Virtual power plants (VPP) could prevent 1.5 to 7.3 million metric tons of CO2 emissions in 2024, according to a new report.
RMI (formerly Rocky Mountain Institute), an independent nonprofit focused on transforming global energy systems, and Virtual Power Plant Partnership (VP3), a coalition of nonprofits and organizations focused on unlocking the market potential of VPPs, recently released the report, entitled “Power Shift: How Virtual Power Plants Unlock Cleaner, More Affordable Electricity Systems.”
The report explores the potential role VPPs could play in transforming and decarbonizing the electricity grid, as well as delivering affordable, reliable power.
VPPs use advanced software and communication technologies to manage, optimize and coordinate the output of distributed energy resources (DERs), like rooftop solar and energy storage systems, electric vehicles, smart thermostats, and smart home devices, such as appliances, televisions and smart lights.
Virtual power plants aggregate tens, hundreds or even thousands of DERs into a single, dispatchable resource that can either reduce load or create supply during times of peak demand, helping the grid to stay in balance.
DER owners that participate in a VPP typically receive incentive payments ranging between $500 to $1,000 per year, depending on the program.
A reliable, lower-cost, cleaner resource mix
The report’s authors created a detailed model of a Mountain West grid and nationwide network of VPPs for the year 2035. They compared the results of that model to a portfolio without VPPs, concluding that VPPs “can reduce costs and carbon [emissions] while maintaining reliable grid operations.”
By 2035, VPPs could prevent up to 12 million to 28 million tons of carbon, 2-4% of projected U.S. power sector emissions, researchers found.
They also determined that fully integrating VPPs into the grid could lower net generation costs by 20% or $140 per household each year, reduce carbon emissions by 7%, add 200 MW of renewable capacity to the grid, and avoid the need for 1.5 GW of new gas-powered generation units.
VPPs gaining traction in the market
Utilities have taken note of the potential of VPPs in recent years, with Puget Sound Energy (PSE) and San Diego Gas & Electric (SDG&E) already exploring different opportunities. PSE, Washington state’s largest utility, recently expanded its VPP partnership with cleantech software company AutoGrid, and SDG&E is running a VPP pilot project to help the grid meet electricity demand when summer temperatures rise.
Likewise, the Public Utility Commission of Texas announced two VPP pilot programs and CPower Energy, a Baltimore-based energy management firm and member of VP3, is creating VPPs for the New York Independent System Operator.
There are also several private companies working to accelerate the adoption of the VPP market.
RenewHome, an entity launched earlier this year as a result of the merger of Google Nest’s Renew and OhmConnect, claims to be the largest VPP in North America. The company, which is part of the VP3 coalition, plans to manage energy use in millions of homes across the country by controlling more than a dozen different types of connected devices, including smart thermostats, heating and cooling systems and water heaters.
In California, GoodLeap, a fintech company that offers financing for sustainable home upgrades, launched GoodGrid, its VPP network, in early August. Since it debuted, the network has aggregated more than 200 customer batteries and dispatched energy in response to six different “stress” events to support the state’s grid, according to a company statement.
"Distributed energy has proven its value to the millions of customers who benefit from cleaner, reliable, affordable energy every day," said GoodLeap founder, chairman, and CEO Hayes Barnard. VPPs "offer a path for homeowners and utilities to work together to meet our country's increased energy needs," he said.
Maximizing the potential of VPPs
For VPPs to reach their full potential by 2035, several key pieces need to the fall into place, according to the RMI/VP3 report. The authors identified four key conditions that must be met to maximize the grid benefits of VPPs :
- Continue to deploy distributed energy resources and accelerate VPP enrollment nationwide.
- Ensure that VPP capabilities, program design, and customer experience support regular, responsive VPP dispatch.
- Ensure that VPPs integrate accurate and timely data on grid conditions and carbon emissions.
- Encourage grid decision makers to evaluate, plan for and realize the full value of VPPs, including avoided transmission and distribution costs.
“Today’s grid operators and planners face interrelated challenges to delivering reliable, affordable electricity to ratepayers, from growing projected loads and retiring generation capacity to clogged interconnection queues and increasing high-impact, low-probability weather events,” the report said. “As multiple grid challenges emerge, VPPs present a flexible, deployable solution for managing grid needs.”
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