Relevance of Virtual Power Plants in Indian Real Estate

Virtual Power Plants

The present picture of the real estate sector consists of evolving customer needs, a drive to incorporate the latest technology that can act as a unique selling point (USP), and an effort to go smart and sustainable while complying with environment-centric regulations. As humans continue to rely on nature’s limited resources for the fulfillment of their consumption demands, the requirement for heterogeneous renewable power sources, particularly in smart buildings, has increased. 

With multiple systems at one place, these power plants bring with it the promise of energy independence and reduced battery prices, amongst other advantages. Therefore, in the bid to maximise energy efficiency in real estate, the novel concept of virtual power plants is now gaining popularity. 

While the utilities sector is already reaping the benefits of this groundbreaking technology, the real estate industry is yet at the nascent stages. However, with the built environment technology shifting from macro to micro scale, the real estate industry will benefit immensely. Read on to know how.

What is a Virtual Power Plant (VPP)?

Operating as a unique energy network, a Virtual Power Plant is a cloud-based cluster of power generating units like wind farms, solar parks, combined heat and power units (CHP), and storage systems. These systems are mostly independently owned and operated units that are set up on a medium scale and work through a system of interconnected networks. 

These interconnected systems are then operated through a central room of the virtual power plants or what is also known as an energy management system (EMS). By using 2 major technologies – Artificial Intelligence (AI) and the Internet of Things (IoT) – the EMS coordinates the power flows coming from the generators, controllable loads and storages. 

Let’s understand this through an example. 

Say there’s a mixed-use area having more than 1000 houses and multiple commercial centres. To power the community, energy is being supplied via a nearby power plant. It is very much possible that the energy requirement in one house is greater than the others and vice-versa. 

A lot of houses or commercial complexes in the community may also be using energy generated from renewable sources like solar rooftop panels. Here, weather plays a significant role in energy demand and supply. During the sunniest hours of the day, excess energy is produced. However, this often gets wasted if no one is at home to use it. On the contrary, during monsoon season, the panels do not get charged efficiently, thereby reducing the energy supply. 

Now, if these distributed energy sources (DERs) like solar panels are connected via a cloud-based server, excess energy can be put back into the grid, and batteries or more energy can be supplied across homes. 

So, when all these portfolios i.e. energy systems are combined into one super, cloud-based system, it starts acting like a traditional power plant. These virtual power plants can then store and generate energy for the entire community and reduce the overall burden on the electricity grids.

How do Virtual Power Plants Work?

As discussed, there exists a central control system that connects the various individual units of virtual power plants via a remote control network. This central control network facilitates efficient monitoring, coordination and control of the various assets. 

  • Any control commands or data that needs to be transmitted across a network is affected through data connections that are highly secure due to the encryption protocols that shield it from the other data traffic. Each and every individual asset present in the network of Virtual Power Plants works along an optimized schedule. 
  • In addition to the above mentioned features, a machine learning and data science-based algorithm is employed by the central control system. Just like conventional power plants, these algorithms help to adjust to balancing reserve commands from transmission system operators, facilitating a bidirectional exchange and flow of data between the individual units of the VPP and providing real-time data on the capacity utilization of the units attached to the network. 
  • In this manner, we can balance any fluctuations that occur in the generation of renewable energy by ramping up and down power generation and power consumption of controllable units.
  • An instance of the same would be the feed-in, electricity storage charge levels and consumption data of smart buildings that can be used for the generation of precise predictions for trading of electricity and scheduling of controllable power plants. 

Why Should the Real Estate Sector Use Virtual Power Plants?

The development of virtual power plants has already been known to benefit various sectors with regard to electrification of transport systems, generation of green energy and the intersection of grid networks. Given the enormous potential this technology offers, the real estate sector is no alien to its promised benefits. From develops to housing associations and construction companies, the VPP technology can generate value for all. 

The following are the reasons for us to consider this paradigm shift in Proptech

1. Sustainability

First and foremost, an increasing number of consumers have begun valuing sustainability and green energy, besides an obvious will to generate additional savings on their costs. This movement has been amplified in the present times due to the UN Sustainable Development Goals and awareness with regard to the environment that has been generated by various social initiatives. 

2. Space-as-a-Service (SPaaS)

Additionally, we need to realise that the idea of a constructed environment is graduating from a mere space that is offered to a customer into a service in itself. This is in amplification of the concept of space as a service that focuses on the taylorization of services as per the needs that are specific to each and every user. 

Space as a service (SPaaS) refers to the model of combining a physical location along with the provision of essential amenities in order for the space to deliver an all-encompassing experience. In essence, the concept aims to combine real estate with extra ordinary user experience (UX). Besides offering enhanced productivity, the space as a service business model is a method for great cost savings. 

3. Reducing Grid Load

The newly developed concept of VPP aims to relieve the load on the power grids. This is made possible by the smart method of distributing the power generated by the individual units during periods of peak load. In addition to this, the total power generation and power consumption of the units in virtual power plants is traded on the energy exchange. 

The aggregation of data provides a reliable energy supply, while saving the need for reliance on fossil fuels. By virtue of their efficiency, virtual power plants, therefore, promise to benefit the entire energy value chain.

4. Cost Efficiency

The virtual power plants provide us with an opportunity of an additional revenue generation system given the wide array of business models that have been produced, in turn creating a broader range of stakeholders for the constructed environment. 

While the Virtual Power Plant might seem to be a far fetched idea that can not be suited as per everyone’s budget, what must be realised is the fact that the proposed model and solution is soon to be standardised due to its minimal cost. Installing VPPs might not even remain an option. 

virtual power plants

How Virtual Power Plants will Benefit the Indian Real Estate?

Several countries in the world are becoming increasingly aware of the norms of environmental protection, and India is not far behind in the race. India has set a target of achieving 175GW renewable energy by 2022 and smart technologies will have a significant role to play in this.

There has been some transformation in the Indian real estate sector too in recent years as newer renewable resources have been stepping into the picture. The limited supply of fossil fuels and the growing need for technology enabled buildings has led to further research in the use of alternative sources and mediums for energy management, leading to the penetration of distributed energy resources (DER) in the country’s real estate industry. 

The government’s focus on developing 100 smart cities, pan-India, using ‘smart solutions’ is already promoting the development of the real estate and construction sector. What is important to note, however, is that the National Smart Grids Mission under the Ministry of Power is acting as a catalyst in the growth and development of smart cities. 


Spanning more than 3 million sq km, 260 GW capacity and 200 million plus customers, India operates one of the largest synchronous grids in the world. However, the estimated power demand in India will surge to almost 900 GW by 2032. Plus, with the real estate sector poised to reach market value of US$ 1 trillion by 2030, India is now strengthening the electrical network by combining automation systems, communications, IT and smart real estate to build a strong and smart grid. 

Smart grids represent the use of modernised power grids that integrate renewable and distributed energy sources like solar and wind plants into the grid using ICT Technology. As discussed, DER refers to any energy resource which is connected to the grid at distribution level. This integration of DERs has facilitated the shift from centralized to decentralized systems-a concept on which virtual power plants actually works. This is done to provide reliable and quality energy supply to end-users. 

Although there are many core infrastructure elements that define both the missions, combining smart grids with the national smart cities mission will therefore open the gateway of using virtual power plants, quite significantly, across cities. This means that power generation and supply can be ensured even without the presence of utility grids in an area. 

Owing to the fact that the design of the proposed model allows the setting up of a database practically anywhere, the concept of virtual power plants possesses the potential to improve the socio-economic condition of the country. 

Challenges Faced in the Process of Development

Even though the development of virtual power plants opens up great prospects for the Indian real estate industry, the implementation of the proposed strategies is not devoid of its many challenges. 

  • One of the major challenges toward VPP development is the lack of framework available for regulation. As a result, companies find it very hard to attain the necessary permission and happen to be at a loss when it comes to the legal aspects of setting up. Moreover, there has hardly been sufficient effort from the end of the government to make available to these companies appropriate technical expertise that they might require for the understanding of this relatively new technology. 
  • The issues around power grid safety, stability, pricing, and operational efficiency are also visible. These indirectly stem from the need for a proper framework surrounding the technology. 
  • In addition to this, a large number of security and privacy concerns sprout up over time. The concept of virtual power plants is wholly based on the technology of Software as a Service (SaaS). Since SaaS operates on a cloud computing network, it becomes highly prone to cyber attacks that put vast amounts of data collected from the users at the risk of breach. For this reason, companies face a moral dilemma as to the ethicality of VPPs.

In a world scenario, where thousands of people live without power and yet there is wastage during the consumption, it is high time for us to buckle up and move to more sustainable solutions that guarantee concern for the future. As of now, the real estate sector in India is far from having channelised these benefits. As a growing number of companies in the UK and the rest of Europe take this step towards sustainability, it does offer some hope for green energy generation in the world. The very first step, therefore, is the upgradation of technology to standards that are compatible with SaaS based virtual power plants. Even though this might be a hard road to travel, the returns are definitely worth it.


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