Dive Brief:
- Lawmakers in Michigan and New York are considering bills that would require the states’ utility regulators and major electric utilities to develop virtual power plant programs open to third-party aggregators.
- Both bills envision VPP programs that pay distributed energy resource owners for alleviating stress on the electric grid during periods of peak demand, and possibly for ancillary services, such as voltage support.
- The Michigan bill advanced out of a Senate committee last week and awaits consideration by the full Senate. In New York, companion bills are pending before energy committees in the Senate and Assembly.
Dive Insight:
The New York plan gives utilities and the New York Department of Public Service about eight months from the date of passage to develop and finalize VPP programs.
Each program must include a separate battery and non-battery rider and may include a third rider for electric vehicles. Individual customers with eligible equipment, such as a home battery and an EV, may participate in multiple riders simultaneously.
Each rider must have a framework for reducing peak demand and may provide additional grid services such as “clean peak service” that reduces reliance on fossil-fuel peaker plants, congestion relief and other location-specific services, avoidance or deferral of distribution system upgrades, and ancillary services, according to the bill text.
The Michigan bill gives the Michigan Public Service Commission one year from the date of passage to adopt final VPP program requirements. The bill allows participation from a set of broadly defined demand response resources whose power consumption can be controlled and from distributed generation and storage resources that can export power to the grid.
Michigan has a wealth of underused distributed energy resources at homes, businesses and industrial facilities, supporters of the bill say.
“By leveraging the untapped potential of businesses with large facilities that already generate onsite renewable power, Michigan can maximize energy resources, quickly add grid capacity, and reduce reliance on volatile fuel costs,” Kelly Trombley, senior director for state policy at Ceres, said in a statement co-signed by about a dozen environmental and clean energy groups.
Samarth Medakkar, Michigan policy lead for Advanced Energy United, said in an email that the Michigan bill is an example of policy that “can help us quickly build a homegrown virtual power plant resource and avoid the need to keep online old plants already scheduled to retire due to high costs.”
That was a reference to Consumers Energy’s 1.6-GW J.H. Campbell power plant, a coal-fired generator that the U.S. Department of Energy has ordered to run for nearly a year past its scheduled retirement last May. The plant’s continued operation last year alone cost Midwestern ratepayers $135 million, Consumers said in a recent securities filing.
Each bill includes some of the customer-friendly provisions laid out in model legislation developed by Solar United Neighbors, a nonprofit that advocates for distributed energy resource owners.
For example, both prohibit utility-owned DERs from participating in the VPP programs and — subject to regulators’ discretion — allow enrolled DERs to benefit from non-VPP revenue streams, such as wholesale market programs.
Additionally, the New York bill requires utilities to provide “non-discriminatory access to customer data, hosting capacity data and other grid data” to help aggregators, customers and DER developers identify grid support needs and facilitate program enrollment.
Shannon Anderson, Solar United Neighbors’ distributed power plant policy director, said in an email that the Michigan and New York bills are two of several state VPP initiatives the group is watching this year. The Virginia Senate passed a bill earlier this month requiring Appalachian Power to develop a VPP program; a separate bill requiring the state’s electric cooperatives to do the same awaits Democratic Gov. Abigail Spanberger’s signature. Pennsylvania legislators are considering their own VPP bill.
Legislators ran out of time to advance VPP bills in Oregon and New Mexico earlier this year, but “as the second year for those bills, we’re hoping third time’s the charm in 2027,” Anderson said.
If enacted, the Michigan bill would require state regulators to consider whether the eventual implementation of Federal Energy Regulatory Commission Order 2222 necessitates any modification of VPP program requirements “to increase program participation.”
FERC expects the Midcontinent Independent System Operator, which oversees the bulk of Michigan’s grid, to complete implementation of Order 2222 by June 2029. FERC issued Order 2222 in 2020, but technological and bureaucratic challenges have hindered implementation in some organized markets in the years since, experts say.
Though the New York bill is silent on the implications of FERC Order 2222, the memo accompanying the Assembly version notes “significant barriers to deployment and operation of distributed power plants in New York, including New York Independent System Operator rules that do not allow distributed energy resources of less than 10 kW” to form resource aggregations for wholesale market participation.
“To unlock the grid, ratepayer, and customer benefits that residential battery storage and other distributed energy resources can provide, our state must establish new opportunities for customers to participate in utility-administered grid support programs,” the memo reads.
