During record-high temperatures this summer, virtual power plants (VPPs) played a crucial role in relieving grid stress. Despite their success, some utilities worry that relying on VPPs over conventional generation could threaten grid reliability. But no resource offers 100% certainty, including traditional power plants, argues Paul Hines, Vice President of power systems at EnergyHub.
He highlights that during Winter Storm Elliott in December 2022, EnergyHub’s VPP assets provided critical load relief, while natural gas plants were responsible for two-thirds of the historic power outage across the eastern and midwestern U.S. “EnergyHub's data suggests that a well-designed VPP achieves better than 98% dispatch reliability,” Hines noted.
In addition to their high reliability, VPPs offer benefits beyond conventional generation. Traditional power plants require significant investment and long lead times, while VPPs are cheaper and faster to deploy. Programs like Ontario IESO’s Peak Perks™, for example, have scaled to 150 MW of peak demand reduction capacity in less than a year.
The consultancy E3 recently noted that the current scale and speed of load growth, combined with supply-side constraints, are unprecedented. Over the next two decades, load growth may fluctuate en route to an electrified economy. VPPs offer a modular, scalable solution, putting less capital at risk than traditional power plants. And while new power plants supply new loads, they don’t address transmission and distribution system needs; VPPs can do both, balancing supply and demand across the grid and protecting assets like substations and transformers from overloads.
According to market analysts, there are currently over 500 VPP projects in North America. Within these projects, you’ll find everything from thermostat-based VPPs like Arizona Public Service’s Cool Rewards program, which leverages over 90,000 DERs to keep power supply reliable in the face of extreme heat, to the multi-state ConnectedSolutions VPP program, which dynamically dispatches over 200 MW of batteries, thermostats, and EVs to support a range of bulk and distribution grid needs.
RMI’s recent Virtual Power Plant Flipbook further highlights the variety of VPP applications, showcasing over a dozen U.S. programs of varying sizes and configurations delivering multiple advanced grid services. “What do all of these programs have in common?” asked Hines. “They harness the wide-ranging capabilities of VPPs to solve the utility’s unique challenges.”
To capture the full value of VPPs, they need better treatment in the regulatory arena. Current limitations stem from how VPPs are understood and utilized; as a result, VPP capacity is often discounted in resource plans due to reliability concerns. As more data is collected from real-world VPPs, they should receive greater capacity credits and play a larger role in integrated resource planning.
Part of the solution also lies within utilities, whose consideration of VPPs and other DERs is typically siloed within small, specialized teams and whose business model in most cases hasn’t evolved to fully embrace the multiple value streams of VPPs. Utilities will need to adapt to better integrate the teams that handle VPPs within the broader organization.
With these changes, VPPs can help utilities navigate the rapidly evolving grid and drive the transition towards a more sustainable and resilient energy system.
