According to the Brattle Group, which prepared a study for Google, a virtual power plant (VPP) is as reliable as a conventional one, costing 40% to 60% of alternatives. It notes that 60 gigawatts of VPP add $20 billion in societal benefits over 10 years — like preventing emissions and providing resilience.
Virtual power plants orchestrate millions of dispersed assets to manage the supply of electricity — power that asset holders can resend to the grid and distribute to commercial and industrial businesses during peak usage or emergencies. The ultimate goal is to revamp the energy landscape, making it cleaner and more reliable. By using onsite generation such as rooftop solar in combination with battery storage, those services can reduce the network’s overall cost by deferring expensive infrastructure upgrades.
“With the massive growth in consumer adoption of clean, flexible energy technologies that is expected over the coming decade, virtual power plants are no longer a virtual reality,” says Ryan Hledik, a Brattle Principal and coauthor of the study. “There is real potential to leverage these technologies to improve reliability, enable decarbonization, and reduce costs to consumers” — valued at between $15 billion and $35 billion. “But barriers still need to be overcome.”
Real Reliability: The Value of Virtual Power models the value and performance VPPs compared to conventional resources. It examines the net cost of providing 400 megawatts of resource adequacy from three resource types:
- A natural gas peaker
- A transmission-connected utility-scale battery
- A VPP composed of residential demand flexibility technologies
The study also looks at where VPPS might be deployed — an asset the authors say has great potential.
Guidehouse Insights agrees that VPPs have a bright future, noting by 2030, decentralized generation will total more than 500,000 megawatts of capacity. Compare that to centralized generation, which will amount to 280,000 megawatts. The market is already deploying more rooftop solar with battery storage than big power plants.
For example, New Orleans has eight transmission lines that feed into the city. But Hurricane Ida knocked out all of them in August 2021. The city also hosts about 200 megawatts of onsite generators to keep hospitals and industrial sites operating during mass outages. A virtual power plant configures the onsite generation, battery storage, and demand response with software programs.
A New Purpose for EV Batteries
Virtual power plants and microgrids don’t need long-distance, high-powered transmission lines. But they rely on the local distribution grids. The same high winds and hard rains can destroy those lines too. But there are multiple distribution lines instead of one central, high-powered wire.
“The more distributed resources you have, the less susceptible to single contingencies you are and the more opportunities you have for power,” says Jon Wellinghoff, former Federal Energy Regulatory Commission chairman, and chief regulatory officer for Voltus, during a web conference.
He said 28 million electric vehicles will hit the roads in the United States by 2030 — storing more electricity than this country’s power plants. The battery storage in those vehicles is a valuable asset that could join in the collective aggregation strategy, supplying backup power if the primary grid is down and the localized microgrid must step up. However, the aggregators must fairly compensate drivers to get them involved in the wholesale electricity market.
And therein is the potential for commercial and industrial customers to participate. Using distributed energy resources for resilience is one thing — to bounce back after a storm, wildfire, or earthquake. It’s also a way to get paid for those assets by allowing utilities or aggregators access.
Aggregators can monitor and manage those distributed energy resources through cloud-based programs. Industrial and commercial businesses can curtail their demand at certain times, reducing stress on the electricity network. For example, aggregators enlist companies willing to hold back during peak usage — an electricity bundle packaged and sold into energy markets.
Red Feather Lakes, Colorado, illustrates the potency of distributed energy resources. The community has suffered frequent outages because of winter storms — served by a single transmission line. It now has rooftop solar panels connected to battery storage and a microgrid — with a propane-fueled backup generator.
Duane Highley, chief executive of Tri-State Generation and Transmission Association in Denver, says that this system will run mostly on renewables by the end of this decade. San Francisco is similar, with most rooftop solar systems linked to a battery — batteries that can be aggregated to form a generation unit or VPP.
“Google already enables one of the largest virtual power plants in the United States by helping our thermostat users avoid carbon and earn rewards through the Rush Hour Rewards (RHR) program and our recently launched Nest Renew service,” says Parag Chokshi, director of product strategy and operations at Google Nest. “We believe the continued growth and support of virtual power plants … is crucial to continue building towards a decarbonized, reliable grid of the future.”
VPPs represent a cost-saving and provide peace of mind to commercial and industrial customers — insurance if the primary grid goes down. But corporate assets such as battery storage devices and demand response have value beyond such resilience; aggregators can access them, compensating companies and improving their returns on those investments. Compensation, though, is critical — still, a sticking point when it comes to asset holders.