You might not realize it, but the next time you shop for a new refrigerator or water heater, you might also be investing in a new power plant—and opening the door to your region’s wholesale power market. It turns out the smart
Wi-Fi connections in new appliances can offer more than status alerts and remote monitoring capabilities.
Such app-based operational controls also provide new options for engaging with coordinated efforts to address electricity supply and demand concerns that already have had significant effects during weather-related usage spikes. Interest in such plants is growing as utilities and regulators seek new ways to support distribution grids without building new natural gas infrastructure.
Maintaining smooth grid operations is a constant dance between supply and demand, requiring kilowatts generated to equal kilowatts used on a continuous basis. Power quality problems and even system shutdowns can occur if either factor falls out of balance with the other.
As utility planners seek to balance electricity supply and demand in the face of growing solar and wind generation, they’re turning to innovative options that call on customers’ equipment during high-demand periods. But these aren’t your father’s old demand-response programs—they’re a much more sophisticated approach incorporating artificial intelligence (A.I.), machine learning and cloud connectivity built into today’s appliances and battery inverters.
They also could help support the current push to electrify everything from cooking to transportation by giving grid operators new options for controlling the demand side of the distribution equation.
How do VPPs stack up?
Marketers use the phrase “virtual power plants” (VPPs) to describe these new incentive offerings because they can come into service as quickly as a peaking oil or natural gas generating station during times when distribution systems are strained. Supply-focused VPPs call on customers’ on-site batteries to add power to the grid, while demand-oriented approaches use mass notifications—and sometimes direct operational control—to encourage participating customers to dial back temperature settings and reduce overall electrical use.
Utilities and third-party companies that ensure they can deliver enough energy supplies or reductions are able to bid into wholesale electricity markets just like any other power producer.
California proved VPP effectiveness during heat waves several times over summer 2022. Tesla, Austin, Texas, and energy services company Stem, San Francisco, were able to call on their customers’ battery systems during demand events—Stem’s system dispatched 86 megawatts (MW) on Sept. 6 and Tesla’s hit 16 MW on Aug. 17.
OhmConnect, Oakland, Calif., a demand-response aggregator operating in California, New York and Texas, says its participating customers were able to reduce their collective demand by 2.5 gigawatt-hours (GWh) over the summer of 2022 by setting back their thermostats and other appliances when notified during peak demand periods.
“We are definitely moving beyond pilot stage, but we are woefully behind where we need to be,” said Cisco DeVries, OhmConnect’s CEO, who noted his company “has become predictable and reliable enough to be licensed as a power provider” and can now fully participate in the power markets for the three states where it does business.
While he recognizes the connection to old-school demand-side management (DSM) programs that many utilities established to cut demand peaks in the 1980s and 1990s, DeVries said new programs—such as those his company developed—feature a fundamental difference from those earlier offerings. Those programs often only kicked in during two or three power emergencies per year, but “we dispatch all the time,” he said.
“On hundreds of days a year, we are being signaled to reduce demand. We can predict how many megawatts are available at any given time, so we’re moving from an emergency response capability to a grid support response capability,” he said.
Also, unlike first-generation demand-response contracts, the relationship OhmConnect has with its participants allows them to opt out of any request. Instead, they’re incentivized through cash payments, gift cards and other benefits to participate as frequently as possible.
“That changes the game to peoples’ responses,” DeVries said. “They know what to do and they can make some real money. We have customers who make hundreds of dollars a year.”
Ryan Hledik, principal with Boston-based energy consulting firm The Brattle Group, also sees direct ties between DSM from the 1990s and the more advanced plans on offer today.
“I think of VPPs as an evolution,” he said. “We started with demand-response 1.0—typically it has been used as a resource of last resort in emergency situations. That evolved 5–10 years ago as demand flexibility. We’ve started thinking about more than capacity, and we’re now incorporating resources behind the meter that can push electrons back onto the grid. It’s all part of the same concepts, but we’re just incorporating new ways of managing them.”
Resources to meet demandHledik co-authored a Brattle Group study released in May that identified significant financial benefits from broader use of VPPs. His team modeled a plan that combined the energy saving and production capabilities of smart thermostats and water heaters, managed electric vehicle charging and behind-the-meter battery storage, weighing each technology according to its potential adoption within a hypothetical utility’s customer base. So, for example, demand-response savings from smart thermostats are expected to be much more significant than kilowatts pushed onto the grid from homeowners’ battery systems, given thermostats’ much higher affordability and availability.
The report defines a midsize utility in need of 400 MW of new resources to meet peak demand needs in summer and winter, with analysts comparing a VPP approach to the expense and performance of a new natural gas plant designed only for peak-period operation and a transmission-connected, utility-scale battery.
Brattle Group’s analysts found the net cost to the utility of the VPP was 40%–60% of the cost of the other two options. When adding societal benefits, including reduced emissions and deferred transmission and distribution investments, research found a VPP actually saved more money than it cost.
For Hledik, the results confirmed the value VPPs can provide to utilities and their customers.
“Under conditions that would be considered pretty challenging, you can run a VPP in a way that provides the same degree of resource adequacy” as a natural gas peaker plant, he said.
VPPs also offer options for commercial and industrial customers to add new financial opportunities for their own on-site resilience investments. For example, for operations considering new backup generation, being able to earn VPP-related utility payments or credits could make a battery system more appealing than a natural gas generator, while also helping such companies reach their sustainability goals.
A.I. and new battery technology
This is the market a new partnership between energy-management software developer Maplewell Energy, Broomfield, Colo., and battery maker Urban Electric Power, Pearl River, N.Y., is hoping to address.
Each partner brings its own special sauce to the new combined offering. Maplewell Energy has developed a predictive A.I. tool called JANiiT that provides real-time energy management based on predicted facility needs and related utility demand charges.
Urban Electric Power has developed a unique battery technology based on the long-proven zinc manganese dioxide chemistry that’s been used in familiar alkaline batteries for decades. The batteries are rechargeable for 10 years or more and offer significantly longer-duration discharge than lithium-ion options.
Maplewell Energy’s CEO and co-founder Matt Irvin sees a couple different customer profiles for whom the two companies’ combined service offerings could be especially appealing. The first includes commercial, institutional and industrial enterprises and operators of multiproperty portfolios (e.g., retail chains) that are actively investing in distributed energy resources (DERs), such as rooftop solar and their own battery systems. The second includes organizations that might be considering DER installations but are still figuring out how to monetize the storage investment.
“Part of the equation of making that battery affordable is VPPs,” Irvin said, noting that his company’s energy management system could help these customer’s meet multiple goals. “You have customers who really value resiliency. JANiiT can reserve a portion of that capacity for resilience.”
Other companies could be considering storage to lower their operations’ demand peaks and reduce expensive demand charges. Again, Irvin said, the software could enable these users to add a VPP value stream on top of this goal, potentially speeding up their return on investment.
The near future could see VPPs become a more active part of utility operations nationwide. For example, Irvin expects the technology’s applications could expand to include support for ancillary services—activities such as voltage and frequency regulation that help grids run smoothly.
“I do see that as a future for VPPs,” he said. “Five years from now, we see situations where we’re partnering with a utility. There’s certainly this space where we can offer the utility some services.”
On the residential customer side, OhmConnect has begun working with appliance makers such as Carrier and Google Nest to allow it to directly control connected devices, and DeVries sees such partnerships growing, enabling behind-the-scenes participation, and savings, without customers having to set back devices themselves.
“That capability is now available, and it allows for a seamless, integrated experience,” he said.
This kind of grassroots-level availability has potential financial opportunities for VPPs to be available to all utility customers, not just those with expensive solar-plus-storage installations, DeVries said. “We need to bring everybody along,” he said, noting that 35% of his company’s current customers fall into lower income brackets.
“It’s not just for folks who can afford solar and storage. That kind of accessible-to-everybody benefit is something we’ve been missing in the energy transition,” he said.
stock.adobe.com / Trostinka_25 / Zoa-Arts / Trostinka_25