IDC Energy Insights Predicts Virtual Power Plant a Reality Within Next 5-10 years

New Study Provides Guidance for Utilities to Enable Virtual Power Plants

FRAMINGHAM, MA – December 07, 2010 – IDC Energy Insights today announced the availability of a new study, Technology Selection: Building the Technology Foundation for the VPP (Document #EI225861), indicating that within five to ten years, the Virtual Power Plant (VPP) will become mainstream in most electricity markets. As such, IDC Energy Insights urges utilities to take VPPs into consideration when approaching their business processes, enterprise architecture, and control systems. The new study not only examines what it will take for utilities to enable Virtual Power Plants, but provides guidance on what utilities may already have in place, what needs to be modified, and what needs to be added to make this a reality and stay ahead of the competition.

"The Virtual Power Plant has emerged as a way to aggregate distributed energy resources and demand response as if they were a single power plant," said IDC Energy Insights practice director, Jill Feblowitz. "We believe utilities will see the most innovation and development in the enterprise and real-time service bus, analytics for pricing and resource optimization, and on the far horizon in the decentralization of processing and optimization with the introduction of microgrids."

The IDC Energy Insights study reveals that as VPPs start to appear on the grid with greater frequency, they will enable a more flexible and streamlined process for electricity distribution. The emergence of new information technologies to monitor, control, and dispatch VPPs will allow for a much more precise balancing of electricity demand and supply.

However, once VPPs penetrate widely onto the grid, to realize their promise they will still be required to provide a more efficient and cost effective service than the traditional system for power delivery. As such, IDC Energy Insights believes that the real-time requirements of VPPs will introduce new complexities. The control infrastructure to support VPPs will need to address flexible and scalable integration and control new distributed resources and the development of standards to support interoperability.

Today, few utilities are able to support a fully functional VPP that relies on real-time communications to all points in the distribution grid; i.e., substation to meter (and appliance). IDC Energy Insights believes that the companies and standards bodies that are working on finalizing such a system today will be the winners tomorrow when the other obstacles diminish.

Once the financial and regulatory barriers to VPPs are overcome, the market must decide on the most cost-effective and efficient business model for the VPP operational ecosystem. The rewards of a utility's adopting a new VPP model would include maintaining the traditional monopoly over electricity distribution, while updating the control mechanism to a model that is more flexible and, potentially, more profitable. This is a business issue that utilities need to act upon soon to remain competitive.

"The danger of a utility's taking a slow approach to developing VPPs is that another non-utility actor will take on the role of VPP operator," said Ms. Feblowitz. "Once a technology leader attains first-mover status it will be extremely difficult for the utility to dislodge them from their perch."

IDC Energy Insights will hold a complimentary Web conference, Virtual Power Plants: Where the Smart Grid and Distributed Energy Intersect, on December 8, 2010 at 12:00 p.m., U.S. Eastern time. To register, visit http://bit.ly/VPPWebcast [http://bit.ly/VPPWebcast].

For additional information about this study, or to arrange a one-on-one briefing with Jill Feblowitz, please contact Sarah Murray at 781-794-3214 or sarahbethmurray@gmail.com. Reports are available to qualified members of the media. For information on purchasing reports, contact insights@idc.com; reporters should email sarahbethmurray@gmail.com

About IDC Energy Insights

IDC Energy Insights provides research-based advisory and consulting services focused on market and technology developments in the energy and utility industries. Staffed by senior analysts with decades of industry experience, IDC Energy Insights covers both the utility and oil & gas segments, providing independent, timely, and relevant analysis focused on key business and technology issues. IDC Energy Insights serves a diverse and growing global client base, including electric, gas and water utilities, IT suppliers, independent power producers, retail energy providers, oil and gas companies, equipment manufacturers, government agencies, financial institutions, and professional services firms. International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world's leading technology, media, research, and events company. For more information, please visit www.idc-ei.com [http://www.idc-ei.com], email info@idc-ei.com, or call 508-935-4400. Visit the IDC Energy Insights Community at http://idc-insights-community.com/energy [http://idc-insights-community.com/energy].

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