249. World’s largest VPP - Oct26

SPEAKER_1 (0:03)

With Laurent Segalen from London, and Gerard Reid from Berlin, this is Redefining Energy.

Gerard Reid (0:09)

Today on Redefining Energy, we're going to look at virtual power plants, Laurent.

Marc Rühs (0:13)

VPPs.

Laurent Segalen (0:15)

And Gerard, do you know who is Dr. Shimon Awerbuch?

Marc Rühs (0:20)

No idea.

Laurent Segalen (0:22)

Well, Shimon Awerbuch is a US economist and finance scholar who invented the term VPP 30 years ago. Okay.

He died at the early age of 51, 20 years ago in a light plane crash over the Alps.

Marc Rühs (0:39)

Right.

Laurent Segalen (0:39)

But he did a foundational work in 96 called The Virtual Utility, where he said that electricity generation must be treated like a financial portfolio and that renewables are a powerful edge against fossil fuel volatility. Okay. Fascinating. So Dr. Shimon Awerbuch, it's in your honor that now VPPs have become so big. The global capacity market right now is assessed at 100 gigawatt, plus or minus 20 gigawatt because it depends where you look.

And it's a 7 billion market expected to grow at a category of 20% in the next five years, to reach 40 billion within a decade. So that VPP thing is really becoming big.

And the whole point is to digitally coordinate a flexible network of distributed resources, which are cheaper than big central stations.

Gerard Reid (1:39)

Yeah. Well, listen, I'm looking forward to the discussion here with Marc Rühs.

And Marc is the CEO of Next Kraftwerke, which is one of the stuff in the Europe's biggest VPP.

Laurent Segalen (1:50)

It's the world's biggest VPP.

So 15 or 16 gigawatts. We had Voltus a few years ago, nine gigawatts, Tesla has one. And it's a tough one to enter. The names are in Europe, StatKraft is doing it, NLX and the US called Renew Home, Seapower. So it's fascinating to have a few very big company doing that aggregation and management of all those resources.

Gerard Reid (2:18)

Let's bring Marc in the show.

Laurent Segalen (2:20)

Marc, welcome to the show.

Marc Rühs (2:22)

Thank you for having me, Laurent Gerard.

Gerard Reid (2:24)

So Marc, maybe let me kick off and just sort of ask the question. You're the CEO of a German business called Next Kraftwerke and you're now part of the Shell Group.

Could you talk a little bit about what Next Kraftwerke is, what it does?

Marc Rühs (2:38)

Next Kraftwerke is actually mostly known for being a virtual power plant and you can imagine a virtual power plant being a network of assets that are connected digitally. They're linked together and treated like a single large power plant and these assets are digitally connected and they're centrally controlled and marketed. Next Kraftwerke, and I have to give the kudos to the founders here, they started 15 years ago by aggregating a couple of backup generators and then they added lots of small solar PV biomass assets.

They found a very neat way in pooling those assets and placing those assets into the market. If I look at Next Kraftwerke today, we are a virtual power plant that aggregates around 14,000 customers, and those assets are very tight. We have everything from offshore wind, PV, small PV, big PV, batteries, industrial flex and biomass in our portfolio. If we add up all of the capacities together, we should be around 15 gigawatts of assets. We have become quite a large energy trading house that has a lot of technology stuck in it.

Laurent Segalen (3:52)

That's very interesting because you present yourself as being able to provide additional power. But we had a few years ago, Voltaire on the show and they present themselves as reducing demand. So are you also reducing demand? And I guess it's mostly around HVAC systems.

Marc Rühs (4:10)

From our perspective, if we look at the market, we actually see a great system change ongoing. We see a great trend towards electrification and actually that demand for electrification is growing. So I would see that we actually need more power, but that power needs to come from different sources. What we are taking away is baseload plans, and we are exchanging those with assets that are virtually connected, that are decentralized, that are big and small, and distributed over a great region. These VPPs, they play an important role throughout this energy transition that we're going through.

The energy transition is probably less about being able to provide the renewable energy, but more about the orchestration of that, focusing on how systems work, on how grids work, how about flexibility works. And the VPP is actually the tool for that orchestration.

Gerard Reid (5:06)

Marc, can I ask just to maybe talk about a little bit of the current market situation, what you're seeing in the wholesale markets and how you help your clients through this situation?