Promoting VPP policy

A Virtual Power Plant (VPP) is an aggregated system of energy assets remotely and automatically assembled by innovative software platforms like RMI's to optimize and dispatch services for distribution or wholesale markets. VPPs enable the seamless integration of diverse distributed energy resources (DERs), including renewable sources, energy storage systems, and demand response, allowing them to operate as a unified entity.

VPPs play a crucial role in accelerating the transition to renewable energy by optimizing DER assets and empowering consumers through technologies like RMI's patient portal and onboarding solutions. They offer centralized monitoring, control, and optimization capabilities, reducing peak demand, enhancing grid resilience, decreasing carbon emissions, and driving sector decarbonization.

Benefits of VPPs

Virtual power plants (VPPs) offer numerous benefits by aggregating and optimizing distributed energy resources (DERs) like rooftop solar, batteries, EVs, and smart thermostats. These benefits include:

1. Enhanced Grid Reliability and Resilience: VPPs can reduce peak demand by up to 60 GW by 2030 and over 200 GW by 2050 [3], [7]. They can inject power or reduce demand during critical times, enhancing grid reliability and resilience.

2. Cost Savings: VPPs can help avoid $17 billion in annual power sector expenditures by 2030 [3], [7], [10]. They can lower energy bills for participants and non-participants by reducing the total cost of grid operation.

3. Accelerated Decarbonization: VPPs can decrease the dispatch of highly polluting power plants, drive the build-out of renewable energy sources, and enable economy-wide electrification [3], [7], [9]. They could avoid 44-59 million tons of CO2 emissions by 2050 [7].

4. Empowered Consumers: VPPs enable consumers to play an active role in shaping the energy system [3], [7]. Participants can earn rewards, cash payments, or bill savings by providing grid services [7].

5. Equitable Benefits: VPPs can decrease reliance on natural gas-fired peaker plants, benefiting low-income and minority communities [7]. They can provide revenue and cost-reduction opportunities for low-income households [7].

6. Flexibility and Optimization: VPPs can optimize energy resources based on real-time demand and market conditions [9]. They can shift energy consumption to times when electricity is plentiful and low-cost, balancing supply and demand [11].

7. Renewable Energy Integration: VPPs can help increase renewable energy capacity by combining utility-scale and distributed solar power [11]. They can balance the grid by aggregating diverse DERs like wind, solar, and energy storage [11].

Policy Recommendations

To accelerate the widespread adoption of virtual power plants (VPPs) and harness their benefits, policymakers should consider the following recommendations:

• Advance policies to expand beneficial distributed energy resource (DER) adoption, such as tax credits, rebates, carveouts in energy portfolio standards, and financing options [5]. This will increase the pool of DERs that can participate in VPPs.

• Enable easy participation in retail and wholesale markets for VPPs, fostering a cooperative approach between aggregators and utilities [5]. Clear market access rules and streamlined processes are crucial.

• Appropriately value the 'non-energy benefits' of VPPs, like decarbonization and pollution reduction [5]. This can be achieved through carbon pricing mechanisms or other incentives.

• Maintain equitable penalties and incentives to ensure a level playing field for VPPs and other grid service providers [5]. Fair competition will drive innovation and efficiency.

• Preserve customer choice and control around VPP participation and demand response activities [5]. Consumer empowerment is a key benefit of VPPs.

• Develop smart regulatory frameworks that support the fair and efficient growth, integration, valuation, compensation, and advancement of VPPs [4], [6]. Flexible and forward-looking regulations are essential.

Initiatives like RMI's Virtual Power Plant Partnership (VP3) [8] aim to educate policymakers, identify best practices, and address challenges hindering greater VPP adoption. A coordinated industry effort can unlock the full potential of VPPs to enhance the affordability, reliability, and resilience of the energy system.

Successful VPP Examples

Successful VPP examples from around the world highlight the potential and versatility of this technology:

• Emsys VPP Platform: This platform has been widely adopted by energy companies across Europe and beyond. For instance, Kelag (Austria) set up a VPP in just 3 weeks, Protergia (Greece) uses it for trading electricity from solar and wind plants, and Pure Energy (Turkey) integrates geothermal power plants. Emsys VPP has also provided consulting services in Thailand, India, and the Dominican Republic for improving wind and solar forecasting systems.

• Flexibility Trading: A Swiss electricity supplier aggregates biogas plants for day-ahead and intraday flexibility trading using Emsys VPP. CNR (France) has adapted the platform to the French market, while Statkraft (UK and Germany) uses it for flexibility trading and maximizing benefits from its 10 GW wind portfolio.

• Green Mountain Power (GMP) VPP: In 2017, GMP (Vermont, USA) offered residential customers a chance to own Tesla Powerwall batteries at a reduced price and a 10-year payment plan. 2,000 households signed up, allowing GMP to remotely control the batteries for grid support.

  • This VPP saved GMP $500,000 in a week during a 2018 heatwave by avoiding peak prices.
  • It also reduced transmission system payments by drawing on VPP resources during peak demand.
  • GMP developed algorithms to monitor and control the residential batteries, selectively using them for outages or grid support.

These examples showcase the global adoption of VPPs across diverse energy resources and markets, enabling grid flexibility, renewable integration, and cost savings.

Conclusion

The transition towards a more sustainable and resilient energy system requires innovative solutions that seamlessly integrate diverse distributed energy resources (DERs). Virtual power plants (VPPs) play a pivotal role in achieving this goal by aggregating and optimizing these resources, empowering consumers, and enhancing grid reliability. As policymakers and industry stakeholders continue to prioritize decarbonization and energy affordability, the widespread adoption of VPPs will be instrumental in unlocking their multifaceted benefits.

The successful implementation of VPPs globally, from Europe to the United States, underscores their versatility and potential to drive the energy transition. By fostering conducive policies, fostering market access, and valuing their non-energy benefits, policymakers can create an environment that enables VPPs to thrive. As the energy landscape evolves, VPPs will continue to be a key enabler of a more flexible, resilient, and sustainable power system, benefiting both consumers and the environment.