In 2003 Elsam acquired Danish Nesa, which trades, distributes and transmits electricity. As a condition for the acquisition, Elsam was obligated to supply virtual power plant (VPP) capacity as of 1 January 2006.
The company that buys VPP capacity obtains the right to deliver power as if it owned a power plant. The capacity is virtual because Elsam still owns the plant and is responsible for the actual power supply. The actual power is delivered to the area DK1 (Jutland and Funen, Denmark).
The purchase of VPP capacity represents a supplement to the purchase of power on the power exchanges or from other suppliers. The benefits of VPP capacity include a high degree of flexibility in supply on an hour-to-hour basis.
The VPP capacity is sold for predetermined periods at an "option price". The option price is set in an auction prior to the period. For each hourly period in which the option is exercised, a pre-determined fixed "energy price" is paid for the actual quantity of power sold. The total payment for the use of the virtual power thus consists of an option price and an energy price. Please see further information in the section "Product".
Virtual Power Plant Auctions - An introduction