Skip to main content

Power Points

We're having a virtual power plant moment

Virtual power plant concept art
Metamorworks

From wildfires to heat domes and polar vortexes to floods, the impacts of extreme weather are being felt across the United States. The climate chaos is revealing the fragility of our energy grid, and planned and unplanned outages are becoming more common. Losing energy during extreme weather is more than uncomfortable; it’s dangerous. 

It makes sense that home and building owners are investing in solar generation and storage resources, which can keep power flowing when the grid is down. And, when aggregated, these assets can do more than just help the owners; they can help the entire grid become more resilient by providing new, dispatchable resources to utilities.  

In other words, extreme weather is driving renewed attention in the virtual power plant (VPP). 

What is a virtual power plant?

A VPP is a collection of privately owned energy resources that can be interconnected and that operate together. While independently owned and operated, they can be controlled centrally, allowing dispersed resources to respond to energy supply and demand. 

The result: potentially lower energy costs to consumers, additional value of assets to owners, and more flexibility for grid operators. 

As utilities scramble to ensure reliability during extreme weather while increasing their renewable energy makeup, more are encouraging customers to participate in VPP programs.

This idea isn’t new. The term has been around since the 1990s, but it’s gotten increased attention in the last decade as distributed energy resources have become more common, software has improved, and the value of grid flexibility has become more clear. By some accounts, increased load flexibility could have prevented last year’s heat-wave-induced rolling blackouts in California. 

Three VPP companies I’m watching 

Sonnen

Earlier this month, sonnen, a smart residential energy storage provider owned by Shell, announced the launch of the sonnenCommunity New York Virtual Power Plant. Through the program, sonnen will supply solar plus storage to 200 homeowners at a discounted rate with the vision to provide renewable energy and a dispatchable resource to the NYISO energy market. 

In March, sonnen launched a similar partnership with the backing of the California Energy Commission to provide community solar to 50 low- and medium-income residents in Los Angeles County, with the goal of forming a virtual power plant in Southern California Edison’s territory. 

Swell Energy 

The residential energy technology provider Swell has worked with utilities and customers to create VPP programs in California, Hawaii and New York. The company thinks of the resources as a new asset class and has helped utility partners recognize residential solar plus storage as a dispatchable resource in a utility’s portfolio. 

"We show them precisely how certain loads can be taken [offline] on certain circuits in a surgical manner, as opposed to just a massive battery farm in the middle of the desert," said CEO Suleman Khan in an interview with Energy Storage News earlier this year. 

The company raised $450 million to deploy its technology at the end of 2020, and Khan says the company has 300 megawatt-hours of energy storage capacity under contract over the next three years.

Tesla

Last week, Tesla announced the details of a plan to use its Powerwall integrated battery system in California as part of a VPP to support the electric grid during record high temperatures over the next few months that are expected to increase energy demand. 

Customers can opt into the program, but won’t be compensated for participating. Instead, Tesla is framing the program as a "public good" to support the California grid. Currently, the utilities in California ask customers to voluntarily reduce energy use through their behavior during specific hours of the day. Tesla’s program essentially automates that same concept for utilities. 

"While customer compensation for this program is a possibility in the future, in the meantime customers are encouraged to participate in the program and mobilize the excess capacity of their Powerwall systems," says the company’s website

The choice to not compensate customers is worth watching to see if other programs follow suit and how many of the company’s 50,000 California customers opt in. 

Tesla has been in the VPP game for several years, including partnering with Vermont’s Green Mountain Power to supply Powerwalls to customers in 2017. 

Utilities incentivize VPPs

As utilities scramble to ensure reliability during extreme weather while increasing their renewable energy makeup, more are encouraging customers to participate in VPP programs. Below are three recent announcements; they are by no means the only programs out there. 

  • On July 19, Hawaiian Electric launched a program allowing residential and commercial customers to get a cash rebate for adding energy storage to solar arrays. In exchange, the customers opt into a VPP program to use or export the power from that storage during two peak hours of the day. 
  • On July 13, Arizona Public Service announced a $1,250 incentive for customers that install a new battery and allow the utility to use up to 80 percent of its capacity during peak hours. 
  • In May, Southern California Edison (SCE) adopted an initiative to incentivize its customers to participate in a VPP program by offering "GridRevenue" for those that offer their resources during peak hours. The effort is in collaboration with Swell Energy (mentioned above). This is in addition to SCE’s program announced last year with Sunrun, in which the utility is setting up a 300-home VPP. 

With extreme weather on the rise, this trend is sure to continue. That could spell good news for homeowners looking for financial opportunities to get their own distributed energy resources and utilities, which have the unenviable task of providing reliability in an increasingly chaotic world. 

[Want more great analysis of the clean energy transition? Sign up for Energy Weekly, our free email newsletter.]

More on this topic