US deployment of 80GW to 160GW of virtual power plants (VPPs) – triple current scale – by 2030 to help address national capacity needs could support rapid electrification and save $10bn in annual grid costs, according to a new Department of Energy (DoE) study.
VPPs are aggregations of distributed energy resources (DER) such as rooftop solar with behind-the-meter batteries, electric vehicles and chargers, electric water heaters, smart buildings and their controls, and flexible commercial and industrial (C&I) loads that can balance electricity demand and supply.
They can also provide utility-scale grid services like a traditional power plant. VPPs enroll DER owners – including commercial, industrial, and residential consumers – in a variety of participation models that offer rewards for contributing to efficient grid operations.
President Joe Biden has set a 2035 goal for the US to achieve a carbon-free electric grid. By comparison, renewables including hydro supplied 22.6% of total power generation in 2022, according to DoE.
The 79-page study, Pathways to Commercial Liftoff: Virtual Power Plants, suggests the US between now and 2030 will need to add enough new power generation capacity to supply more than 200GW of peak demand were it to follow a path towards 100% clean electricity five years later. New capacity needs could nearly double.
In all pathway scenarios to 2035, the “mix of weather-dependent renewable generation will be unprecedented,” said the report, leading to more variable electricity supply and higher demand for transmission capacity.
Barring a dramatic improvement in efficiency and timeliness of siting and project approval processes at the federal, state, and local levels, the US is unlikely to have sufficient transmission additions and electric grid upgrades in place to approach the 2035 target.
That is one reason the Biden administration, regulators, and utilities are looking at concurrent approaches and policies to address supply and demand.
“Large-scale deployment of VPPs could help address demand increases and rising peaks at lower costs than conventional resources, reducing the energy costs for Americans – one of six of whom are already behind on electricity bills,” said the report.
It notes that VPPs are not new and have been operating with commercially available technology for years. Most of the 30GW to 60GW of VPP capacity now is in demand response programmes that are used when bulk power supply is limited. Texas, which experienced a record heat wave this summer, is an example.
These programmes turn off or decrease consumption from DERs such as commercial and industrial equipment and smart thermostats.
“However, VPPs have the technical potential to perform a wider array of functions,” said the report, which claims they can contribute to resource adequacy at a low cost, increase resilience, reduce carbon emissions and transmission and distribution congestion, and “be adapted to meet evolving grid needs.”
Despite those purported benefits and growing adaptation of VPPs on the market, their limited integration into electricity system planning, operations, and market participation has inhibited growth to date.
“Regulation-driven grid planning requirements and cost-benefit assessments undervalue the potential benefits of VPPs in most jurisdictions, deterring investment in programmes and potential grid upgrades that enable VPPs,” said the report.
It lists so-called imperatives for VPPs to achieve “lift-off” and scale.
These include expand DER adoption with “equitable benefits,” simplify VPP enrollment, and integrate into utility planning and incentives, and also into bulk electricity markets.