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Virtual power plants coordinate distributed resources and demand for a more resilient and cost-effective energy transition. And they are gaining ground in the United States. VPP pilot programs have been running in the United States for years. The market is maturing and the technology is competing with centralized power plants as a low cost alternative that benefits both the grid and end users. A VPP is a virtual aggregation of small-scale distributed energy resources (DERs), such as photovoltaics, energy storage, electric vehicle chargers, and demand-responsive devices such as water heaters, thermostats, and appliances. VPP technology has shown great promise in replacing natural gas plants on grids, offering additional capacity at times of peak electricity demand. In the past decade, the United States has spent more than $120 billion on 100 GW of new generation capacity, primarily for resource matching. A study by Boston-based consultancy Brattle Group estimates that utilities could save $35 billion by 2033 by focusing on VPPs for peak capacity. “By deploying grid assets more efficiently, distributed resource aggregation lowers the cost of energy for everyone, especially VPP participants,” says Jigar Shah, director of the Department of Loan Programs Office. US energy. The Brattle Groups 400 MW resource adequacy study considered a utility with 1.7 million residential customers. The utility had 5.7 GW of gross peak demand and 3.6 GW of net peak demand from solar and wind resources. Its goal was to generate half of its electricity from renewables by 2030. According to the study, the use of VPP plants would be between 40% and 60% cheaper than other alternatives, such as gas plants and battery batteries. grid. The Brattle Group estimates that the 60 GW deployment of VPPs could meet US resource needs through 2033 for $15-35 billion less than the cost of alternatives. That level of VPP deployment could also provide more than $20 billion in emissions and resiliency benefits over the decade. “VPPs do more than provide decarbonization and network services: they increasingly offer network operators a large-scale, quality-of-utility alternative to next generation and system buildout, through automated efficiency, capacity support and non-wired alternatives,” says Shah. Hestia Project The DoEs Office of Loan Programs has supported VPPs, recently proposing a $3 billion conditional loan to energy-as-a-service provider Sunnova to roll out its “Project Hestia” across the country. The plan aims to increase access to solar energy and VPP services for disadvantaged communities that might not otherwise be able to obtain residential solar loans. Sunnova will receive indirect cash flows and partially guaranteed by the loans that support the clients accounts. Eligible homes will be required to use Sunnovas energy management system, accessible via smartphones or other electronic devices. The system will recommend demand response behaviors, allowing customers to reduce energy costs while helping to balance the grid during peak demand. If issued, the DoE package would support Sunnovas lending for VPP-capable solar, storage, and other adaptive home technologies. The guarantees could boost up to $5 billion in loan origination, saving on interest and lowering the weighted average cost of capital. “The Hestia project would enable a historic private sector investment in Americas disadvantaged communities and energy infrastructure,” said William J. Berger, Sunnovas CEO. Market tailwinds Changing US market conditions are further driving VPP adoption. The Reduced Inflation Acts $369 billion of climate and energy spending includes many requirements to serve energy communities: disadvantaged communities crucial to an equitable energy transition. Projects in designated energy communities are eligible for an additional 10% investment tax credit, which supplements the 30% base credit for renewable energy projects. Other states are beginning to follow Californias lead in reducing or eliminating net energy metering (NEM), a key rate mechanism in launching the US residential solar market. The old NEM rates offered customers full retail value for each kilowatt-hour of electricity fed into the grid. Californias NEM 3.0 tariff essentially removes the value of exported energy, and other states will follow suit. Solar energy installers have warned that this could lead to a market based on self-consumption from batteries, with the consequent defection from the grid, which would do little to help grid flexibility. VPPs, however, offer network services such as demand response, demand shaving, and others. Resilience VPPs also reinforce grid resilience in areas affected by extreme weather conditions related to climate change. Residential solar installer Sunrun has been selected to deploy a 17 MW VPP network of solar plus storage in Puerto Rico. Following Hurricane Maria in 2017, the government of the Caribbean island created a framework for DER with the Puerto Rico Energy Public Policy Act of 2019. Sunrun will enroll Puerto Rican clients this year to start operating VPP next year. The company claims that customers will save on energy costs and will be compensated for offering battery storage capacity to the grid now managed by US-Canadian joint venture LUMA Energy. According to Sunrun, the 10-year VPP program allows customers to opt out. “We are solving the energy insecurity of the island by changing the model so that solar energy is generated on rooftops and stored in batteries to supply each home and then shared with neighbors, creating a clean and shared energy economy”, says Mary Powell, CEO of Sunrun. |
