DERs Serving the Macro Grid: Momentum Continues to Grow for Virtual Power Plants

The energy industry is facing significant challenges in the coming years. Data centers and a host of electrification efforts are demanding more electricity–but, given the speed of technological advancements and policy changes coming out of Washington, D.C., how much power they’ll need and how quickly they’ll need it is up for debate.

Mother Nature is yet another challenge. Increasingly destructive weather patterns are wreaking havoc on grid infrastructure as wildfires, hurricanes, winter storms and extended tornado seasons drive up the number and duration of storm-related grid outages.

And you can add aging infrastructure to the list of woes. Much of the country’s fleet of traditional power plants, as well as its transmission and distribution apparatus, is operating well beyond its “best by” date and slated for retirement. The U.S. was expected to shutter 5.2 GW of capacity in 2024, primarily coal and natural gas plants. Close to 5 GW of U.S. nuclear power capacity has been retired since 2017, according to the U.S. Energy Information Administration. Some of that nuclear power is being considered for restart, but even so, resource adequacy will still be less than what the 21st century energy load demands.

Renewable energy resources are coming online to replace some of that retired capacity, but due to their intermittent nature, they add yet another layer of complexity to the system.

For a growing number of utilities, including Rocky Mountain Power and Xcel Energy in Colorado, San Diego Gas & Electric in California, NRG Energy in Texas and Puget Sound Energy in Washington, virtual power plants (VPPs) are emerging as a key tool for navigating this volatility while maintaining the grid’s integrity and reliability, and keeping the cost of electricity as low as possible.

Why VPPs?

VPPs use advanced software and communication technologies to manage, optimize and coordinate the output of tens, hundreds or even thousands of distributed energy resources (DERs) into a single, aggregated dispatchable resource that can be used to bolster the grid during times of peak demand.

There are three categories of DERs that VPPs can leverage: rooftop solar and energy storage systems, smart thermostats, and smart devices that can be controlled to reduce load when the grid is congested.

Each DER that’s connected to a VPP must be dispatchable, or able to quickly adjust the amount of electricity it sends to or draws from the grid. Solar is an intermittent power source, so it is not dispatchable unless it is paired with an energy storage system, typically a battery.

VPPs are kind of the flip side of the microgrid coin. Whereas microgrids connect and control DERs to serve a near-site customer, VPPs are an array of DERs that are deployed outward to serve the larger grid in times of need.

Not everyone is on board with VPPs. Detractors believe they make managing and operating the grid too complex, and that the path forward should focus on simplifying the grid not making it more convoluted.

Proponents, however, see VPPs as a way to democratize energy, help the grid stay in balance and keep consumer energy bills down.

The U.S. Department of Energy touted the benefits of VPPs in its latest Liftoff Report, noting the technology is a low cost solution that can be deployed quickly to help solve the challenges facing the grid.

As proof of growing interest in VPP technologies, multiple utility-based VPP projects have been announced in recent weeks.

Rocky Mountain Power expands VPP program

Utah-based Torus, an energy storage solutions provider, announced the technical details of its new 70 MW VPP initiative with Rocky Mountain Power (RMP) last week.

The VPP, which is expected to be online in the next 12-18 months, will leverage Torus’ Nova Spin, a flywheel energy storage device that the company says has twice the operational lifespan of conventional battery systems.

The company’s lithium-iron phosphate battery energy storage system, Nova Pulse, will also be deployed in support of the VPP.

The American made energy storage systems will be installed at commercial and industrial facilities in Utah, including data centers. The systems are designed to provide benefits to the facilities as well as grid-scale services.

While deployment details are still being finalized, a representative from Torus said each installation will be customized based on the facility’s power requirements, backup needs and grid service capabilities.

The VPP will support Utah’s efforts to double its power production in the next 10 years–an initiative known as Operation Gigawatt.

"Enhancing and expanding the Rocky Mountain Power system is the key to meeting Utah’s energy future,” said Dick Garlish, president of Rocky Mountain Power. “Collaborating with innovative leaders in technology and energy, like Torus, is essential to meet the goals of Operation Gigawatt.”

The VPP marks an expansion of RMP’s Wattsmart Battery Program, which offers incentives encouraging homeowners and businesses to install energy storage systems and connect them to RMPs smart power grid. Participants are compensated for allowing the utility to manage and dispatch their stored energy in support of the power grid during times of peak demand.

RMP will integrate the Torus systems into the Wattsmart Battery program and manage the grid-level dispatch. Torus will provide technical operations support in the form of real-time performance monitoring, AI-powered predictive maintenance, hardware security and secure SCADA integration.

"This technical implementation demonstrates how our relationship with Rocky Mountain Power will deliver both grid resilience and energy security," said Nate Walkingshaw, CEO of Torus.

VPPs gain momentum

Utilities in Puerto Rico, Colorado and Nova Scotia, Canada, are also expanding access to VPP programs.

In collaboration with Enphase Energy, a global supplier of microinverter-based solar and battery systems, Luma Energy, Xcel Colorado and Efficiency Nova Scotia will expand consumer access to VPPs, offering incentives to residents who install Enphase’s IQ Battery 5P.

Xcel Energy customers in Colorado will receive a $350/kW upfront incentive to install an IQ Battery 5P, with a $5,000 cap per site. Those installing three of the batteries can earn $4,032 upfront and an annual payment of $100 during the five-year participation period.

Puerto Rico’s Luma Energy is offering participants with three IQ Battery 5Ps approximately $1,000 annually, assuming the batteries deliver up to 80% of their capacity when called upon during demand response events.

Efficiency Nova Scotia, the province’s first energy efficiency utility, is running a pilot program featuring the IQ Battery 5P. Participants with a 15 kWh Enphase battery system, which typically includes three IQ Battery 5Ps, can receive $1,500 in annual performance incentives. As with the Puerto Rico program, participants’ systems must deliver up to 80% of their energy capacity during demand response events to qualify for the incentive.

Sunrun expands its VPP

Sunrun announced last week that more than 20,000 customers participated in 16 virtual power plant programs across nine states and territories in 2024. The company's VPP portfolio, which is built on Sunrun’s fleet of residential solar and battery storage systems, has a combined instantaneous peak of nearly 80 MW.

“Our largest and most successful programs are in Puerto Rico and California—places with vastly different power grids—but both equally benefiting from Sunrun customers’ solar-plus-storage systems being networked together to augment supply. I want to thank our amazing team which has turned the dream of VPPs into a reality,” said Chris Rauscher, head of Grid Services at Sunrun.

Sunrun has 16,000 solar and storage customers participating in VPPs in California in what the company said is the largest single-owner VPP in the US. The company has another 4,000 VPP participants in Puerto Rico.

In addition to a partnership with Tesla Electric and Vistra on two VPPs in Texas, the company’s portfolio includes a collaboration with Orange and Rockland Utilities in New York that it said is the largest residential VPP in that state. In Maryland, the company has created a bidirectional electric vehicle-to-home VPP with Baltimore Gas and Electric.

“Utilities are at a point where they can’t grow fast enough for the increased demand for electricity,” said Sunrun CEO Mary Powell. “Our power plant portfolio is at an inflection point because we have the resources and expertise to quickly develop, deploy, and scale programs to provide smart, controllable load. Combining solar with storage not only provides American families with energy independence and peace of mind, but also the ability to support the grid when it’s needed most.”