Real Promise of Virtual Power: CPower Finding Value Stack for Energy Customers in Using VPPs to Balance Grid Under Load Duress

And balance is everything in electricity transmission and distribution. Power generation capacity and customer load must be nearly equal to maintain the U.S. standard frequency of 60 hertz. Otherwise, as the Electric Reliability Council of Texas (ERCOT) grid nearly found out four years ago, the system could suffer outages.

With data center power load growth and electrification of both transportation and industrial sectors rising, the need for additional, dispatchable power is crucial and immediate. DERs such as microgrids can deliver directly connected power for a customer such as a hospital, food processor or military base, but when not needed some of those kilowatts can be combined into MWs and turned in the other direction.

“Those assets that make up a microgrid, whether it’s solar or combined heat and power or batteries, they have value to that site,” CPower’s Sachs said. “But they also have value to the grid.”

VPPs can also mitigate environmental issues from fossil grid power. A 2024 study by RMI (formerly Rocky Mountain Institute) and VPP coalition VP3 determined that the aggregation and distribution of VPPs could prevent at least 1.5 million metric tons of carbon dioxide emissions per year, perhaps as much as 7.3 million tons.

“By 2035, VPPs can avoid 12 to 28 million tons, or two to four percent of projected US power sector carbon emissions,” reads the executive summary of the RMI report.

It's not magic, or is it?

So what is a VPP? Well, it’s complicated but simple at the same time: VPPs are customer energy management technologies supporting operation of the electric grid. They use advanced software and communication technologies to manage, optimize and coordinate the output of DERs, like variable loads, rooftop solar and energy storage systems, electric vehicles, smart thermostats, and smart home devices, such as appliances, televisions and smart lights. So VPPs combine elements of decarbonization such as renewables, digitalization and energy efficiency.

Those DERs in the tens or hundreds of thousands are aggregated into a single, dispatchable resource moved along the main distribution grid to either reduce load or create supply during times of peak demand.

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CPower is a long-time player in Virtual Power Plants including demand response, and the company works with every grid system operator except Southwest Power Pool. These include PJM Interconnection, ERCOT, CAISO (California) MISO (Midwest), ISO-New England and NYISO (New York) which last year selected CPower as the first aggregator approved to bid into the new DER Participation Model.

Providing an extra layer of grid resource adequacy is a central target for VPPs, but so are frequency regulation, demand response, day-ahead markets and more. On the microgrid customer side, it offers another potential revenue stream to pay for an expensive microgrid that otherwise is focused solely on backup power in the event of grid outages. It’s called “value stacking” by microgrid developers.

“There is now inherent flexibility in everything” energy-wise, Sachs noted. “Anything that stores, generates or consumes energy is connected to the distribution grid, and that can respond to the grid (when needed). If it’s a refrigerator (with a smart plug) it becomes a DER. . . It’s really not magic.”

Beating the huge interconnection delay with small resources

Sure feels like magic to those untrained in smart engineering and two-day grid communication. But here we are: The power of a massive gas-fired plant contained in the combination of hundreds of DERs and appliances.

“The grid needs us,” Sachs said. “It is a fascinating time.”

Indeed, it is, as well as an era that strikes fear in the heart of utility and industrial project developers. The advent of artificial intelligence and need for expanding cloud-based computing is revolutionizing a power demand market that was forecast as remaining flat only a few years ago.

Some reports indicate that data center capacity could grow 30 to 50 GW over the coming decade or so. Fifty GW is the equivalent of 50 new conventional nuclear power reactors, of which only two new ones have been built in the U.S. this decade.

Building new utility-scale generation requires two to five years of running the interconnection gauntlet. CPower’s Sachs is confident that the grid will find its way toward more “all of the above” solutions from mega microgrids to gas-fired plants to SMR nuclear. And those data centers must be built.

“As a country, we don’t want to fall behind in the AI arms race,” he pointed out. “If you take away VPPs, you must build new gas-fired generation, which can take years. Supply chains for key components have long and growing backlogs. On top of that there are also huge interconnection queues that can take years to work through. And even if one can miraculously solve those challenges, in many regions we still need gas distribution to provide power.”

Comparatively, Sachs added, VPPs can be built, scaled and operating within half a year.

Data center backup power creates challenges and solutions

As VPPs are being deployed, data centers, each with massive amounts of available backup power, can help be part of a solution to grid congestion.

“The power sector is not good at adding scale quickly,” Sachs said. That’s where VPPs come in.

“We need to find the right balance, deferring some of those costs –such as huge transmission investment—because you can’t just triple the energy bill for consumers.”

Once again, VPPs offer inherent flexibility to take the sting out of a grid-scale resource adequacy issue. And data centers can stack greater value by deploying their distributed energy assets to help fix the larger problem.

“They want a sustainable solution,” Sachs noted. “Your DERs are worth money and add value to your society.”