Pathways to Commercial Liftoff

The pathway to:
Virtual Power Plants Commercial Liftoff

Deploying 80-160 GW of virtual power plants (VPPs) by 2030 could expand the US grid’s capacity to reliably support rapid electrification while redirecting grid spending from peaker plants to participants and reducing overall grid costs.

Between 2023 and 2030, coincident peak demand on the grid will rise ~60 GW, from roughly 740 GW to 800 GW of demand.  At the same time, fossil assets are retiring. Roughly 200 GW of peak-coincident demand must be served with new resources coming online by 2030. Tripling the current scale of VPPs could address 10-20% of this peak demand. This could avoid ~$10B in annual grid costs, and much of the money that is spent on VPPs would flow back to participating consumers. 

See full report for sources. 

VPPs are aggregations of distributed energy resources (DERs) such as smart appliances, rooftop solar with batteries, EVs and chargers, and commercial and industrial loads that can balance electricity demand and supply and provide grid services like a traditional power plant.

There are many kinds of VPPs that function in different ways to meet the needs of the local or regional grid.  Functions in use today include: Supplying homes with energy from on-site solar-plus-storage systems during peak hours when bulk power generation is scarce; Shifting the timing of EV charging to avoid overloading local distribution system equipment; Charging distributed batteries (increasing demand) when clean electricity is abundant to reduce curtailment, for example, of utility-scale solar. 

Collectively, VPPs can deliver a range of benefits.

Resource adequacy

  • Integrate distributed generation and storage capacity
  • Shift demand to follow supply

Affordability

  • Defer grid capex (generation, T & D)
  • Avoid fuel costs
  • Compensate consumers and businesses

Reliability & resilience

  • Integrate back-up power
  • Eliminate single-point-of-failure

Decarbonization & air pollution reduction

  • Add distributed renewable generation
  • Reduce curtailment of renewables
  • Reduce reliance on fossil fuels

T&D infrastructure relief

  • Increase efficiency by smoothing peaks
  • Alleviate congestion with local dispatch

Community empowerment

  • Enable consumers to optimize energy cost, use, and source
  • Retain and create good jobs

Versatility & flexibility

  • Defer grid capex (generation, T & D)
  • Avoid fuel costs
  • Compensate consumers and businesses

Growth in VPPs is at an inflection point, driven by several market factors.

Learn more about each by clicking the boxes below.

The pathway to commercial liftoff for VPPs requires progress on five imperatives.

1. Expand distributed energy resource adoption with equitable benefits.

Governments, nonprofit organizations, utilities, DER manufacturers, and VPP platforms can collaborate on holistic support for DER adoption and VPP deployment that prioritizes equitable benefits, including electricity bill savings, grid reliability and resilience, air quality improvements, and job opportunities. Offering low-cost financing and rebates for energy-efficient, VPP-enabled devices, for example, can induce consumers to shift spending on equipment or vehicle upgrades toward DERs with greater potential system benefits.

Utilities, DER manufacturers, VPP platforms, consumer advocates, and regulators can develop a phased approach to streamline VPP participant enrollment. Measures include consumer education, automatic enrollment of DERs into VPPs at the point of purchase with opt-out options, and wider VPP-enablement of DER devices.

Private sector and public sector stakeholders can improve coordination and resourcing for the development of guidelines, standards, and/or requirements that make VPPs more repeatable and shorten the design and pilot stages of individual VPP deployments. Priority areas include improved DER and VPP forecasting tools, standardized service agreement contracts, and measurement and verification (M&V) methods. Standardization of distribution grid operations overall (i.e., including and beyond VPPs) will accelerate liftoff; key areas include distribution system reliability standards and formalized grid codes to govern system participants, DER interconnection and data standards, and cybersecurity. 

Increased standardization (Imperative 3) will accelerate VPP integration into retail and wholesale markets (Imperatives 4 & 5).

Governments, utilities, and nonprofit organizations can increase resources and personnel support for utility regulators (e.g., public utility commissions, boards of cooperatives, and more) to revise or introduce new distribution system planning requirements, procurement processes, ratemaking, and customer programs that promote cost-effective DER adoption and VPP deployment while accounting for potential necessary grid upgrades. 

In restructured markets, ISOs/RTOs may benefit from targeted support for the timely and inclusive integration of VPPs into system planning and marketplaces as outlined in FERC Order 2222.

DOE and its collaborators have over 20 complementary programs underway to accelerate VPP liftoff. Additional initiatives may take shape in response to industry engagement that this report aims to catalyze.

The U.S. Department of Energy, in partnership with other federal, state, and local agencies, has tools to address challenges to commercial liftoff and is committed to working with communities and the private sector to build the nation’s clean energy infrastructure in a way that meets the country’s climate, economic, and environmental justice imperatives.

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