| Homes equipped with solar, batteries and other distributed energy devices are a potential major resource for meeting peak US power demand. Source: RoschetzkyIstockPhoto/Getty Images Plus via Getty Images. |
Millions of individuals and organizations have invested in distributed energy resources such as rooftop solar arrays, building-mounted batteries, smart thermostats and electric vehicles to cut their carbon footprints and save money.
Entering 2024, calls are growing louder to orchestrate such isolated small-scale assets into vast remote-controlled fleets, often referred to as virtual power plants (VPPs), as essential instruments of the US energy transition.
"Now is the time to be ambitious," Ruben Llanes, CEO of Silicon Valley VPP pioneer AutoGrid Systems Inc., said in a recent interview. "For a long time, we've been developing technology, infusing AI into it, machine learning into it, data science into it, and I feel there is finally this convergence between the capabilities that we've developed with the market need."
Deploying 80 GW to 160 GW of VPP capacity by 2030 could cover 10% to 20% of the estimated peak power demand in the US by that time, the US Energy Department said in a September report. Such a contribution could save $6 billion to $11 billion in annual grid costs and reduce reliance on natural gas-fired peaker plants, according to the DOE.
"It's a call to action," Llanes said of the report, one that AutoGrid and a growing ensemble of VPP collaborators plan to heed by working together to dismantle regulatory, market and financial barriers.
AutoGrid plans to join forces in early 2024 with fellow VPP software specialist Uplight Inc. to steer small-scale energy resources to generate, save or shift power to provide grid services that typically come from large-scale plants. Schneider Electric SE intends to sell AutoGrid to Uplight, the companies announced Dec. 14. Schneider Electric is AutoGrid's France-based parent and a strategic investor in Uplight.
The proposed transaction, the terms of which were not disclosed, is pending regulatory approval. It comes as AutoGrid seeks to build on its 8 GW of VPPs under management around the world, including through an expanded VPP initiative unveiled in November with Puget Sound Energy Inc. (PSE), Washington state's largest utility.
The PSE-AutoGrid project targets 100 MW of aggregated demand response from residential and business customers by 2025.
"This is just the starting point," Aaron August, PSE's chief customer and transformation officer, said in an interview. "When we think about the scale of where we want them to go, quite honestly, I'd like to get all of our customers enrolled into some form of a VPP program."
The VPP with AutoGrid could encompass roughly half a million of PSE's nearly 1.2 million electric customers, August said.
"We're trying to do something holistic," added Gisela Glandt, AutoGrid's vice president of VPPs. The company will provide "full turnkey services" for the initiative, including customer enrollment, resource dispatching, aggregation monitoring and management of all participating PSE programs.
Addressing barriers
Known as the Virtual Power Plant Partnership (VP3), the coalition plans to amplify the benefits of distributed energy aggregation, develop best practices and road maps, and help create public policy.
"The VPP model is now ready to flourish in these United States," said Blake Richetta, president and CEO of Sonnen Inc., a US home battery subsidiary of Germany's Sonnen GmbH, which is owned by oil and gas giant Shell PLC. "It is time to really take the next leap, which I think will be as big of a leap or bigger than when the solar industry first started to catch on."
"At a broad level, VPPs are arriving," added Cisco DeVries, CEO of home energy management company OhmConnect Inc., another VP3 member. "People are going to take control of their energy use and figure out how to make the best use of their kilowatts, demanded and generated, and that's a watershed moment."
"The regulatory world, the states, the [public utility commissions] are all still kind of trying to figure out how to make the world look like a natural gas power plant," DeVries said.
In 2020, the Federal Energy Regulatory Commission approved its landmark Order 2222 to open up wholesale market opportunities for aggregated distributed energy. Implementation, however, has been challenging for some entities, such as the Midcontinent ISO. FERC in October directed the 15-state network operator to propose an earlier compliance timeline than MISO's 2030 plan.
Many states within MISO and Southwest Power Pool have bans on third-party aggregators of retail customers, although state energy regulators in Michigan and Missouri partially lifted prohibitions over the past year by opening up VPP opportunities for large commercial and industrial utility customers.
"There are rules and regulations that continue to change pretty significantly," said AutoGrid CEO Llanes. "And depending on which part of the country that you're in, depending on what sort of infrastructure that utility is working with, there are all sorts of variables that need to be worked out."
Postcards from the future
Nevertheless, VPP proponents are optimistic that regulators, grid operators and utilities will embrace and appropriately value VPPs.
Sonnen CEO Richetta is encouraged by a new VPP pilot program in Puerto Rico run by LUMA Energy LLC, operator of the US Caribbean territory's transmission and distribution grid. The Battery Emergency Demand Response Program is designed to test the ability of aggregated battery resources at solar-powered homes and businesses to plug projected capacity shortfalls. Participants receive compensation for exporting their stored solar electricity during such times of high grid stress.
"It is a very good step in the right direction," Richetta said. Although the program is "elementary" in terms of grid services and is budgeted to enroll only 6,500 customers in 2024, "it already has opened doors to discussions about how grid services could be expanded dramatically," Richetta added.
Residential solar and energy storage installers Sunnova Energy International Inc. and Sunrun Inc. are also participating in the LUMA program, relying on Tesla Inc. batteries.
"They go from not really being able to make any money on their battery storage system with grid services to making hundreds of dollars a year," DeVries said.
OhmConnect is partnering with SunPower Corp. on a VPP to support the grid with stored onsite solar electricity in grid emergencies. It launched in August in the service territory for PG&E Corp. operating arm Pacific Gas and Electric Co., delivering an average of 400 kW of capacity and a total of 1.2 MWh of energy during events.
"Obviously, the goal is for this to be many, many times bigger, but we're really excited to see this get off the ground," the OhmConnect CEO said.
The program can help to improve the economics of battery-backed solar arrays after a major rooftop solar reform took effect in April, slashing the value of distributed solar exported to the California grid.
"It closes the gap considerably for customers who can participate in it, but it doesn't solve the economic issue that a lot of folks have raised," DeVries added.
California's shift away from net energy metering at the full retail rate has unleashed turmoil for many market participants, although some solar and storage suppliers have embraced the move as a means of encouraging more battery-backed systems that can be orchestrated into VPPs.
"We are ready to embrace [the new] tariff," Richetta said.