Dive Brief:
- California could avoid $755 million in traditional power system costs and save electricity consumers $550 million annually by deploying about 7.7 GW of virtual power plant capacity by 2035, or five times its current VPP capacity, the Brattle Group said in a report released Thursday.
- The report analyzed the cumulative potential of five VPP technologies, including smart thermostats, behind-the-meter batteries, managed electric vehicle charging, automated demand response for commercial and industrial users and grid-interactive water heating, while excluding high-potential technologies, such as bidirectional EV charging, that Brattle says still face technical or commercial barriers to widespread adoption.
- Yet despite its high penetration of distributed energy resources and innovative pilot programs like Pacific Gas & Electric’s 30-MW load-shaping pilot with Sunrun, California’s VPP rollout “is just not yet happening at the scale you would expect,” Brattle Group Principal and report co-author Ryan Hledik told Utility Dive in an interview.
Dive Insight:
Almost all of California’s 1.6 GW in VPP capacity lies in traditional demand response, largely in the commercial and industrial sector, the report found.
California’s commercial and industrial DR programs include voluntary load-reduction incentives, agricultural pumping load control and time-varying rates, such as critical peak and time-of-use pricing, while residential DR programs include air-conditioning load control, time-varying rates and voluntary load reduction, the report said.
With these programs, Brattle ranked California 34th out of 50 states in 2022 utility-led DR capacity on an electricity sales-normalized basis, which Hledik called “surprising” given California’s tech-forward reputation and ongoing technological innovation in its utility sector. The top five states — North Dakota, Arkansas, Minnesota, Alabama and Nebraska — all had at least five times California’s sales-normalized DR capacity in 2022, though Hledik cautioned against overinterpreting those results since “one [irrigation management] program in a small agricultural state could really move the needle.”
The Brattle report identified several “emerging VPP programs” that could help California reach its 2035 VPP potential if scaled or imitated, including PG&E’s Sunrun pilot, various battery VPPs participating in existing California programs like the Demand Side Grid Support Program and the Emergency Load Relief Program, Sacramento Municipal Utility District’s managed EV-charging pilot and a PG&E and Southern California Edison pilot of dynamic hourly pricing for high-load technologies like batteries, EV chargers, HVAC systems and irrigation pumps.
For efforts like these to have a meaningful impact, they need both to scale beyond the pilot stage and be utilized frequently to perform multiple grid services, sonnen USA CEO Blake Richetta told Utility Dive in an email.
Well-intentioned VPP initiatives can backfire when enrolled assets aren’t utilized as intended, Richetta said. “The worst case scenario [is] when ineffective energy programs contribute to increased costs, which are disproportionately painful for lower-income households.”
Utilities, system operators and regulators should remove “unnecessary bureaucratic barriers” to VPP deployment, dispatch distributed assets daily so that VPPs “become deeply integrated into the fabric of [the] energy system” and use VPPs for a “full value stack” of grid services rather than emergency load reduction only, Richetta said.
Richetta pointed to Rocky Mountain Power’s Wattsmart VPP in Utah, which sonnen USA helped to develop. Richetta said Wattsmart was the country’s “largest residential behind-the-meter battery-based, direct utility-dispatched VPP,” as an example of a sophisticated, scalable program that has “hardened” the grid, reduced the duck curve effect and “directly [displaced] actual coal in the system.”
The Brattle report cited the Wattsmart VPP as an external example of “success at scale,” along with Green Mountain Power’s battery program, whose “generous incentives” have already achieved a 1% participation rate among all GMP customers and which the utility forecasts could scale to 8% participation by 2030, Hledik said. The program is part of Green Mountain Power’s Zero Outages Initiative, which envisions bringing “energy storage to all Vermonters” by the end of the decade.
Broad customer participation in VPP programs will be crucial for California to reach its full potential, the report noted. Of the 17 “sensitivity cases” Brattle examined that could push the state’s VPP potential higher or lower than the 7.7 GW-by-2035 base case, “participation” had the highest upside of around 12 GW, or about 4 GW above the base case. Other customer-facing sensitivity cases that could increase VPP potential above the base case include “eligibility” and “program operation,” Brattle found.
“Seamless participation is key,” Hledik said.
