In its most ambitious form a virtual power plant (VPP)
is an aggregation of many small power generation and energy storage systems that can be managed using a modern computer based control system to behave like a traditional power plant. (See illustrations in Figures 1 and 2.) Given the ability to store this electricity, the virtual plant becomes dispatchable and can be used by the utility to displace generation from, for example, a gas plant that would normally be used to provide electricity during peak demand times. Such VPPs have a number of key benefits
- Reliability: Extreme weather has created risks to electrical reliability in every part of the US and world. VPPs can be built and deployed rapidly, can be sited near critial loads (and thus can bypass transmission and distribution constraints), and can turn electric devices into power supplies to help provide resilience when the grid is down.
- Affordability: many homes and businesses that participate in VPPs receive direct compensation, and those that do not still experience lower bills resulting from deferred transmission, distribution, and generation capacity investments that typically get passed on to customers. VPPs can further reduce wholesale energy and fuel costs by shifting demand away from high-cost peaking resources and toward low- or no-marginal cost resources.
- Decarbonization: VPPs will allow earlier retirement of fossil fuel plants and create a more efficient grid. It is estimated that by 2050, VPPs could avoid 44-59 million metric tons of CO2 emissions per year.
- Electrification: Over the coming decades, increasing adoption of electrified technologies such as heat pumps and electric vehicles will mean we must accommodate sustained load growth in the electric system. VPPs enable cost-effective electrification by avoiding transmission, distribution, and generation capacity bottlenecks.
- Health and Equity: VPPs present an opportunity to replace aging fossil fuel power plants that have been tied to significant adverse health outcomes, in particular in Black and low-income populations.
In what was perhaps the boldest early test of a VPP, Tesla and the government of South Australia announced a very ambitious plan
to install rooftop solar systems on 50,000 homes and link them them together with battery facilities to create a virtual 250 MW solar plant with 650 MWh storage capacity, which was estimated to be capable of roviding 20% of the state of South Australia's average daily power needs. (See Video 1) By the middle of 2018 rooftop solar and battery installation had been completed on 100 homes. Preliminary testing showed that the in-home Tesla Powerwalls can provide the same response to frequency changes as the grid-scale Tesla battery array installed in South Australia at the end of 2017, while saving South Australia residents about 30% on their electricity bills. The Tesla VPP had an opportunity to showcase its capabilities
in 2019 during an unexpected coal power outage in Queensland. The system responded to the power interruption using energy from their Powerwall batteries, which helped keep the grid stable. Although the project has progressed slower than originally planned, it continues to move forward
More recently, the definition of a VPP has expanded to incorporate distribute energy resources (DERs) such as electric vehicles (EVs) and chargers, electric water heaters, smart buildings and their controls, and flexible commercial and industrial (C&I) loads, which make up the bulk of the estimated 30 - 60 GW of VPP capacity in 2023. Residential and commercial customers who sign up for DER programs allow the utility companies to turn off or curtail power usage at times of peak demand in return for savings on their utility bills. With electricity demand growing for the first time in a decade and fossil assets retiring, the US Department of Energy estimates that deploying 80-160 GW of VPPs by 2030
, i.e., tripling current levels, would save on the order of $10B in annual grid costs and contribute approximately 10-20% of peak demand.