Peak Performance: APS's Virtual Power Plant Saves Big During Brutal Heatwave
Through its innovative virtual power plant (VPP), Arizona Public Service (APS) harnessed smart home devices to save 190 MW during a historic heatwave, shifting peak demand and proving critical capacity for grid reliability. The utility’s coordinated demand response programs are setting new standards for energy management and customer engagement.
Last summer, Arizona recorded its hottest July in the state’s history. As temperatures surged over three brutal weeks, Arizona Public Service (APS), a utility that serves about 1.4 million homes and businesses in 11 of Arizona’s 15 counties, marked a stunning surge in energy use. “We sat on a whole lot of [temperature] record highs—most days over 110F and 115F,” reflected Kerri Carnes, director of Customer Technology and Programs at APS.
Customers had previously set a record of 7,660 MW on July 30, 2020, but during the July 2023 heatwave, the all-time peak soared to 8,162 MW on July 15, 2023, she said. Customers “used more energy than the 2020 peak record over a streak of nine days straight,” and during an intense period, consumption exceeded the previous peak record on 18 different days.
At the time of the 2023 peak demand, the utility’s reserve margin was 18%. While APS had an adequate supply powered by its diverse mix of energy sources, including renewables, nuclear, and flexible natural gas, the extreme heat event allowed APS to test the functionality of the utility’s virtual power plant (VPP) for reliability needs. Essentially a collection of APS’s demand response (DR) programs, the VPP represents a virtual network of smart home products—such as smart thermostats, commercial and industrial DR, behavioral DR and batteries.
During the extreme heat event, empowered by customer conservation, these “grid-edge” devices provided an astonishing savings of a combined 190 MW, Carnes said. The effect proved so monumental that the VPP “actually changed the peak day last year,” she noted. “We exercised the full VPP on July 26—and had we not, July 26 would have been our peak day. So, I just think that really shows the reliability that these resources can provide.”
Launching the Virtual Power Plant
APS first began contemplating that DR would play a more crucial role in the future of its power system in 2016. While the utility was cognizant that advancements would continue to permeate the power industry and more utilities were adopting DR as a conservation tool, APS at the time grappled with a decrease in avoided costs. As the company’s 2017 Integrated Resource Plan (IRP) suggests, low natural gas and wholesale power prices challenged the cost-effectiveness of demand-side management (DSM) programs, “particularly those that incent savings during midday hours when solar generation is at its highest and wholesale power prices are among their lowest.”
“We were talking very frequently with [the Arizona Corporation Commission] about our need to have an enhanced focus on peak load management,” Carnes said. The company eventually set its focus on developing DSM programs that would instead focus on energy savings during the late afternoon and early evening high-demand periods. As the IRP notes, the effort sought to carefully target savings to load profiles that best fit resource needs and integrated energy efficiency with load-shifting and demand-response opportunities.
Over the years, the vision has evolved into a comprehensive suite of programs. Launched in 2018, APS’s “Cool Rewards,” a residential thermostat program, has grown to be the largest component of the company’s VPP, encompassing more than 90,000 thermostats. The program manages energy consumption in direct response to the electric load demand fluctuations within the power grid by working with thermostat manufacturers to slightly increase thermostat setpoints, thus reducing a home’s cooling load. These minor temperature adjustments by APS customers really add up, resulting in reducing the overall load on the system during the hottest days. But it also boasts the capability to shed more than 138 MW of energy, adding to its reliability and energy avoidance benefits.
In parallel, the Peak Solutions Commercial and Industrial DR program takes flexible capacity benefits by tailoring programs designed exclusively for commercial customers for megawatts of DR each summer season. Yet another key program is the APS Residential Battery Pilot program, through which the utility partners with residential customers who have options to participate in a data-share construct. In this construct, they dispatch their battery consistent with their time-of-use on-peak hours for daily load shifting and share that data with APS, or APS can dispatch participating batteries for DR. Finally, the VPP also includes Energy Saving Days. This voluntary behavioral DR program is designed on gamified customer engagement to produce improved energy and demand savings.
The VPP has grown steadily since its launch, driven by innovative approaches by APS’s Customer to Grid Solutions team, Carnes said. “When I moved into this role in 2019, we were at maybe 20 MW worth. Last summer, we were able to achieve 190 MW across all of our programs,” she noted. “I really do attribute that to thinking about the customer experience,” she added.
In the fall of 2020, for example, the team launched “APS Marketplace,” an online platform where customers can buy “qualifying” smart home technology devices. “It was a real game-changer” in driving major enrollment growth. The platform instantly removed barriers for customers, allowing them to easily access and enroll in demand response programs, she said. “It’s a seamless, frictionless experience for our customers. You don’t have to mail us your receipt anymore. You don’t have to wait for the incentives or rebates to be applied. It all gets applied at the point of sale, making those technologies more affordable and more attainable for our customers.”
APS’s focus on improving customer engagement and experience has been a central aspect of building its VPP, Carnes added. APS is continuously evolving its marketing strategies to recruit more participants and make potential participants aware of program benefits—including that the customer ultimately retains control over their devices. “We leverage various marketing tactics and we’re constantly gauging the effectiveness of those tactics and kind of revamping and evolving those over time,” she said.
A Unique Dispatch Approach
But at the same time, APS has also been working to maximize the effectiveness of its VPP. The VPP operates efficiently under a single resource operating platform developed by Energy Hub. A single point of reference limits human performance errors, represents affordability for customers, and simplifies dispatch during events of high demand, Carnes said.
However, “We’ve always tried to play around with different dispatch strategies to test what happens with performance, what the degradation looks like,” she noted. Last summer, for the first time, the utility demonstrated a “staggered dispatch,” which Carnes said may be increasingly important as the utility continues to grow the VPP. “We like to say we’re playing Tetris with the devices—it helps us stretch their contribution out over the on-peak period because our retail on-peak actually ends before the system peak ends,” she explained. “So having the ability to stretch that out helps smooth the snapback that naturally occurs at the end of the on-peak period.”
Thinking about how to most efficiently dispatch the assets flexibly will allow APS to grow the portfolio beyond thermostats, for example, to include a whole-home distributed energy system or an actively managed electric vehicle charging program, Carnes noted. Trying those strategies out in more measurable ways before those technologies begin to make a real impact on the grid is part of the utility’s service to its customers, she suggested. “It’s to make sure that we’re developing deep and trustful relationships with our customers.”
When APS developed its Cool Rewards program, for example, “it was important for us to make sure that customers understand that we view this as an incredibly important part of maintaining reliability and affordability for our customers every summer. But at the end of the day, they retain control,” said Carnes. However, not all APS programs have been successful. “We tried a water heater program, but we couldn’t keep them wi-fi connected, so we shut it down, though we haven’t given up on that,” she said.
By incorporating customer feedback into the development process, APS ensures the programs meet customer needs and expectations, she explained. “My team works very hard to make sure that we’re incorporating the voice of our customers at every part of the development process. We really are. We do not subscribe to designing a program that makes sense to a bunch of utility folks and then pushing it out and hoping for the best. We check in with customers.”
Preparing for Tomorrow’s Loads
Looking ahead, Carnes expects the VPP will play an even larger role as load growth surges upwards, driven by electrification and data centers. Carnes and her team are now shooting to exponentially expand the VPP capacity from the current 190 MW over the next ten years.
“Over the next 10 years, we’re going to be challenging all of my teams and frankly our business partners across the enterprise to help us really anchor the infrastructure and technologies that we need,” Carnes explained. The benefits of the VPP extend beyond reliability, translating into cost savings for all customers. “Think of the startups that we saved on conventional generation, the fuel that we save. All of that translates into savings that get passed to all of our customers, whether they’re a participant in the program or not, and that is a good thing. That is reliability and affordability in action,” she emphasized. “Having flexibility through customer-sited programs and partnerships, we think, is just going to be such an important part of the overall solution.”
—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).