Real benefits

Above: Annualised net cost of providing 400 MW of resource adequacy (source: The Brattle Group)

The cost estimates are shown in the chart below and the conclusion drawn is that the VPP can provide the same resource adequacy at a significant cost discount relative to the alternatives.

The study also identifies key near-term activities for enabling the deployment of VPPs, which currently are “adopted well below their market potential.”

“With the massive growth in consumer adoption of clean, flexible energy technologies that is expected over the coming decade, virtual power plants are no longer a virtual reality,” noted Ryan Hledik, a Brattle Principal and co-author of the study (along with Brattle senior research analyst Kate Peters). “There is real potential to leverage these technologies to improve reliability, enable decarbonisation, and reduce costs to consumers. But barriers still need to be overcome.”

Key findings from the Brattle study include the following:

• A VPP leveraging commercially-proven residential load flexibility technologies could perform as reliably as conventional resources.
• The net cost to the utility of providing resource adequacy from a VPP is roughly 40–60% of the cost of the alternative options; 60 GW of VPP deployment could meet future US resource adequacy needs at $15–$35 billion less than the cost of the alternative options over the ensuing decade.
• 60 GW of VPP could provide over $20 billion in additional societal benefits – such as those related to emissions and resilience – over ten years.

“Google already enables one of the largest virtual power plants in the United States by helping our thermostat users avoid carbon and earn rewards through the Rush Hour Rewards (RHR) programme and our recently launched Nest Renew service,” noted Parag Chokshi, director of product strategy and operations at Google Nest. “We believe the continued growth and support of virtual power plants in the residential sector is crucial to continue building towards a decarbonised, reliable grid of the future.”

Guidehouse guidance

A new report from Guidehouse Insights, Business model innovations can drive virtual power plant growth, exploring trends affecting the VPP market, also sees expanding opportunities for virtual power plants.

With renewable energy capacity increasing and the adoption of distributed energy resources (DER) continuing to grow throughout all customer segments around the world, there is a growing need for flexibility in power grid operations,
says Guidehouse, with VPPs representing an opportunity to connect the expanding network of DER while providing flexibility and other essential grid services without the harmful emissions of fossil fuelled power plants.

“As technology advances and new market frameworks are implemented to allow non-utility and demand side resources to fully participate in energy markets, VPP deployments have started progressing beyond demonstrations and pilot projects to large-scale programmes,” says Dan Power, senior research analyst with Guidehouse Insights. “With consumer-sited resources becoming more critical to grid operations, utilities will need to adopt new management technologies and software platforms to maintain grid reliability, while end consumers will need additional assistance in acquiring DER and participating in VPPs.”

EnergyHub hits the million mark

In April 2023, EnergyHub reported that it had become the first distributed energy resource management systems (DERMS) provider to have more than one million distributed energy resources — including smart thermostats, electric vehicles and EV charging equipment, energy storage systems, water heaters, and more — under management.

The company works with more than 60 utility clients across North America (including Arizona Public Service (APS), DTE Energy, National Grid, and Salt River Project (SRP)), and hundreds of device partners to support DER-based virtual power plants.

“These devices collectively deliver 1.35 GW of flexibility across North America’s electrical grid,” said EnergyHub CEO Seth Frader-Thompson.

In 2022, the number of EVs participating in EnergyHub programmes increased more than 200%, the company says, and the number of batteries increased more than 80%.

The exponential growth of connected DERs promises much-needed load flexibility as more renewables come online — but only if utilities can harness that flexibility when and where they need it with reliable VPPs, says EnergyHub.

“Over the past five years, we’ve partnered with EnergyHub to build our Cool Rewards programme into a key part of APS’s flexibility strategy,” said Kerri Carnes, director of customer to grid solutions at APS. “We can now call on more than 75 000 enrolled thermostats delivering 110 MW of reliable flexibility, helping us shift energy demand and incorporate more renewable power onto our smart grid.”

EnergyHub also works with SRP to reach limited to moderate-income customers with a kit programme activated in partnership with Techniart/Resource Innovations. SRP was one of the first utilities to expand its Bring-Your-Own- Thermostat (BYOT) programme to multi-family dwellings and small-to-medium businesses and can now call on more than 78 000 thermostats to deliver flexibility.

For the USA to achieve 100% renewable energy by 2035, massive flexibility — of the order of 500 GW — needs to be available to match demand to variable renewable generation, estimates EnergyHub.