The Reality of Virtual Power Plants

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  • February 24, 2020

As grid-based technologies go, distributed energy resources (DER) have come a long way in a relatively short period of time, and it appears the pace is speeding up. New devices, software, and applications are evolving constantly, which only increases our chore of keeping up with all the developments. So it really pays to keep your eyes and ears open. Different perspectives have also been known to reveal some interesting insights, which recently put a different slant on DER.

A few months ago, “Charging Ahead” (November 2019 T&D World) featured the customer’s side of the grid, which should have covered the topic sufficiently, but perspectives can change. That is happening in the behind-the-meter (BTM) segment with a concept called the virtual power plant (VPP). A VPP is a network of independent DER systems utilizing a cloud-based control system to perform like a single large capacity energy source.

Grassroots BTM-DER

This is a huge task since the BTM-DER is primarily being driven by individual commercial, industrial, and residential customers rather than the utilities, regulators or policymakers. It also helps that BTM-DER technology is digital in nature and user friendly, which makes it easier for these customers or an aggregator to combine the electrical output for sale to the grid.

It also helps that the price of solar panels and battery storage systems are dropping substantially and are expected to continue this downward trend. This is especially noteworthy because the customers’ acceptance of these BTM-DER systems is picking up momentum. This will increase the number of individual BTM-DER assets, which is exactly what is needed for a VPP. Keep in mind these devices are already changing utility business plans and aggregation intensifies that situation.

According to a recent Navigant Research report, “The proliferation of DER will be among the most disruptive trends to the traditional energy industry over the next decade.” In addition, Navigant predicts that DER generation capacity will exceed 500 GW by 2028 and these DERs are definitely changing the status quo.

If more evidence is needed, the Solar Energy Industries Association (SEIA) reports that in 2019 Apple was the No. 1 corporate solar user with 393.2 MW of PV panels. Amazon was No. 2 with 329.8 MW, and Target was NO. 3 with 242.4 MW. SEIA also reported that the second quarter of 2019 was the fourth consecutive quarter of more than 600 MW of residential solar capacity installed.

That is a lot of generation individually, but when it is combined, it is easy to see a VPP emerging. Initially our individual customers saw BTM-DER as a technology that offered them positive benefits (green electricity and reduced energy bills), but then net metering regulations turned customers into prosumers. Prosumers are customers who not only are consuming electricity, but also producing it as well. Prosumers caught the attention of aggregators, but it didn’t stop there.

BTM-DER and Storage

It really gets interesting when a prosumer becomes a prosumager. The prosumage concept has been around for several years, but in case this is an unfamiliar term, the name comes from combining producer (pro) plus consumer (sum) plus storage (age) together.

Having customers with storage capabilities isn’t new, but keep in mind the prosumager has an economic focused perspective of the energy marketplace. They understand that storage provides a way to counter the demand and time of use charges imposed by utilities to thwart the growing distributed generation issue.

Tesla — Powerwall 2 Home with solar panels.

Tesla — Powerwall 2 Home with solar panels.

Remember back a few years ago when the Federal Energy Regulatory Commission (FERC) approved a rule to allow the participation of electric storage in capacity, energy and ancillary service markets. Prosumagers quickly realized this rule gave them a way into the critical services marketplace, which can generate money as well as electricity.

Interestingly, the 2019 Black & Veatch (B&V) “Strategic Directions Report” has included a section about BTM energy supply options (Note – the full report is available on the B&V website). One of this year’s survey questions asked about 900 industry leaders, “Do you view the adoption of alternative “behind-the-meter” energy supply options by customers or third parties as a threat to the utility business model?”

The results are very striking. Nearly 46% of the respondents said, “Yes if regulatory models preclude market flexibility.” About 43% thought, “The threat could come from a utility’s failure to deploy its own alternative energy solutions.” Surprisingly, about 27% of the respondents said, “No, the adoption rate of new generation sources is too slow relative to the importance of traditional generation sources to the grid maintenance program.” So once again, perspective is governing how these leaders see the impact of BTM technology.

Prosumage Gains Traction

Turning the customer into a prosumage got an unexpected boost by global climate change. This phenomena is producing what is being referred to as extreme weather events. Storms are causing prolonged power outages and can last days, weeks, or even months, which is not only frustrating and disruptive, but can be life threatening.

In addition, wildfires have spawned a new category of power outage in an effort to prevent those types of fires — the public safety power shutoff. Power is cut to areas where the danger of wildfire is extreme. Customers thought they did not worry about outages, since they rooftop solar systems — then they got a surprise. They found out their systems are not designed to work during an outage. It’s a complicated subject, but keeping it simple, most of these systems use the grid to buffer the variability of their solar generated electricity.

Without the grid’s buffering capabilities, solar generated electricity experiences voltage and current swings that could damage the customer’s electronics and motors. There is another very important reason for turning the solar system off when the grid goes down — utility crews are working on circuits during outages. Any customer generated power feeding the circuit would be dangerous for the crews. None of these problems are showstoppers, but they point out everyone involved with the technology needs to understand what they expect that technology to be able to do, but when those systems work, it’s amazing.

Last year South Australia’s government, working with Tesla, announced a VPP project that will consist of 50,000 houses. Tesla said they completed Phases 1 and 2 with over a 1000 houses hooked up. Tesla supplies a 5 kW rooftop solar array with a 13.5 kWh Powerwall 2 storage battery to each house. Using sophisticated software, each of the houses are interconnected together to form a virtual grid. Phase 3 will connect the remainder of the 50,000 houses. When completed, the full VPP will provide 250 MW of power and 650 MWh of storage to South Australia’s grid.

Also in 2019, a press release from AutoGrid, a California company, announced it was teaming up with the Japanese energy services company ENERES for VPP project. It anticipated adding more than 10,000 DER solar assets, including storage, to the VPP between 2020 and 2021. The VPP design allow it to be quickly scaled up in subsequent years.

While all of this was taking place, Sunrun filed a motion with FERC last year. The result was FERC issuing an order exempting residential aggregators from some federal qualifying facility filing requirements. This is a significant hurdle when it comes to combining BTM-DER for VPP purposes. Of course interested aggregators still have local and state regulations to deal with, but it’s a start toward more VPP projects in North America (NA).

Speaking of NA, there is a lot of interest in the United States when it comes to combining BTM-DER to make a VPP. Austin Energy, EPRI (Electric Power Research Institute), University of Texas (UT) Austin, and the Department of Energy (DOE) are exploring what they call “flexible energy pathways.” In a nutshell, DOE has provided a US$5 million grant for a project called SOLACE (Solar Critical Infrastructure Energization system). The plan is for the SOLACE project to link together homes with solar arrays to store electricity in Austin Energy’s large storage battery.

Using a grid-forming inverter being developed by UT Austin and other equipment, the team will form a microgrid connected to the Austin Energy grid. The idea is being able to move power from the battery through Austin Energy’s network to critical loads during power outages.

All of this points out that the perception of the BTM grid segment is changing, but so is its reality. The power delivery system is shifting from centralized power stations to a more diverse electricity source. What started out as customers tinkering with solar arrays and other BTM-DER technologies is morphing into a virtual power plant. These VPP are capable of providing the same services as a traditional power plant without the baggage that fossil fuel-powered generations bring with it. Are we, as an industry, ready for that — we need to be, we’d better be!

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