Virtual power plants (VPPs) can help utilities meet heightened demands during extreme heat waves—an increasing necessity as electricity use is projected to grow significantly in the coming years, according to a July 2024 report from RMI.
Indeed, summertime peak demand, driven by the electrification of industry and consumer adoption of electric vehicles and heat pumps, is projected to grow by 38,000 megawatts (MW) in the next five years, “equivalent to adding another California to the electric grid,” RMI wrote.
VPPs, aggregations of distributed energy resources, can help utilities meet the challenges of peak demand at a cost that is roughly 40% of a gas peaker and 60% of a battery, avoiding between $15 billion and $35 billion of potential capital investment nationwide, according to RMI.
“More than 500 VPPs have already been deployed across North America, realizing these benefits,” the authors wrote. “However, given the increasingly urgent need for adaptable and low-cost near-term solutions, regulator and utility interest in VPPs is increasing as are the number of VPP policies and utility programs.”
RMI lists several VPPs that have been deployed in less than a year:
- A VPP run by the Ontario Independent Electricity System Operator enrolled 100,000 homes just six months after launching in mid-2023. The Save on Energy Peak Perks program, run in partnership with grid-edge flexibility provider EnergyHub, can reduce summer peak demand by up to 90 MW.
- In August 2022, California PUC launched Demand Side Grid Support (DSGS), allowing noninvestor-owned utility customers to participate in emergency reliability programs. Within a year, DSGS had 142 MW of committed capacity. It has since expanded and is helping to support the California grid in the face of drought and extreme heat.
- In November 2022, the Texas Public Utility Commission developed rules and approved an aggregate distributed energy resources (ADER) pilot in ERCOT just four months after the program was initially proposed. The program, intended to enhance grid reliability and lower energy costs, was initially capped at 80 MW of capacity. In light of the project’s success thus far, regulators announced in December 2023 their plans to expand the pilot and enable ADERs to participate in ERCOT’s contingency reserve service. Phase 2 of the ADER pilot launched in February 2023.
The report details a set of VPP policy principles released this year by the Virtual Power Plant Partnership, or VP3, which is a coalition of hardware and software technology solution providers, distributed energy resource aggregators and others.
The 17 principles, divided into five main categories, are intended to help regulators and policymakers understand how to leverage VPPs “to achieve reliability and affordability outcomes for customers and the grid.”
“Utilities need not reinvent the wheel to implement VPPs: enabled by effective policy, utilities and grid operators can join their peers to use VPPs to meet summer peak and other grid challenges,” according to RMI.
About The Author
KUEHNER-HEBERT is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience. Reach her at [email protected].