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Actually, you're statement was correct, and so was the reponse added by the user above. There are two things that control the amount of block-storage that a tenant/user can deploy.

The first is as you guessed, the available space in the cinder-volume VG. If you're not using thin provisioning then the 500Gb capacity of the VG is in fact all you have for both Volumes and Snapshots. In addition, as the other poster pointed out there are also quotas assigned to each user. This included GB's of volumes and snapshots allowed as well as total number of volumes and snapshots allowed. There are additional quotas as well but those two are the primary ones regarding your question.

As far as where the VG cinder-volumes is located. It's not actually on the controller, it's on what's called a Cinder volume node. The machine/node that is running the cinder volume-service. You can add cinder-volume nodes/services to grow and scale over time. You can also have multiple cinder volume services running on a single machine that points to different VG's or external SAN based storage.

Hope that helps.