Virtual Power Plants: The future of renewable energy

By Robert Senior

Why are virtual power plants (VPPs) commonly discussed as the ‘next big thing’ in the renewable energy sector?

Loosely defined as a collection or aggregation of renewable assets, VPPs can consist of batteries, smart thermostats, EV chargers, and other resources. Operators control the VPP remotely, determining each customer’s supply of electricity according to demand.

Best of all, VPPs provide real-time value to both the end user (customer) and the utility. By joining a VPP, end users can realize a reduction in cost of system acquisition via the return of generated energy to the utility.

Utilities, in turn, can draw needed energy during peak consumption periods from the VPP, lessening the load on the electric grid and greatly reducing the risk of blackouts or other unwelcome events.

The financial benefits are apparent, but what’s in it for those who are in the renewable energy game for more than profits? What about the effect on the environment?

One side effect of recent weather events—from record-breaking heat in the U.S. West, powerful storms in the South and Puerto Rico, and devastating ice storms throughout the Midwest—is increased awareness about the growing demands on the U.S. electrical grid.

Floods and powerful thunderstorms besieged Mid-Atlantic and New England states this summer. Every region of the U.S. has resiliency concerns because of extreme weather patterns, and VPPs can provide a significant portion of the solution thanks to their reliability and potential for rapid deployment during a crisis.

In the long term, increased utilization of VPPs will bring more devices online and in turn reduce CO2 reliance. One leading study finds that over the next quarter century, proper implantation of VPPs could allow for a reduction of almost 60 million tons’ worth of CO2 emissions.

But the journey begins with small steps—getting more entities and utilities involved in VPPs, encouraging their usage, and providing proper incentives.

To that end, the U.S. Department of Energy’s Loan Programs Office (LPO) reported that as of February, VPPs were among the top-five sectors in cumulative requested loans, at over $300 million per project. Projects receive support via the Title 17 Clean Energy Financing program.

The Department of Energy offered its strongest show of support to date in April through the LPO’s commitment to Project Hestia. The LPO announced a partial loan guarantee of up to $3 billion to make distributed energy resources (DERs) including solar, battery storage, and VPP-ready software available to more American homeowners.

If finalized, the loan will provide clean energy systems for about 100,000 homeowners throughout the United States, many of them in ‘weather-disadvantaged’ communities with high prevalence of climate hazards, extended outage durations, and high energy usage.

Some statistics around Project Hestia:

• Over the next 25 years, the 500+ MW project will avoid more than 7 million tons of CO2 emissions—the equivalent of permanently removing 1.5 million cars from our roads.
• When finalized, the project will create approximately 3,500 U.S. jobs.
• Almost a third of all customers impacted by Project Hestia will have batteries installed with their systems, including 100 percent of Puerto Rico-based customers, where frequent and sustained power outages are of particular concern.

The final point has ramifications well beyond this project. The aggregation of DERs can be used for load curtailment or exporting of energy. Battery systems are ideally suited for both uses as they provide and store ample power. The end user and utility alike have a myriad of options with battery storage to fully shape consumption and match supply and demand.

In a state like California, with its abundant supply of solar, batteries can store the excess for effective use during solar downtimes.

“Through VPPs, we can drastically aid the grid operators in providing lower-cost, resilient energy,” said Brian London, vice president of Energy Services for Fortress Power. “The versatility of these batteries enables us to accomplish all of this.”

Behind-the-meter batteries provide value to all ratepayers. For effective participation in a VPP, the energy must be both storable and dispatchable. That way, when everyone comes home at night and turns on their TVs, cranks up the air conditioning (or heat, depending on location), and charges their electric vehicles, the utility can access that needed energy.

The virtual power plant has its own significance to end users, utilities, and the industry at large. For some, it’s a means of magnifying or enhancing energy creation. To others, it’s a revenue-generating vehicle through the trade or sale of energy, while another group sees VPPs as an ideal backup plan during power outages.

But all three groups agree: VPPs address myriad concerns pertaining to the electric grid, and if used properly, their potential is limitless.  

Robert Senior is Content Editor at Fortress Power (www.fortresspower.com).

Q3 2023