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The concept of virtual power plant (VPP) offers a solution to control and manage higher level of dispersed generation in nowadays passive distribution network. Under certain conditions the VPP is able to displace power and energy which implies more control on the energy flow in the networks. To accomplish this objective tight coordination between both VPP and network operators is vital. Major transition stepstowards smart grid are achieved when the design of the distribution network is taken in full consideration. Adding confined active functionalities in the backbone of the medium voltage network simplifies the integration of VPP and thus the transition towards smart grids. A description of the VPP concept is followed by explanation of its operation. The integration of this system in present passive distribution networks is considered to reflect its appropriateness and the implications for the VPP operator. Then the steps which the network operator Liander in the Netherlands is following in order to develop the distribution network into a smart grid are discussed while highlighting the so-called ‘smart network’-design. Finally the integration of the VPP system with the ‘smart network’-design is considered.

While smart grids are considered as an outcome to integrate a high penetration level of dispersed generation (DG) in the power system, most distribution networks are still passive controlled. To accelerate the transition towards smart grids network operators can take two important steps: 1. developing active distribution network through smart network design; and 2. facilitating active control of dispersed generation through virtual power plant (VPP) system. The role of the network operators with respect to the development of VPPs in the Netherlands is in the first place facilitating rather than operating the VPP system since they are prohibited by law from managing DG&RES. On the other hand, their position in the unbundled electricity chain makes the network operators eligible to initiate the VPP systems in their own region. In addition, the development of an ICT infrastructure is necessary for the transition from passive to active controlled distribution network. Combining the ICT control systems of both VPP and distribution network will prevent excessive costs and benefit the involved operators and prosumers. In the distribution network of Liander, a network operator in the Netherlands, an active controlled backbone infrastructure is emerging as a first step towards smart grids. During the transition period the development of active networks and VPP systems is dependent on the increasing number of prosumers.

The integration of distributed generation (DG) and renewable energy sources (RES) in the passive controlled distribution networks leads in present situation to an expansion of the network capacity and thus to excessive investments. If no measures will be taken these expenditures will increase in proportion to the growth of DG&RES. The virtual power plant (VPP) anticipates these challenges and in addition facilitates better dispatching of power and energy from centralized generation to the DG&RES. The VPP offers a concept for the control and management system of DG&RES that responds to the regulatory and socio-economical constraints beside technical challenges. While most VPP concepts are based on active distribution networks, this work uses the VPP concept to transit the present passive distribution networks to the active networks in the future. For that purpose three transition stages are developed after laying of the foundations for a definition of the VPP with the Dutch situation as an example. To anticipate future developments in the electricity infrastructures, the capability of the VPP to combine with the common known control and management concepts is investigated