A new study says virtual power plants (VPPs) and their many benefits for electrical grids are at an “inflection point” as consumer demand and legislation propel a shift to greater electrification.
“Over the next decade, VPPs could play a central role in meeting grid and societal needs,” says the Rocky Mountain Institute (RMI). But “barriers related to wholesale market value, retail offerings, and consumer awareness must be addressed” to unlock their full potential.
VPPs are formed by hundreds of thousands of households that combine the latent energy potential from thermostats, electric vehicles, batteries, and solar arrays to support the grid by flexibly charging and discharging to meet fluctuating electricity demand. By combining power from these many sources, VPPs can provide the same energy services as a traditional power plant. However, policy-makers, utilities, and consumers have historically overlooked VPPs, which has held them back from reaching their full potential.
The analysis lands as Calgary-based power retailer Solartility Inc. unveils plans for Alberta’s first VPP, Sustainable Biz reports. The company says the service could cut building energy costs by 30%.
“You could say (a VPP is) thousands of small-scale solar and storage [units] installed in residential homes,” said CEO Kelly Tallas, who launched the company in 2014 as a solar distributor in the Philippines. “Then, using aggregation software, they act as one virtual power plant to interact with the wholesale market directly.”
It’s an approach that builds on Alberta’s “unique” status in Canada as a province that gives retailers access to the wholesale market, Tallas said.
According to RMI, VPPs offer numerous advantages. They provide grid resilience in the face of rising extreme weather events and can be deployed rapidly using power from existing sources. They can also be sited close to energy loads, allowing them to bypass transmission or distribution bottlenecks.
VPPs have already played a critical role in helping grids avoid blackouts during periods of high demand. During the record-high temperatures of California’s heat wave last summer, hundreds of thousands of grid customers partnered with companies like OhmConnect, SunRun, Leap, Autogrid, Voltus, and Tesla to form VPPs, and were paid for their contributions.
That compensation makes electricity more affordable for non-VPP customers by reducing the total cost of operating the power grid. The added efficiency also helps decarbonize energy generation and reduce greenhouse gas pollution.
Critically, VPPs also create an opportunity to end utilities’ reliance on aging fossil fuel infrastructure like natural gas-fired peaker plants. Those facilities are tied to adverse health outcomes that have an outsize impact on Black and low-income populations, who are 1.2 times more likely than the average American to die prematurely from exposure to particulate matter from fossil fuel power plants.
The RMI study identifies several barriers to “unlocking the VPP opportunity,” noting that virtual power plants must be more accessible to customers to ensure long-term growth. RMI recommends adjusting wholesale market rules, developing retail utility offerings for VPPs, and raising consumer and policy-maker awareness of VPP technology and benefits.
“Stakeholders who have an interest in the growth of the VPP market, including consumer advocates, large energy users, technology developers, and service providers need to ensure that their voice is heard and listened to,” RMI says.