Consolidated Edison is trying to meet the load growth in its territory, forcing it to make some hard choices: it could invest $2 billion into wires or devise low-cost solutions, including using distributed energy assets (DERs). Specifically, the utility is concerned about 50 hours of the year when the load exceeds its capacity to deliver it — something that DERs could solve.
ConEd decided to deploy a 5-megawatt battery storage project to remedy the dilemma. It is dispatched during peak hours, enabling the utility to forego an expensive capital project. Total cost: $200 million, or much less than $2 billion. In this case, ConEd is part of a virtual power plant — the orchestration of thousands of dispersed assets to manage the electricity supply. Indeed, a distributed energy system, or a virtual power plant, would have 200,000 subsystems. Or, 200,000 5-kilowatt batteries would be the equivalent of one power plant that has a capacity of 1,000 megawatts.
“The goal is to have multiple assets — to mix and match assets to honor our commitment to the grid,” says James Lombardi, solution and enterprise architect for demand response at Enel X, in a talk with this writer for a White Paper. “We are managing their assets on their behalf because we have incentivized those commercial and industrial businesses. Our responsibility is to make sure they will participate when they say. We are confident we can deliver.”
Enel X is working with ConEd. It has also deployed 50,000 electric chargers in California, allowing fleet managers sell the electricity in their car batteries to grid operators. Once the aggregator can get enough owners to agree to this arrangement, it can bid that collective load into electricity markets. That is what Enel X is doing in California. Some customers may need help to respond. But the aggregator anticipates that and has a large enough load to satisfy the grid operator’s demands.
Everything from demand response to energy storage to electric vehicles can participate. For it to work, the aggregator must guarantee their participation, and in return, those asset owners — often commercial and industrial customers — will get paid. For their part, utilities can defer investments in capital-intensive projects such as power plants and transmission lines.
“I do think that system resilience is critical,” says Ronald Schoff, director of the Electric Power Research Institute, told this reporter. “Virtual power plants are a technology that needs a market construct to incentive or support. And so I think the technology side may be easier than the market side.”
Are Virtual Power Plants Ready for Prime Time?
Virtual Power Plants are possible because of an order written by the Federal Energy Regulatory Commission, or FERC Order 2222. That enables DERs to be aggregated and bid into wholesale energy markets run by grid operators.
Aggregators can monitor and manage those distributed energy resources through software programs — facilitated by cloud-based programs that give them a full panoramic view. Industrial and commercial businesses can curtail their demand at certain times, reducing stress on the electricity network. Virtual Power Plants are a valuable asset that allow electricity to bid into markets by shifting the times when energy is used. For example, demand response aggregators sign up many businesses willing to cut their usage during peak times. This package is then bundled and sold into regional wholesale energy markets.
Only some people think the technology is ready for prime time. “Virtual power plants probably hold a lot of promise, but I think the technology is still relatively nascent across the board,” John Di Stasio, president of the Large Public Power Council told this writer.
However, the need could not be more pressing. Consider Hurricane Ida, which hit New Orleans in 2021 — 16 years to the day after Hurricane Katrina struck: The city has eight transmission lines and Ida knocked out all of them. A contingency plan failed to deliver during that time. A virtual power plant could have coordinated distributed energy assets, providing power to a city that had blacked out. In fact, the city hosts about 200 megawatts of onsite generators that help fuel hospitals, industrial sites, and its convention center operating during mass outages.
As it happens, Guidehouse Insights says virtual power plants may soon play a starring role: by 2030, decentralized generation will total more than 500,000 MW of capacity, while centralized generation will total about 280,000 MW.
“More distributed energy is coming online this year than a central generation,” says Peter Asmus, now a director for AutoGrid but the author of the Guidehouse study for the White Paper. “We will need more Virtual Power Plants — things can orchestrate those assets. It is viable, and it is happening.”
Distributed energy resources add value to businesses. But they also give communities some resilience, preventing widespread outages during extreme weather events. Virtual power plants are an intelligent strategy and ConEd’s usage illustrates the potential. With success, others may eventually follow suit.