When I first wrote about virtual power plants (VPP) in 2014, it was a mystery term applied to an energy efficiency project in my town. A decade later, virtual power plants are to energy nerds what Taylor Swift is to music fans — the big star on the platform.
The Rocky Mountain Institute said VPPs “may be our most important and most overlooked domestic energy resource.” The Brattle Group, in a study for Google, found that 60 GW of virtual power could save society $15–$35 billion. A Forbes headline said they’ve gone from “geek to must-have chic.”
One of the most persuasive advocates of the technology is Jen Downing, senior advisor in the Department of Energy’s (DOE) Loan Programs Office. I heard Downing speak at Dervos 2023, a conference held by the DER Task Force on November 9 in Brooklyn, NY. I also caught her presentation at RE + 2023 via YouTube. She is the lead author of the DOE’s new liftoff report on virtual power plants.
By comparing virtual power plants to sandwiches, Downing offered insight into why they are having a moment — or maybe a decade or more. Both can contain many different fixings and still be what they are. It’s an insightful analogy because it points to how we can move toward a decentralized grid efficiently or wastefully.
What are VPPs? Pretty much what they sound like — a way to feed the electric grid without a physical power plant. Instead, the service comes from aggregating distribution energy — solar, batteries, hot water heaters, EVs and the like — to balance supply and demand. This creates an opportunity to forgo constructing more costly and polluting power plants.
Think of it like this. You can spread all of the sandwich ingredients across the table — cheese, bread, meat, lettuce, tomato, pickles and mayonnaise — and try to pick them up one at a time and eat them, probably spilling some along the way. Or you can package them between two manageable slices of bread and enjoy flavors that become more than the sum of their parts.
Right now, distributed energy resources (DERs) are spread across the table for the most part. Homes, businesses and communities are adding distributed generation, electric vehicles, and energy efficiency projects ad hoc to meet their climate goals, reduce costs, improve reliability, or because they like the idea of locally controlled energy.
Bringing these resources together into VPPs is important because power demand is growing as we electrify transportation and switch to electric heat. At the same time, it’s becoming more difficult to build conventional power plants and transmission lines.
Of particular concern is growth in peak demand, expected to increase by 60 GW between now and 2030, according to Downing.
The US typically builds natural gas peakers to meet peak demand, a high-cost and inefficient approach given that they only run about 5% of hours of the year. The same applies to the transmission and distribution lines built to handle the peaks. Only about 15%-20% of their capacity is used.
“That’s just kind of mind-boggling when you think about the fact that our grid has cost trillions of dollars to build and operate. And in any other context, if you had a machine that you spent trillions of dollars on, you would try to maximize uptime. So why is our grid an exception?” Downing said.
Downing related other ways, besides serving peak periods, that virtual power plants offer benefits. She described a real-world example where an all-battery virtual power plant serves a utility with high solar energy production. The utility orchestrates 7,500 behind-the-meter batteries, which accomplish three things:
- Absorbs solar energy from 10 am to 2 pm, a time of abundant solar production
- Powers host homes and businesses from 7-9 pm when the sun sets and electric demand rises. Or the power is exported back to the grid.
- Offers fast frequency response to maintain power quality on the grid.
“That translates to savings for all Americans, all electricity consumers. But I think what’s equally striking is that the money that is spent on VPPs over traditional resources flows for the most part right back to the DER owners themselves. And so we’re helping people afford the more energy efficient devices and frankly rewarding them for being part of the energy transition,” Downing said.
Listen to Downing talk about virtual power plants here.
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