The U.S. is grappling with a harsh winter, as dangerous cold snaps sweep from the Midwest to the South, pushing grid operators to their limits. These extreme weather events, exacerbated by climate change, are not just a seasonal inconvenience; they are a stark reminder of the urgent need for a more resilient and flexible energy infrastructure. The past decade has seen the highest temperature extremes in recorded history, and these extremes are becoming increasingly erratic. For utilities, this means navigating a complex landscape where demand surges during extreme weather events, all while contending with the threat of increasingly volatile weather patterns.
The Department of Energy (DOE) has identified a critical need to boost national virtual power plant (VPP) capacity. Currently, the U.S. has between 30-60 GWh of available VPP output, but the DOE recommends ramping this up to between 80-160 GWh. This increase is essential for balancing electricity demand and supply, especially during peak periods. The DOE defines virtual power plants as “aggregations of distributed energy resources (DERs) that can balance electricity demand and supply and provide utility-scale and utility-grade grid services.” This means that utilities can leverage a variety of DERs, including solar panels, battery energy storage systems, electric vehicles (EVs), and smart devices like thermostats and water heaters, to enhance grid resilience and flexibility.
The virtual power plant market is booming, with analysts predicting a 24.8% compound annual growth rate (CAGR) by 2034. This growth is driven by the strategic value of VPPs in strengthening the grid and defraying high peak energy costs. States like Texas and Puerto Rico are already implementing VPPs as reliable and decentralized energy resources. For utilities, VPPs offer a way to leverage community-generated solar and battery energy or through aggregate load shifting designed to conserve during peak periods of usage or as part of an energy arbitrage strategy.
Virtual power plants are realized by employing behind-the-meter DER assets found in residential, business, and commercial customers through the use of a grid-edge distributed energy resource management system (DERMS). This system aggregates these otherwise disparate resources for use in demand flexibility programs. Demand response, for instance, is a time-tested strategy that aggregates customer devices for communal conservation efforts. This often manifests as part of a thermostat program, which allows program managers to shift or decrease usage to off-peak periods of demand. Similarly, EV charging and Bring Your Own Device (BYOD) programs are effective load-shifting tools to mitigate usage during peak periods, decreasing the potential for costly peak energy purchases while strengthening grid resiliency.
Utilities can optimize and streamline their operations once a VPP program is established. Advanced monitoring and predictive analytics play a crucial role in this optimization. Smart grid technologies like EV telematics, solar inverters, and other device interfaces provide useful metrics for utilities to determine their best strategy moving forward. Through the use of forecasting technology, program managers can use device data to inform their demand events, energy purchases, and more. This approach allows utilities to quickly identify and respond to potential issues before they escalate, reducing outage times and enhancing overall reliability.
Predictive analytics also enable utilities to anticipate severe weather patterns and take proactive measures, such as pre-positioning crews and resources. While demand flexibility programs cannot prevent or resolve outages caused by extreme weather events, VPPs present a decentralized resource separate from conventional generation strategies. This means that utilities can access and distribute energy as needed when possible. Furthermore, utilities can use forecasting technologies to inform energy purchases in advance, preparing for potential outages.
Battery storage has grown exponentially in recent years and is a critical component of any VPP. Batteries are useful in demand flexibility initiatives like demand response and as part of an energy arbitrage strategy. Grid operators can tap into battery energy storage systems to manage stored energy to either slow charging speeds or to access available energy as part of a VPP program. Utilities can also use stored battery energy during periods of peak demand to minimize time-of-use (TOU) rates and mitigate peak energy market purchases.
Despite the benefits, behind-the-meter DER assets represent an unknown quantity to grid operators due to environmental pressures. Virtual power plants alleviate this by providing an abundant path to clean energy through aggregate load shifting. Tools like Topline Demand Control, which combine model predictive control, AI, and forecasting with a Grid-Edge DERMS, are designed to optimize DERs, guaranteeing a reliable output tailored to meet the needs of the grid operator.
As temperature extremes increase in both winter and summer months, developing more VPP capacity through demand response and other initiatives is crucial to meeting demand. Especially during uncertain weather months, VPPs offer an opportunity for utilities to meet demand, reduce energy insecurity, and defray the high costs of infrastructure upgrades.
