Virtual power plants can help the power grid deal with some of its most pressing issues, such as meeting rising demand and helping to integrate more renewables affordably, according to a recent report from RMI and the Virtual Power Plant Partnership (VP3).
The report, “Power Shift: How Virtual Power Plants Unlock Cleaner, More Affordable Electricity Systems,” lays out a path to expand VPPs, in line with the Department of Energy’s VPP Liftoff report from last fall. (See DOE Report Lays out Commercialization Path for VPPs.)
About 500 VPP programs already are in operation, providing between 30 GW and 60 GW of peak-coincident capacity in the country. With hundreds of gigawatts of new distributed energy resources coming online, the report says VPPs could serve much of the emerging need for 160 GW by 2030.
While the technology is being used today, it’s important that it’s part of any planning processes, said the report’s co-author, RMI’s Tyler Fitch.
“The key is going to be changing our operations and planning processes such that VPPs are visible to them and making it such that VPPs can respond to signals in ways that make sense for the grid,” Fitch said.
Current planning practices can silo the distribution system, where VPPs are located, off from the bulk transmission system, so ensuring they can be procured and dispatched like any other is going to be important to fulfilling their potential, Fitch said.
Ben Brown, CEO of VP3 member Renew Home, said VPPs offer the kind of dispatchable, clean resource the grid needs.
“I think there tends to be a lot of focus on newer technology; technology that can go after solving some problems,” Brown said. “And I think for us, it was really important to highlight that, hey, there’s a lot of existing latent resources out there.”
Renew Home was created by the merger of Google Nest Renew and OhmConnect, and it now runs the largest residential VPP in the country. More than 80 million households have installed electric heating and cooling systems, and water heating increasingly is done with electricity, Brown said.
“Those represent … an existing growing resource that, if tapped into correctly, really can provide a meaningful, very low-cost way to support decarbonization and some of the load growth that we’re seeing on the grid,” Brown said.
VPPs offer benefits over the grid-scale resources they compete with in that they are rapidly deployable, meet load where it exists and offer local economic, reliability and resilience benefits, the report says.
“We believe we could bring together about 50 GW of VPP capacity online by 2030 just through kind of the current funnels,” Brown said.
VPPs do not require new technology, and there’s no need to build new infrastructure, with customers installing smart thermostats, distributed solar and storage, and electric vehicles into their existing homes, Brown said.
“Being able to engage directly with households around ways in which their home can add value to the grid and therefore actually them get paid for it, and then being able to reduce their energy costs, is such a huge component of this,” he added.
Getting residential customers signed up in VPPs will be increasingly important to help balance the grid, Brown said. ERCOT, where Renew Home is active as a retail electric provider, already sees its demand peak in the summer, and its winters are driven by residential demand. That will be more common across the country.
“Most of the rest of the country, over the next 10 to 15 years, will probably go through updates with using heat pumps, and that will actually drive more and more heating-related electric peaks versus what’s just happening in certain regions of the country where electric heating is already pretty high,” Brown said.
Heat pumps are efficient, but modeling in the Northeast shows their adoption could greatly increase the peak demands of residential and commercial customers in coming decades.
The adoption of EVs by consumers will add many new DERs to the grid, Fitch said.
“I think we’re sort of at an inflection point here, where a lot of the operational questions are being answered, and lots of the business models are being figured out,” Fitch said. “And … especially with the [Inflation Reduction Act], there’s a whole asset turnover, in terms of internal combustion vehicles to EVs, that will really facilitate a greater role for VPPs.”
Coordinated EV charging so the vehicles on a block are not all charging at once and overloading the local system is part of it, but utilities are realizing that more subtle, minute-by-minute shifts in that demand can help integrate those new loads cost effectively and reliably, Brown said.
“Otherwise, you’re dealing with a problem where you’re just overbuilding infrastructure and passing on that cost to consumers in a way that is not necessarily healthy for where we need to go,” he added.
DERs represent a growing base for VPP, just as the power grid’s need for additional supply as demand grows.
“In the context where interconnecting grid-scale resources is hard, there’s this unique window for VPPs to play this capacity role,” Fitch said.
Some VPPs already are, with Fitch pointing to SunRun’s aggregation of solar-plus-storage systems in California, which provided the grid with an average of 48 MW of dispatchable capacity during a heat wave this July, the company said.
FERC Order 2222, which required RTOs and ISOs to integrate DER aggregations into their markets, also helps integrate DERs into VPPs, Brown said. But some of the rules could be changed to encourage more participation from residential consumers, as the minimum thresholds to participate in some of the markets are too high.
The other big issue facing the industry is access to data, he said.
“It’s not easy for households to be able to get access to and share utility meter data very easily and everywhere, and so that’s an area that we believe there could be continued progress on,” Brown said.
That would help utilities engage with their customers in new ways, such as setting up smart home platforms, apps and other kinds of communications beyond the monthly bill or occasional email, he added.
