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Virtual Power Plants – How Can They Succeed?

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Julian Jackson's picture
Staff Writer, Energy Central, BrightGreen PR

Julian Jackson is a writer whose interests encompass business and technology, cryptocurrencies, energy and the environment, as well as photography and film. His portfolio is here:...

  • Member since 2020
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  • Nov 30, 2022

In September 2020, FERC Order 2222 paved the way for VPPs in the USA. Nearly two years later, VPPs are still at beginning stage of organized capacity, energy delivery, and ancillary services deployment at the regional level. If they are to make an impact on the energy market and emissions reductions they need to scale up at a national level. Is 2023 going to be the year for lift-off?

A VPP is an online, virtual collection of distributed energy resources (DERs) like PV, energy storage, EV chargers and demand-responsive devices (such as water heaters, thermostats, and appliances). VPPs do more than provide grid services and decarbonization – they increasingly provide grid operators with a large-scale and utility-grade alternative to building more generation and other infrastructure through automated efficiency, capacity support, and non-wire alternatives.

The major benefits of VPPs are that by utilizing grid assets more efficiently, the system lowers the cost of power for everybody, particularly the stakeholders in the VPP network.

The Solar Energy Industries Association estimates almost 5% of U.S. owner-owned homes now have rooftop PV. Energy storage is rapidly advancing, with more storage deployed in 2021 than the previous five years combined. Renewables, IoT appliances and energy storage are increasingly popular with customers. Overall, $110 billion is projected to be invested in DERs up till 2025.

VPPs could offer a future solution or...a future failure... to produce cleaner, sustainable, and more reliable energy, but as they are an early-stage advanced technology, utilities should be addressing various issues that cannot be avoided if this technology is to be employed safely and productively.

While they are expected to be resilient against major power outages like those that caused so much hardship in Texas in 2021 and could happen again. If virtual power plants are going to be an infrastructure asset, there are three points of potential failure:

  • A lack of cybersecurity resources to protect the connected networks from being hacked

  • Weak data governance to protect the communication of data through several different resources.

  • Not having a third-party resource to be the watchdog of the data flowing between the many distributed energy resources (DER)

These are not insurmountable challenges: cycbersecurity can be tightened, and appropriate legislation can be put in place to ensure security of communication and an appropriate regulatory framework, for example establishing a supervisory agency, to ensure the security of date flow between different nodes of the VPP network.

With the grid becoming more unreliable and power outages a common frustration, more utilities will need to turn to alternative ways to avoid catastrophic failures combined with data management software to govern this flowing data. This needs an input of both funding, and management time and oversight.

It will also need government support as well as new structures of regulation applicable to the new technology. At the state and consumer level, utilities have an important role to play in rolling out DER integration and advanced demand response. Equally important will be the ability of VPP aggregators to secure revenue contracts so that they have a good level of ROI.

By investing government capital funds, retail and wholesale power cost reductions are possible. Private financial sources will be incentivised to get involved, which will enable lower customer acquisition costs and ongoing revenue streams for the services provided.

These and other issues are far from intractable, and well worth the significant amount benefits that should accrue to society if enough momentum builds behind VPPs in the future.

Jesse Nyokabi's picture
Jesse Nyokabi on Dec 9, 2022

Thank you very much for sharing @Julian.


Julian Jackson's picture
Thank Julian for the Post!
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