A virtual power plant, or VPP, is a sophisticated energy management system that harnesses the power of various distributed energy resources, integrates them into a unified network, and optimizes their operation to provide reliable, efficient, and sustainable energy services to both grid operators and energy consumers.
A distributed energy resource (DER) refers to any resource located on the distribution system or behind a customer meter, which may include, but is not limited to, electric storage resources, distributed generation, demand response, energy efficiency, thermal storage, and electric vehicles and their supply equipment.
One of the VPPs super powers is the amount of different kinds of energy sources it can bring together to work on the grid in harmony. Energy sources like solar, wind, battery storage and demand response can blend seamlessly onto the grid when they come through a VPP.
Think of it this way: each individual DER is a piece of fruit. When you take an assortment of pieces of fruit and add them all together, you have a tasty, diverse fruit salad.
What is the difference between VPP vs. Microgrids?
Microgrids and VPPs are similar, but serve different purposes in the energy landscape.
A microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable entity with respect to the grid. Microgrids can disconnect from the traditional grid to operate autonomously and locally. Microgrids can strengthen grid resilience and help mitigate grid disturbances with their ability to operate while the main grid is down and function as a grid resource for faster system response and recovery.
While VPPs and microgrids do share some similarities, there are some key differences. VPPs must always be connected to a grid, where microgrids can either be standalone or connected. Another key difference between the two is that VPPs do not require any sort of battery storage, and microgrids do.
VPPs are essential to managing microgrids. They can coordinate multiple DERs within a microgrid to maintain energy supply during grid outages or operate autonomously to optimize energy use and reduce costs.
VPPs offer a dynamic and decentralized approach to distributed energy resource aggregation, while the interconnection of microgrids serve as localized hubs for optimizing energy use and enhancing resilience. Together, they can revolutionize our energy infrastructure, providing cost-effective grid services while facilitating the transition to a clean energy future.
What is FERC order 2222 and how do VPP’s support the intentions behind it?
The Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of natural gas, oil and electricity. They work to ensure reliable, safe, secure & economically efficient energy for consumers at a reasonable cost.
FERC order 2222, issued in September of 2020, is meant to reduce barriers to smaller DERS participating in the electricity wholesale markets by establishing a new category of market participants: DER aggregators. When smaller DERs aggregate together they can fulfill FERC minimum size requirements for participation by regional transmission organizations (RTOs) or independent system operators (ISOs).
California is a good example of why the rules that govern RTOs/ISOs needed to be updated. Last summer’s sweltering heat wave saw text messages going out to California residents, asking them to conserve energy during high grid-strain. And it worked, but it also outlined a paradox as pointed out by Rocky Mountain Institute (RMI) : While a handful of power plant owners are paid millions to keep the grid operating, millions of homeowners were paid nothing to stabilize the grid when it really mattered.
California ISO Corp, or CAISO, is closest to implementing FERC order 2222, but even they are two years out from final implementation.
Where are VPP’s being successful?
While FERC 2222 is a boon to the future of VPPs, there are already several examples of them operating very successfully.
While you think of VPPs as being large in scope, some of them can be much smaller. Residential, even. For instance, Sense has a partnership with OhmConnect which incorporates their Fuse product with our real-time, device level insights. This integration creates a residential-level VPP that enables customers to earn rewards for reducing their home electricity use when the grid is stressed.
VPPs have been very successful making energy less expensive. According to the Department of Energy, buying peaking capacity from a VPP made of residential smart thermostats, smart water heaters, home managed EV charging, and behind-the-meter batteries can be 40% lower net cost to a utility than buying capacity from a utility-scale battery and 60% lower than from a gas peaker plant.
VPPs help enable the efficient integration of renewable energy sources into the grid. Research conducted by the RMI found that VPPs could reduce peak energy demand in the US by 60 gigawatts, which is equivalent to the energy used each year by 24 million households, and reduce annual power sector expenditures by $17 billion dollars by 2030.
It is not exaggerating to say that VPPs are essential to our clean energy future. They are key to reducing the power industry’s dependence on climate-damaging fossil fuels, and there are already plenty of results to prove it. For example, during a heat-wave in California in the fall of 2022, OhmConnect’s 200,000 active members saved 1.5 GWh of every, equal to taking an estimated million homes off the grid for an hour.
How does Sense fit in with a VPP?
At Sense, we know that a home is not just made up of devices, it’s made up of people. An educated and engaged energy consumer and the ability to add distributed energy resources to the grid are important components in building our clean energy future.
Sense helps consumers be more energy efficient by fully understanding when and how much energy they are using. WIth that insight, we can help encourage consumers to shift or reduce energy use when the electric grid is constrained or even maximize energy storage.
But most importantly, Sense builds trust with our customers. Sense’s real-time experience for consumers is foundational to encouraging der participation including enrollment in both distribution utility and aggregator programs. We support ongoing participation by enabling customers to see the impacts of their actions and increasingly make it possible to automate devices that works in harmony with customer preferences and energy needs.