How to Help California’s Grid? Go Virtual
At first glance, there’s nothing atypical about the small gray house located on a quiet residential street in Richmond, Calif. But look further and you’ll see that it’s the first piece of a revolutionary new type of power plant. Unlike traditional plants, you won’t find any massive cooling towers or transmission lines. That’s because this electrified home is part of a virtual power plant, or VPP.
VPPs are flexible energy sources that can be used to reduce load or provide power to the electric grid, just like typical power plants. But instead of the energy coming from one central source, it comes from a bunch of smaller, distributed energy resources (DERs), such as home solar panels, residential battery packs, and electric vehicles.
These fully electrified Richmond homes, along with dozens of other partially electrified homes in the East Bay city, will be part of MCE’s groundbreaking VPP pilot program. The pilot aims to reduce energy load and grid strain during critical times and increase load when grid conditions are favorable. Participating homeowners will allow their grid-smart energy devices to respond to MCE’s signals to shift load based on the grid’s needs and save money through monthly credits on their energy bills.
How It Works
The homes MCE is equipping to participate in its VPP are outfitted with numerous grid-smart devices that not only provide grid flexibility but also make for a better experience for the homeowner.
VPP in the News
Clean Power Alliance Approves New Program to Install Virtual Power Plant and Provide Low Income Customers Access to Solar Energy at No Cost
CPA will work with Haven Energy to install networked solar and battery storage systems on eligible low-income residents’ homes to provide localized clean power and significant savings on customer electricity bills while managing peak energy demand.
Read more here.
A virtual power plant makes use of many distributed resources as opposed to the singular resource of a traditional power plant (Courtesy of MCE)
California has an estimated 3.1-3.6 gigawatts (GW) of enrollment in “load-shifting” demand response, which includes Time-of-Use rates and VPPs that respond to heightened times of energy demand, according to the California Energy Commission (CEC). That’s enough energy to power 2.5 million homes. By 2030, California hopes to double this to 7 GW of flexible load-shifting capacity.
By 2035, California VPPs could avoid over $750 million annually in traditional power system investment, notes a recent Brattle Group study. Roughly $550 million of those savings would be retained by consumers.
Several community choice energy providers are exploring the potential of VPPs to make electricity less costly and more reliable. For a VPP to work, it needs technology-equipped homes that can reduce demand and incentives to encourage VPP program participation. Just how a VPP program is set up, however, can vary.
“A key difference is who develops and operates the VPP. CCAs can contract out the operation of their VPPs to third parties or do it in-house themselves,” says Catherine Rowen, an intern at Valley Clean Energy who is studying how VPPs work in the CCA world.
The simplest route is to contract with a VPP operator—such as AutoGrid, OhmConnect, or Sunrun—that aggregates DERs in a specific area or region. CCAs or other load-serving entities can enroll in these third-party VPP programs, allowing their customers to participate by syncing up their home DERs or even by simply adjusting their thermostats and appliances at certain times. Many CCAs are engaged with VPPs this way, including Clean Power Alliance and Central Coast Community Energy.
A more hands-on approach is for a CCA to partner with a third party to create a distributed energy resource management system (DERMS), which is essentially the software that operates and optimizes the VPP. That’s the approach MCE chose for its VPP in Richmond. MCE’s DERMS software will connect directly with DERs and flex their energy to support the grid.
Being one of the first CCAs to venture down this path, MCE is developing a DERMS tailored to the CCA structure. Alexandra McGee, VP of Strategic Initiatives at MCE, believes MCE’s work could potentially be used as a template for other CCAs. “We’re trying to demonstrate proof of concept, gather lessons learned, and then offer it to other CCAs, should they be interested,” McGee said.
Ava Community Energy is also exploring this DERMS approach, but instead of building newly electrified homes, this VPP utilizes existing customer DERs with a focus on “residential customers, low-income households, and ‘resilience hubs,’ facilities open to the public that provide community services,” according to Ava’s website.
Which option a CCA chooses for their VPP depends on a variety of factors like cost and investment.
A third approach to VPP participation is via a flexibility market. Here, a CCA contracts with a market interface—such as Recurve’s FLEXmarket—to have a market set up on their behalf. This market allows “a CCA to set a price for each hour they want demand reduction. VPP operators participating in the market can then bid the capacity or energy savings they are able to offer at that price,” explained Rowen.
Another consideration is whether CCA VPPs participate in the California Independent System Operator (CAISO) markets. Participating in CAISO allows VPP resources to count towards the CCAs’ resource adequacy (RA) requirements, a foundational obligation to have enough energy supply. Alternatively, CCAs can use VPP resources to reduce their electricity load, which can, in turn, reduce future RA obligations. This second approach can generate savings for its customers, but the calculus will be different for each CCA.
In support of VPPs’ demand-side benefits, the California Energy Market (CEC) offers demand-side grid support funding to CCA customers as well as other programs, such as for behind-the-meter batteries. Both MCE and Sonoma Clean Power (SCP) benefitted from the commission’s Electric Program Investment Charge (EPIC) program, MCE in building their Richmond VPP and SCP in their GridSavvy Rewards program. Lancaster Energy also received an EPIC grant for similar work.
Maximizing customer participation is crucial to the success and growth of VPPs. For this to happen, customers need both the physical technology (electric appliances and appropriate grid connection) and the incentives to opt into VPP programs.
Fortunately, much of the core work CCAs do has laid the groundwork for VPPs. CCAs already provide education around and financial incentives for the adoption of DERs and grid-smart devices, equipping customers with the tools to participate in VPPs. Another example is the work MCE has been doing with RCF Connects, making use of an innovative Social Impact Bond to fund the purchasing, upgrading, and electrifying of homes, which are then sold at a discount to first-time lower-income home buyers. Like the highlighted Richmond pilot home, these homes will be DER-equipped and ready to participate in MCE’s VPP.
CCAs’ work in the VPP space is reflective of their priorities: advancing a stronger, more reliable grid that can continuously deliver clean energy to Californians, reducing the threat of outages, and helping to lower energy costs for customers. It’s sure to be another area where CCAs are driving growth and innovation.
“We’re going to start with these small pieces— ‘It’s your home, it’s your business, it’s your garage, it’s your car’ —and then offer something that weaves it all together,” McGee said. “It feels like that is in line with the culture of CCAs, to start small and local and then build up for incremental statewide impact.”
