New Virtual Power Plants Could Help to Meet Growing Peak Demand

According to a new report from the U.S. Department of Energy (DOE), titled “Pathways to Commercial Liftoff: Virtual Power Plants,” as a result of the major continuing growth of electric vehicles (EVs) and other distributed resources surging, virtual power plants (VPPs) may be at an inflection point. VPPs are groups of distributed resources, such as energy storage, rooftop solar and EV chargers, all of which can balance electricity loads and provide grid services similar to power plants.

Definitions vary, but the DOE suggests that there is currently 30 GW to 60 GW of VPP capacity in the U.S., which is primarily composed of demand response programs. If this level is tripled, according to the DOE, VPP capacity could meet between 10 percent and 20 percent of peak demand.

By roughly tripling VPP capacity to between 80 GW and 160 GW by 2030, the U.S. could save about $10 billion a year in grid costs, while redirecting spending on peaking power plants to distributed energy resources (DERs) at a lower cost.

The DOE report says that it expects a surge in annual DER additions from 2025 to 2030, including 20 GW to 90 GW of demand capacity from EV charging infrastructure and 300 GWh to 540 GWh of storage capacity from EV batteries.

It also believes that smart thermostats, smart water heaters, and non-residential DER will contribute an additional 5 GW to 6 GW of flexible demand annually. Distributed solar and fuel-based generators will add 20 GW to 35 GW a year. Furthermore, up to 24 GWh of capacity a year can be gained from stationary batteries.

“Rather than viewing the massive adoption of EV and other DERs just as loads to serve, utilities and regional grid operators can view this as an opportunity to increase the flexibility of the grid and more efficiently use existing resources and infrastructure,” said the report.

The DOE added that there are more benefits from VPPs beyond just financial, including increased grid resilience, reduction in greenhouse gas emissions, and reduction in grid congestion.

However, VPPs face some challenges, including their limited integration into power system planning, operations, and market participation. In addition, in most jurisdictions, grid planning requirements and cost-benefit assessments tend to undervalue VPP benefits, which deters investment in programs and grid upgrades that would support VPPs.

To combat some of these challenges, the report recommends measures to support VPP development, including conducting a comprehensive evaluation of their benefits to improve cost-benefit assessments. It suggests that grid operators should be supported in efforts to speed up information technology upgrades and boost personnel, so they can integrate high volumes of DERs into bulk power systems. The report also suggests automatically enrolling customers into VPPs when they buy DERs, but giving them the choice to opt out.

Overall, the report identifies five steps for boosting VPPs:

1 – Expand DER adoption with equitable benefits.

2 – Simplify VPP enrollment.

3 – Increase standardization in VPP operations.

4 – Integrate VPPs into utility planning and incentive programs.

5 – Integrate them into wholesale power markets.


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