Virtual Power Plants: An Untapped Resource for Improving Grid Reliability
Utilities are in a tricky spot. While reliability is one of three key focus areas for utilities as they navigate the clean energy transition, along with decarbonization and affordability, it’s become an increasingly hard pillar to deliver on, especially as growing peak demand becomes a year-round consideration.
This past summer we’ve already seen large portions of the U.S. grid at risk of power shortfalls during heat waves and other extreme weather events—and this trend isn’t new. The National Centers for Environmental Information found that there were 28 separate billion-dollar weather and climate disaster events in 2023, and recorded another 15 through June 2024, putting us on track to surpass last year’s record.
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In addition to extreme weather events, new distributed energy resources (DERs) in homes—including electric vehicles (EVs), solar panels, battery storage, heat pumps, smart appliances, and other electrified commercial & industrial (C&I) loads—are coming online. Not to mention, fleet wide electrification of transportation, data center growth, general increase in power consumption and organic economic development are all major factors adding strain to an already stressed grid. Imagine, instead, that we applied gig-economy rules and trends to our grid infrastructure.
We can empower those same DER customers to be part of the solution and create the biggest opportunity for long-term reliability. By aggregating customer-sited assets into distributed or virtual power plants (VPP), utilities can turn this demand liability into the new supply asset, unlocking flexible capacity to power a more resilient grid.
Utilities are turning to VPPs as a fast, scalable way to improve grid reliability. VPPs bring together multiple asset types, from demand response to solar and storage, to EV chargers to controllable HVAC loads—across residential, small- to medium-size business, and C&I customer segments. Utilities can create dispatchable portfolios of heterogeneous devices that help stabilize the grid in different ways. Having no single point of failure, the portfolio effect inherently drives reliability of the VPP asset itself.
Want to learn more about virtual power plants? Plan to attend Experience POWER Week, scheduled for Oct. 9-11, 2024, in Orlando, Florida, where you will hear from industry experts on VPPs and other technologies impacting the power sector. Register today!
Furthermore, this VPP asset can provide a wide range of grid services, including peak load reduction, ancillary services, wholesale price hedging, and locational constraint management, to balance energy demand and supply across a utility’s network. Unlike traditional demand response programs, VPPs can be deployed year-round like a standard capacity resource, not just during summer and winter peaks. And these portfolios, unlike other power generation sources, can be assembled and dispatched relatively quickly to meet pressing grid needs, even on a daily basis if necessary.
Because VPPs rely on customer participation, developing an effective education, recruitment, and engagement strategy is critical. Instead of treating customers as rate-payers—passive recipients of power from centralized generation sources—utilities have an opportunity to build and strengthen relationships with customers as partners in the energy transition. Delivering personalized program offers and meaningful incentives can help maximize VPP enrollments and participation, ultimately driving grid impact and reducing carbon emissions from dirty peaker plants and other emergency supply resources.
VPPs are currently being deployed across the country, with more resources being added every day. There are large-scale deployments in all North American energy markets, ranging from tens to hundreds of megawatts in size. Rocky Mountain Institute anticipates that VPPs will become such an integral part of our energy resiliency matrix that there could be as much as 60 GW of capacity deployed via VPPs across the U.S. by 2030.
One proven example of a VPP is Puget Sound Energy’s Flex Program, which brings together residential demand response, smart thermostats, EV charging, and interruptible commercial & industrial loads into a single dispatchable resource. While the program is currently focused on providing capacity to support grid reliability, future phases will also support the wholesale market through ancillary services and locational benefits. In fact, since the beginning of 2024, PSE has called fourteen events. As of the end of the winter season, the Flex program has delivered 34 MW of savings with more than 40,000 customers, and the program has only grown since then.
VPPs are a powerful but largely untapped resource to firm up grid reliability. By leveraging energy assets that are already connected to the grid and making them part of the solution, utilities and their customers can benefit from more affordable, decarbonized energy while safeguarding resilience today and for years to come.
—Gisela Glandt is VP of Virtual Power Plants for Uplight.