VPPs and CPower: Q&A with CEO Michael D. Smith

CEO Michael D. Smith knew CPower was a leading enabler of the energy transition when he took the helm a year ago, but he has since learned the extent of that role.

As the nation’s largest virtual power plant (VPP) provider, CPower boosts grid reliability while helping customers unlock the full value of their distributed energy resources (DERs). In aggregating DERs and dispatching them as VPPs, CPower helps customers earn revenue and reduce energy spending by providing services that grid operators need to avoid blackouts. Grid operators pay energy users to help keep the grid balanced, like by using less electricity or supplying power from distributed generation.

Smith has been a leading proponent of VPPs since he became CPower’s CEO in July 2023, broadening awareness of how energy users, particularly commercial and industrial customers and DER Project Owners and Developers, can help the grid transition to clean energy—and be rewarded for doing so.

A year after his first interview with The Current, Smith reflected on how far CPower and VPPs have come and discussed where they are going.

1. The Current: What has surprised you most about your first year at CPower?

Smith: One is the complexity of the industry. Not being a veteran of demand response and virtual power plants, it was eye-opening to learn how complex of a proposition it is to simplify grid services for our customers and make it easy for them to interact with the power grid.

Secondly, every customer is unique, and we must customize our approach accordingly. They each have their own operating parameters and concerns about how participating in a VPP might impact those operating parameters.

For example, if a customer has a large industrial load that powers their operations, you don’t want to impact the industrial process that is their lifeblood. You must work with them to figure out ways to be responsive to grid dispatch without disrupting their core processes.

We’re good at working with each customer to put them in programs consistent with their unique operating characteristics. We know the particulars of the different industries we serve and the needs of the individual customers within those industries.

One big-box retailer may differ from another, for example, in terms of what their motivations are and what they can and cannot do. Industrials will differ from a college campus. So, having those one-on-one relationships with customers is hugely important. That’s our secret sauce.

2. The Current: What are some memorable moments that have stood out to you over the past year? 

Smith: GridFuture was a great milestone for us. Not just because we were looking inward and bringing all our employees together for the first time in four years, but also the outward-facing nature of the event with the inclusion of the U.S. Department of Energy, LS Power and its portfolio companies, our customers and our partners. It made for a fantastic event whose benefits were two-fold.

Internally, there was the engagement of the 200 employees that participated. They were excited to be with their peers and talk about their business and where the industry is headed.

Externally, it validated our ability to attract outside thought leaders who are important to our business and have an interest in our industry. That says a lot about the CPower brand and the interest in the growing importance of VPPs in helping the grid.

And although GridFuture was one of the most memorable moments, it has been one of many enjoyable experiences getting to know the CPower team. Our monthly ‘Get CPowered Days’ in Baltimore have been a great way to bring everyone together on a regular basis.

Many of our employees work remotely or out of offices other than our headquarters in Baltimore. Frequently bringing distributed team members together has fostered face-to-face interactions and relationship building that have further boosted employee engagement, which is vital. We can’t expect to provide world-class service to our customers and our grid partners if we don’t have a highly engaged workforce.

3. The Current: A year ago, you spoke about how the industry was evolving, particularly regarding how the physicality of the electric grid was changing as more customers generated their own energy. Has this trend evolved and how is CPower addressing it?

Smith: The single biggest trend in the energy markets right now is load growth. We’re coming out of approximately 10 years without significant growth in demand. In fact, in some regions of the country, demand shrunk, particularly during COVID.

Now, we’re seeing demand grow rapidly, and it’s in large part because of the participation of some key commercial organizations including data centers, crypto miners and companies that are tapping into artificial intelligence. Computing, mining and all the data that is being used for AI are creating macro growth in overall load, especially in burgeoning data center hubs like Ohio, Illinois and Virginia.

These energy users can also come online much quicker than new power plants can be built. That creates a supply-demand imbalance and that’s what we solve.

We give the grid operators much more efficient and effective tools to manage supply-demand imbalance than building new power plants and associated transmission lines.

Also, in addition to supporting grid stability in an era of demand growth, we support further electrification of buildings and vehicle fleets, and the deployment of on-site renewable generation and energy storage.

All these macro trends point to the need for VPPs, and we support them by being good at connecting our customers’ capabilities with the grid’s needs. It’s why we’ve successfully managed a 40% increase in dispatches YoY to help rescue the grid when it has been needed the most.

4. The Current: What is flexible participation? And why does it matter to grid operators and customers? 

Smith: Our bread-and-butter is a capacity product where the grid pays us, and therefore our customers, to be available in times of grid stress. Grid operators rely on our customers to reduce their loads during emergency conditions.

However, grid needs have changed and continue to do so. Grid operators need much more help than just asking commercial and industrial customers to conserve electricity during emergencies like peaks in summer electricity demands.

Compounding factors drive a greater need for grid flexibility to smooth the energy transition, including issues such as retiring fossil-fuel generators, more wind and solar generation, accelerating vehicle electrification and more extreme weather events.

With all these factors in play, the grid must adapt to shifts in supply or demand more quickly and frequently to keep them balanced and avoid blackouts. This increasing need for flexibility shows up in all the products and programs grid operators use to ensure the system remains in balance—including energy, capacity, ancillary services and bespoke programs.

We offer flexible programs where customers can get paid to provide energy to the grid in times of need. That could be in response to an energy price signal or to support shorter disturbances to help stabilize the grid, like a car’s shock absorber.

Flexible participation is taking part in those energy and ancillary services programs. Customers generally need to be able to react more quickly than in emergency capacity programs.

Flexible participation programs also need customers to be able to react more frequently than in the emergency capacity markets, but they can earn additional revenue streams by participating.

Although any business or organization that has a box with lights, air conditioning and electricity going to it can be part of our virtual power plants, some industries have larger, more flexible loads that can be more useful to grid operators and more rewarding for customers.

For example, we talked about interruptible computing, which includes data centers, crypto and AI customers that have flexible loads. Big-box retailers with multiple sites in multiple states also have a lot of flexibility in their loads, particularly for adjusting their lighting or HVAC systems without interrupting operations or inconveniencing customers or employees. They have a huge opportunity to help the grid.

5. The Current: Let’s look into your crystal ball for a moment. Any predictions for CPower or the industry ahead?

Smith: The industry itself will continue to grow and we will continue to grow along with it as the need for grid flexibility increases and the benefits of VPPs multiply.

According to the U.S. Department of Energy, deploying 80-160 GW of VPPs—tripling current scale—by 2030 could expand the U.S. grid’s capacity to reliably support a ~60 GW rise in coincident peak demand while avoiding $10 billion in annual grid costs. Other research shows that relying on customer-sited DERs that make up VPPs is up to 60% more cost-effective than using gas power plants.

VPPs can also be created quickly by tapping existing resources. They will only become more common and expansive as grid operators realize that they typically take less than a year to stand up and customers see that they can start receiving the benefits of participating shortly thereafter.

As the demand for VPPs rises, CPower and its customers will be there to meet it.

To learn more about VPPs and how CPower can help you monetize your energy assets while supporting sustainability, improving grid reliability and increasing energy resiliency, call us at 844-276-9371 or visit CPowerEnergy.com/contact.