Emerging Technologies: Virtual Power Plants Advance in California

California regulators and utilities are finally beginning to seize the emerging virtual power plant (VPP) opportunity that allows aggregations of rooftop solar and small-scale energy storage to deliver the value of a conventional power plant but with more flexibility. VPPs are distributed energy resource aggregations that typically also include smart water heaters and heating-cooling systems or managed electric vehicle charging, according to Germany’s Next Kraftwerke , which is credited for originating the concept. The key VPP feature is networked control of the interconnected system, which the aggregated resources at the distribution system level feed into. Both VPP’s aggregations of small-scale clean resources and utility-scale resources provide reliability at the bulk system level to meet resource adequacy requirements, said Brattle Group Principal Ryan Hledik. But customer-owned solar and storage can also be used as a substitute for a big power plant and provide system flexibility and local resilience. That includes backup generation, which transmission-connected, utility-scale systems cannot provide, he said. Aggregated customer-owned resources have overcome energy market objections that they are too small and too variable to meet power system performance commitment requirements, Next Kraftwerke pointed out. VPPs can now “trade on the same markets as large central power plants or industrial consumers.” Networked resources, those connected to the grid, can be monitored and optimized by utilities or third-party aggregators, allowing them to be used to help stabilize power systems and manage demand peaks, Hledik and Sunrun Senior Director of Market Development and Policy Chris Rauscher agreed. California’s dominant utilities and leading Community Choice Aggregators are piloting VPP projects. As importantly, the state’s power system operator is developing market rules to eliminate barriers. “This is a paradigm shift,” Sunrun’s Rauscher said. He said California’s policymakers and wholesale market have been slow to embrace VPPs, but they “ are becoming the default choice for New England utilities and installers. Sunrun expects that to true in most of the major U.S. markets within two to five years.” VPPs from New England to California VPP programs have basic structures with three approaches to network control, Sunrun’s Rauscher said. In wholesale markets, the VPP provider’s aggregation must meet the market operator’s minimum technical requirements and its bid must meet the market price, he said. It then is compensated for meeting its committed performance obligation. In 2019, Sunrun’s 20 MW Massachusetts VPP made up of distributed solar and storage was the first Virtual Power Plant to win an ISO New England capacity market bid . The other type of VPP firm obligation is a contract with a load serving entity, like a utility, to defer a capacity need, Rauscher said. Sunrun won the competitive bidding to provide capacity on several upstate New York investor-owned utility circuits. It is compensated by verifying its performance with data on customer enrollment and generation dispatched. Bring Your Own Device The third VPP structure, Bring Your Own Device (BYOD) programs, allow individual customers or aggregators to make resources available for dispatch without a contractual obligation, Rauscher said. The resources are integrated into utility or aggregator software platforms and dispatched and compensated for performance according to preset customer parameters. Compensation to the BYOD aggregator or customer is based on the use of the resource by the utility for reducing peak demand. A reduced upfront price for the solar and battery system is increasingly becoming more common. Sunrun is now seeing markets where installers cannot win customers unless the system is discounted for enrolling in a BYOD program. Many New England policymakers, system operators, and utilities are convinced of the value of all three structures and interest is growing nationally, according to Rauscher. Rocky Mountain Power’s 5.2 MW solar plus 12.6 MWh battery storage VPP has been serving a 600-unit Utah apartment complex since 2019 . Now the utility is planning a new project in partnership with Sonnen and ES Solar to serve as many as 50,000 Utah customers. The Carolinas’ Duke Energy recently announced a Sunrun partnership for “the first BYOD program in the Southeast to demonstrate to the region’s regulators and stakeholders that VPPs are ready to be deployed at scale.” Western utilities are similarly at the pilot stage. A focus of the Portland General Electric (PGE) Smart Grid Testbed Phase II is on learning about a VPP-like co-deployment of Distributed Energy Resources (DER) solutions that can reduce a low-income community’s “energy burden,” PGE Senior Manager, Grid Edge Solutions, Darren Murtaugh said. PGE hopes to learn how to “plan for and integrate” DER and use their flexibility, he added. California is behind the VPP curve California has lagged because its utilities and regulators have required rigorous VPP analysis, but recent interest has accelerated use of New England’s “pilot, refine, and iterate” approach, Rauscher said. East Bay Clean Energy, Peninsula Clean Energy, and Silicon Valley Clean Energy are using VPP-like aggregations to meet peak demand needs . Both the Sacramento Municipal Utilities District and the Los Angeles Department of Water and Power have announced programs to develop the potential to use the BYOD-type for VPP aggregations at scale. And Tesla has proposed a statewide VPP for its customers . A Southern California Edison-Sunrun partnership will develop a 5 MW VPP focused on reliability for 2023. A VPP-like pilot aggregation from a Pacific Gas & Electric-LG Electronics-Sunverge Energy partnership will begin testing impacts for 100 homes this year. And a yet-to-be-detailed San Diego Gas & Electric aggregation is expected to be online this year. California’s 2045 carbon goals could require half of the state’s single-family homes to contribute to power system support, SCE’s Pathway 2045 found. Compensation through California’s 2021 Emergency Load Reduction Program (ELRP), a response to the state’s 2020 blackouts, has become a key support of SCE’s VPP pilot program , SCE Senior Project Manager for Demand Response Randy Robinson Jr. told Current. The key to VPP growth is how quickly customers invest in batteries, rooftop solar, electric vehicles, and other distributed energy resources and how quickly regulators and markets provide incentives to drive that investment, Brattle’s Hledik said. Utilities now have load flexibility portfolios of 5% to 10% of system peak, and with incentives driving DER adoption VPPs could drive U.S. load flexibility to 20% or more , he said. Barriers The utilities hope their pilots reveal the barriers VPPs face. “VPPs are a relatively nascent technology,” SCE’s Robinson said. Its pilots have been designed to understand operational integration and dispatch with VPP assets “fragmented” by ownership and control and to understand how customer engagement and other factors will impact VPP performance. PGE remains uncertain of the amount, speed, and duration of VPP response when called on to meet a system need, Murtaugh said. It also wants to clarify the “hierarchy” of use cases and whether meeting bulk energy, ancillary services, and distribution-specific needs will conflict with optimal system performance or cost. Aggregations of small, distributed resources may have customer acquisition or operational costs that utilities may see as too expensive, Brattle’s Hledik agreed. And utilities may also prefer capital investments with earnings opportunities to using customer-owned resources , but the importance of load flexibility is changing their perception of VPP dependability and value, he said. “California policymakers have been stuck in an outdated paradigm,” and “it is truly confounding and even myopic that they have failed to recognize the value in DER as VPPs,” Rauscher said. That is especially true because of the challenges the state faces in siting and building the utility-scale resources and transmission it needs to meet its ambitious renewables and climate goals, he added. But California now sees that making the transition to VPPs is not that hard, Rauscher said. California is also aware that “customer demand for solar and batteries and electric vehicles is off the charts and is going to drive the growth of VPPs.” Graphics are courtesy of Sunrun Editor’s Note: This is the second in a series of Current columns on various alternative technologies in the pipeline that aim to make a greener and more resilient and affordable grid.

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Emerging Technologies: Virtual Power Plants Advance in California

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