A recent study by the Department of Energy (DoE) suggests that the deployment of virtual power plants (VPPs) in the US could triple by 2030, reaching a capacity of 80GW to 160GW. This substantial growth in VPPs could help address national capacity needs, support rapid electrification efforts, and save $10 billion in annual grid costs.
VPPs are aggregations of distributed energy resources (DER), such as rooftop solar, behind-the-meter batteries, electric vehicles and chargers, electric water heaters, smart buildings, and flexible commercial and industrial (C&I) loads. These resources can balance electricity supply and demand, as well as provide grid services similar to traditional power plants.
The study emphasizes that VPPs have the potential to contribute to efficient grid operations by enrolling DER owners, including residential, commercial, and industrial consumers, in various participation models that offer rewards for their contributions. President Joe Biden has set a goal for the US to achieve a carbon-free electric grid by 2035, and the deployment of VPPs could play a significant role in reaching this target.
In order to meet the increasing demand for electricity and achieve a clean electricity mix, the US will need to add new power generation capacity of more than 200GW by 2030. The study warns that the mix of weather-dependent renewable generation will be unprecedented in all pathway scenarios to 2035. This will lead to more variable electricity supply and higher demand for transmission capacity.
However, without improvements in the efficiency and timeliness of siting and project approval processes, the US may struggle to have sufficient transmission additions and grid upgrades in place to approach the 2035 target. As a result, the adoption of VPPs, along with concurrent approaches and policies, is being considered by the Biden administration, regulators, and utilities to address supply and demand challenges.
The study highlights that large-scale deployment of VPPs can help address increasing demand and rising peaks at a lower cost compared to conventional resources, ultimately reducing energy costs for Americans. While VPPs have been in operation with commercially available technology for years, their integration into electricity system planning, operations, and market participation has been limited.
Regulatory barriers and undervaluation of the potential benefits of VPPs have hindered their growth. The study suggests imperatives for VPPs to achieve “lift-off” and scale, including expanding DER adoption with equitable benefits, simplifying VPP enrollment, and integrating them into utility planning, incentives, and bulk electricity markets.
Overall, the development of VPPs presents a significant opportunity for the US to meet its grid and electrification goals while ensuring reliability, cost-effectiveness, and a smooth transition to clean energy sources.
Sources: Department of Energy (DoE) study