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When Will You Be Part of a Virtual Power Plant?

Dec. 15, 2023
VPPs can help to improve grid reliability, increase the integration of renewable energy, and reduce the cost of electricity.

Odds are, that in the United States you may not yet have access to join a VPP (Virtual Power Plant). Driven by FERC order 2222, grid operators have begun to create the rules that allow aggregators of distributed energy resources (DERs) to form virtual power plants. California Independent System Operator (CAISO), New York Independent System Operator (NYISO) and the PJM Interconnection have taken the early lead, but ERCOT is still pondering new policies to support VPPs. VPPs are coming, and the benefits can be significant.

A virtual power plant (VPP) is a large network of decentralized energy resources, managed by new software for grid operators, that can throttle back demand or export power to the grid. These resources may include electric loads like heat pumps, water heaters, or EV chargers. As an example, imagine that an aggregator has 10,000 EV chargers enrolled and a peak load event on the grid is happening, maybe on a hot summer evening. If the aggregator could command those EV chargers to postpone charging until there is ample or lower cost or cleaner supply the grid load could drop by several hundred megawatts.

This has great value to improve grid stability and when a VPP can make such shifts in loads, the grid operator can share the financial benefits with each of the participating EV owners. In the Massachusetts town where I live, our utility will give EV owners a free WiFi-controlled EV charger worth about $500 with the condition the utility will reduce the EV charge rate during peak load events. The homeowner can override this if they really need to charge at a high rate. The utility estimated that an average participating EV owner that comes home from work and plugs in at 5 or 6 pm will save the utility about $625 per year by reductions in peak loads. As most EVs can easily recharge overnight the homeowner is not inconvenienced. The utility recovers the cost of the free charger in less than a year.

Simply reducing load is only one of several ways a VPP can provide value. A VPP may include generation sources like solar panels, wind turbines, and batteries, and when these are aggregated the VPP can control these as if they were a single, large power plant.  They can perform valuable grid services by reducing power demand, improving power factor, shifting loads, or injecting renewable battery power into the grid. Valuable services can include:

  • Frequency regulation.
  • Voltage support.
  • Demand response.
  • Energy storage.

VPPs can help to improve grid reliability, increase the integration of renewable energy, and reduce the cost of electricity. Since VPPs squeeze more value out of assets paid for by individuals, businesses, or institutions, they are cost effective replacement for the fossil fuel peaker plants that are often called upon today to fill in gaps when the sun doesn't shine, or the wind doesn't blow. As a result, VPPs are becoming increasingly popular, and they are expected to play a major role in the future of the electricity grid.

Grid operators must always have a reserve of transmission capacity and generation capacity to allow a margin of operational flexibility to meet unexpected loads, generation, or equipment failures. To ensure such capacity exists, they charge a tariff to all grid customers that is typically based on how much power your utility distribution system was using during the regional peak hour of each month. In my town we pay about 8 cents per kWh for electrical energy, but we pay about 5 cents per kWh in tariffs to support transmission and generation capacity of the regional system to meet peak demands. In New England, for example, summer peaks occur on very hot days due to AC loads.

With a new emphasis on switching to electric heating to reduce emissions contributing to climate change, winter peaks on frigid days may soon exceed the summer peaks. By reducing loads during these peaks, our utility can reduce the transmission and capacity tariffs, and we are seeing many utilities installing grid scale batteries and expanding DER programs for this purpose.

Why Can’t I Find A VPP Near Me?

Setting up a VPP is a complex process faced with many business and tech-nical obstacles. The grid operator must first create rules and tariffs that would allow for energy trading to be attractive to VPPs. VPPs can be utilities, unregulated arms of utilities, energy-as-a-service providers or even community choice aggregation (CCA) entities. VPPs must find many participants with flexible assets and bid into the grid markets with the confidence they can perform specific grid services. This is a dynamic activity as new participants may join the aggregator gradually.

VPPs need to be able to communicate with the grid operator or utility to receive instructions and provide feedback. Standards like Open ADR and IEEE 2030.5 allow grid operators to communicate with VPP applications over secure internet connections. This communication can be difficult to implement because of the large number of devices that are involved and the need for real-time communication. There is no standard business model and not all devices support the latest communications standards. To allow remote control a diverse collection of customer equipment like heat pumps, water heaters, EV chargers or for interacting with solar in-verters, wind turbine power converters or batteries need to be automated.

Today there is a wide range of communications interfaces often using in-ternet connectivity, but it is unlikely customers have the latest WiFi ena-bled water heater, heat pump or EV charger. There is typically a need for a revenue grade smart meter that can operate in real time with the need-ed cybersecurity and the ability to record data even when disconnected from the internet.

VPP Interaction With The Grid

Established suppliers to grid and transmission operators or large utilities like GE, Siemens, ABB, and Schneider Electric, have adapted their ADMS (Advanced Distribution Management Software) and DERMS (Distributed Energy Management Software) to interact with VPP’s. AutoGrid was an early VPP supplier that focused on aggregation end of the business, but as they were integrated into the Schneider Electric organization, their AutoGrid Flex platform is now part of the “Grid-to-Prosumer DERMS” software which integrates to various existing ADMS systems from multi-ple suppliers.

For example, the GE GridOS DERMS is a transmission and grid operator tool. It can use a power flow model of the grid with or without the VPP to look ahead with forecasts and optimize grid assets. Programs like GE GridOS DERMS interact with advanced distribution management soft-ware (ADMS) to determine the VPP goals that will keep the grid reliable and the power cost low.

Once grid operators realize they can trust VPPs to deliver the services they committed to, the VPP customers should be able to share in the compensation for these services. Such compensation can occasionally be very high if, for example, the VPP can save the utility from an impending blackout, maybe due to unusual weather conditions.

Aggregators For Virtual Power Plants

Here is a list of some of the leading VPP suppliers but be aware this list changes often with new companies and acquisitions.

  1. AutoGrid delivers both SaaS and Turnkey VPP solutions supported by its AI-powered software platform. As part of Schneider Electric, AutoGrid also provides the end-to-end Grid-to-Prosumer DERMS of-fering as well as EcoStruxure Microgrid Flex to fast track microgrid development and participation in VPPs.
  2. Clean Power Exchange (CPE) CPE is a VPP aggregator that provides a range of services to VPP owners, including enrollment in VPP pro-grams, software and hardware solutions, and financial services.
  3. Enel X, through various acquisitions, can provide microgrids, VPP’s, energy storage and green mobility solutions. Enel X manages VPPs with a platform for asset owners to sell their electricity back to the grid.
  4. Leap is the leading global platform for generating new value from grid-connected resources and devices through integration with ener-gy markets. By making it easy for new distributed resources to par-ticipate in energy markets, Leap lays the groundwork for virtual power plants (VPP). Leap works with utility NRG’s automated real-time economic dispatch program to provide NRG customers with more control and flexibility over their energy profile.
  5. OhmConnect: OhmConnect is a VPP aggregator that uses technology to optimize VPP operations. OhmConnect’ s platform allows VPP owners to earn money for providing flexibility to the grid by using their energy resources when they are most needed.
  6. Sunrun’s Brightbox VPP program aggregates the power of Sunrun's home solar and battery storage systems to provide grid support ser-vices and participate in wholesale energy markets.
  7. Voltus: Voltus is a software company that provides a platform for VPP aggregation. Voltus' platform allows VPP aggregators to manage and optimize their VPPs.

As you can see VPPs are still in an early stage of development, but they promise to change the way customers interact with their utility. In the future customers will be rewarded for using power when it is readily available and cheap and to adjust loads that reduce the need for expen-sive new generating and transmission assets. There may be some who just want the power company to provide power whenever they need it, but such customers will pay a premium for that in the future as your meter records a constantly changing power price in the future. Customers that have load flexibility or the ability to export power will be in a better situation to keep their power costs low, especially if they have local assets that can be remotely operated.

Based on ARC research and analysis, we recommend the following actions for owner-operators and other technology users:

Grid operators and utilities are aware they need to maintain opera-tional flexibility and have DERMS, ADMS, and EMS applications. They now need to include the substantial DER resources that are of-ten behind the meter in their forecasts and planning. The optimization problem is shifting and one of the objectives is to give VPP’s a clear operating window to provide useful services so these new DER re-sources can provide the most value to asset owners, distribution utili-ties and the larger transmission network.

VPPs need to be as expansive as possible to maximize the assets that can be manipulated to achieve demand response and to provide sys-tem generation capacity as well as services such as frequency regula-tion. It is important to get a wide range of customers to participate.
The VPP needs to work in real time smoothly and use real time com-munications standards where possible.

The VPP must provide a customer contract that rewards them fairly for the grid services that can be provided. Customers will benefit if they have modern WiFi interfaces to major load consuming devices to achieve automation.

Smart meters must have an extensive AMI interface to provide the information both customers and VPP operators need. Homeowners and small businesses need to have an effective user interface that works on their phone, as well as tablets or PC’s. That interface must show projected opportunities and keep track of any grid service cred-its as they are earned. The interface should be fun to use.

Rick Rys is director of consulting for ARC Advisory Group.


About the Author

RIck Rys

Rick Rys is a senior consultant at ARC. He performs research into and consults with clients on technology areas such as energy management, advanced process control (APC), simulation, and optimization.

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