The Booming Potential of Virtual Power Plants

A recent Bloomberg opinion piece contrasted the massive growth in distributed energy resources (DERs), such as rooftop solar and electric vehicles, with sluggish deployment of other clean energy solutions, such as wind power and transmission upgrades, as the world races to reach net zero emissions. While the author was spot on in many respects, the piece failed to account for the role that Virtual Power Plants (VPPs) can play in augmenting the ability of DERs to support the entire grid, and how utility mindsets are shifting.

VPPs aggregate and coordinate distributed energy assets like flexible load assets, rooftop solar, stationary batteries and electric vehicle chargers. This turns these DERs into a reliable block of flexible capacity that can support a variety of grid needs. With VPPs we can harness the rapid expansion of DERs for the benefit of all and continue driving greater decarbonization and energy reliability while we work through longer timelines for other necessary pieces of the new energy economy.

Furthermore, VPPs provide grid benefits at a far lower cost than alternatives. A study released earlier this year found that the net cost to a utility of providing resource adequacy from a VPP is roughly 40% to 60% of the cost of alternatives, which translates into a 60 GW VPP deployment meeting future resource adequacy needs while saving $15 billion to $35 billion.

There is growing public and private support for VPPs. Recently, the day before the opinion piece was published, the U.S. Department of Energy released its Pathways for Commercial Liftoff report for VPPs. The report found that tripling the current scale of VPPs to 80-160 GW by 2030 could expand the U.S. grid’s capacity to reliably support rapid electrification while reducing overall grid costs by $10 billion per year. Not only that, but there are up to $100 Billion in loans available to support VPP deployment.

Utilities can’t afford to ignore these cost savings, and are highly motivated to gain better visibility and control of DERs to maintain the stability of the grid. Therefore, we have many reasons to be optimistic about the rapid growth in VPPs over the next decade. Any forward-looking energy system analysis that doesn’t include VPPs is incomplete.

VPPs can increase the impact of DERs and buy precious time for technologies like wind generation and transmission upgrades to progress. VPPs won’t solve the climate crisis alone, but they are a promising tool to accelerate the clean energy transition. With their flexible capacity, they can bridge the gap created by the sluggish deployment of technologies such as wind power by leveraging existing resources until large-scale renewables can fully deliver.

Michael Smith

Michael Smith is a visionary and innovative leader who brings more than 25 years leadership experience in the energy industry to CPower as its CEO. Michael joined CPower from ForeFront Power, where he was the CEO of the company’s North American solar and energy storage business, responsible for strategy and all business areas across the U.S. and Mexico.

Prior, Michael served as Senior Vice President, Distributed Energy, at Constellation, the retail energy subsidiary of Exelon Corp., where he was responsible for Constellation’s distributed solar, energy efficiency, and energy asset operations businesses across the U.S. He also served as Vice President, Innovation and Strategy Development, for Exelon Generation, and led Constellation Technology Ventures, Exelon’s venture investing organization. Earlier, Michael was Vice President and Assistant General Counsel for Enron Energy Services and a trial lawyer at Bricker & Eckler, LLP.