As It Plans World’s Biggest Virtual Power Plant, OhmConnect Warns of Market Flaws in California

OhmConnect, partnering with Sidewalk Infrastructure Partners, plans a 550-MW virtual power plant (VPP), Resi-Station, created by pooling and controlling homeowners’ devices and microgrids to provide clean power for California via aggregated flexible demand.

Said to be the biggest project of its kind in the world, Resi-Station will help meet the needs of California’s stressed grid, said Cisco DeVries, CEO, OhmConnect.

“We saw this threat in August and September to the grid. What OhmConnect is doing is fundamental to our success. This is the cheapest, cleanest way to support grid reliability,” said David Hochschild, director of the California Energy Commission (CEC), which gave OhmConnect a $4 million grant in 2016 to support its work. He spoke during a press conference.

However, to help provide California and other states with much-needed clean flexible demand and VPPs, regulations need to change, said DeVries. California needs 10 to 15 GW of flexible demand to meet the needs of the grid in coming years, he said.

In August, during a heat wave, OhmConnect helped meet demand for electricity from the strained grid by controlling the smart devices, microgrids and appliances of 150,000 residential customers, providing 1 GWh for the grid, the equivalent of taking 600,000 homes off the grid. It paid $1 million to its homeowner customers.

Google parent in the mix

Resi-Station will be supported in part with funding from Sidewalk Infrastructure Partners (SIP), which is backed by Google’s parent Alphabet and its Sidewalk Labs, along with the Ontario Teachers’ Pension Plan.  SIP, which focuses on pioneering efficient infrastructure, made a $20 million investment in OhmConnect plus a commitment of $80 million to finance Resi-Station. The $80 million will help OhmConnect recruit new customers and pay for equipment and devices installed in their homes.

Some of the $80 million may be used to install home microgrids, which allow OhmConnect to provide larger amounts of flexible load from each home.

“We can pay for some of the cost of microgrids as long as we can use them,” said DeVries. Right now, the company has about 100 microgrids in customers’ homes.

“Next year, we will investigate how we can support the microgrid industry. Microgrids will be a critical part of the grid of the future, and we want to be in front of supporting that,” he said.

California needs flexible demand

“I ultimately think California needs many gigawatts of this type of aggregated flexible demand,” said DeVries. To achieve that scale will require adjustments in regulations.

The existing California rules and regulations are a “hodge podge” that will help the company get Resi-Station online. But much more is needed. Existing regulations and rules were designed for fossil fuels; regulators and stakeholders need to re-think how to regulate and support the distributed grid of the future and take into account the advantages and disadvantages of distributed energy resources (DER), DeVries said.

For example, the California Public Utilities Commission (CPUC) now caps at 8% the amount of flexible demand that can be included in utility resource adequacy plans. “Not only does the 8% need to be revisited. The way they add up to the 8% is wrong,” said DeVries.

No payment to microgrids for keeping the lights on

California’s summer heatwave and shortages highlighted some of the problems with incentives for flexible load, he added. On August 14 — when there were two hours of rolling blackouts in response to the hottest temperatures on record worldwide — OhmConnect provided about 200 MWh of flexible load, paying its customers that allow the company to control their appliances, microgrids and devices. But OhmConnect didn’t make money by supplying that badly needed resource.

“I would have been economically better off if I had not dispatched my users,” said DeVries. “Issues in the market didn’t work right. That should not be the case. It should be the day when everyone shows up.” It’s unclear exactly why the system didn’t provide enough incentives to attract more flexible load, he added.

OhmConnect was happy to help the state through a major crisis, but can’t regularly lose money as a result of the market not working properly.

Also, in September, after being asked by a state official to provide load, the company lost $100,000 to $200,000 after paying its customers. OhmConnect was happy to help the state through a major crisis, but can’t regularly lose money as a result of the market not working properly.

“We’re working with the state to fix problems like that so we and our customers are aligned, and we can provide the most when the grid is most in need — and get paid for it,” said DeVries.

Another challenge to getting more flexible load online involves measurement and verification. There is no agreed-upon or universal way for states to determine what the expected energy use would have been without the company’s intervention.

“Depending on which agency we’re dealing with, there are five different ways that they count how our energy reduction is measured. And they change those all the time,” said DeVries. In order to create a long-term investment in flexible load, it’s important to know how to count the megawatts. This affects what the consumers are paid as well as the types of devices that are controlled.