind farms, 100 solar projects, 12 biomass power plants eight hydro stations.

The company states the VPP’s total generation capacity is equivalent to that of 10 or 11 nuclear reactors. The VPP has been nominated for a Game Changer of the Year award at this year’s Greentech Festival (no relation to GTM) in Berlin, Germany.

Statkraft's VPP strategy

Statkraft’s U.K. and Germany VPPs are operated in partnership with a forecasting firm called Energy & Meteo Systems, which provides the software needed to coordinate the decentralized power generation assets. 

Statkraft, which claims to be Europe’s largest generator of renewable energy and the second-largest power producer in the Nordic region, is also rolling out VPPs in France and Turkey, the company said this month. 

In France, the company aims to buy up the renewal rights hydro plants, currently mostly in the hands of the French national energy utility EDF. Statkraft already owns two hydro projects in Turkey.

Statkraft’s development of VPPs is likely a response to growing demand for renewable energy power-purchase agreements (PPAs) across Europe.

In the U.K., for example, Statkraft already delivers 12 terawatt-hours of energy a year to more than 400 PPA customers, according to the company’s website.

The company is working toward connecting all of its U.K. PPA portfolio assets to its British VPP and is also planning to use the plant to supply the Irish power market.

Tapping the corporate PPA opportunity

Corporate renewable energy PPAs are already an established feature of Nordic power markets, with aluminum giant Norsk Hydro making headlines in July last year with the signing of a 29-year contract for wind generation from a Green Investment Group-owned project in Sweden. 

The industry body WindEurope reported that Norsk Hydro had secured wind PPAs for around 4.5 terawatt-hours of production a year from 2021 onward.

Also last July, the pharma companies Novo Nordisk and Novozymes signed the first corporate PPAs in Denmark and the first to involve offshore wind, through a deal with Vattenfall. More recently, the trend for corporate renewable energy PPAs has been spreading across Europe.

Last month, for example, the Danish power provider Ørsted inked the first corporate PPA for offshore wind in the U.K., with a 10-year agreement to supply power to Northumbrian Water, a water utility.

Based on its German VPP experience, it seems Statkraft is aiming to tap into the corporate PPA opportunity with a promise of firm power that other providers might find hard to match.

“All of the U.K. utilities recognize the growing need for system flexibility, particularly for this islanded system," said Rory McCarthy, senior research analyst at Wood Mackenzie Power & Renewables.

While there have seen numerous examples of other utilities acquiring VPPs, he said, Statkraft’s partnership with Energy & Meteo Systems could give the company an edge in being able to meet fluctuating demand.

“Being able to match power with demand in real time will be the defining success for utilities with increasing intermittent renewables portfolios as we transition to a low-carbon power system,” McCarthy said.