Tripling the current scale of virtual power plants by 2030 could support rapid electrification as electricity demand grows for the first time in a decade, but limited integration of VPPs has inhibited growth, according to a new report from the Department of Energy.
The report, Pathways to Commercial Liftoff: Virtual Power Plants, noted that between 2023 and 2030, the United States will need to add enough new power generation capacity to supply over 200 gigawatts of peak demand and, if the country were to follow a path towards 100 percent clean electricity by 2035, new capacity needs could nearly double.
In that scenario, deploying 80 to 160 GW of virtual power plants by 2030 to help address national capacity needs by contributing approximately 10 to 20 percent of peak demand and save around $10 billion in annual grid costs and direct grid spending back to electricity consumers, the report said.
The report also noted that distributed energy resources that could be enrolled in VPP programs is growing at an accelerating rate, with electric vehicles representing the vast majority of that growth. Each year from 2025 to 2030, the grid is expected to add 20 to 90 GW of nameplate storage capacity from electric vehicle chargers, 5 to 6 GW of flexible demand from smart thermostats, smart water heaters, and non-residential distributed energy resources, 20 to 35 GW of nameplate generation capacity from distributed solar and fuel-based generators, and 7 to 24 gigawatt hours of nameplate storage capacity from stationary batteries, the report said.
Nonetheless, integration of VPPs into electricity system planning, operations, and market participation has been inhibited because regulation-driven grid planning requirements and cost-benefit assessments undervalue the potential benefits of VPPs in most jurisdictions, the report said, adding that while protocols for VPP planning, operations, and valuation that are necessary for VPP integration have emerged, they vary by service provider and jurisdiction.
The result, the report’s authors said, is “a lack of confidence in the dependability of VPPs among utilities, which has in turn led to many years of collecting data with pilots that – despite their success – have yet to scale up.”
Calling it “an urgent call to action” the DOE said the report is meant to initiate and organize a dialogue between the DOE, other public sector leaders, and the private sector to chart the path forward, including progress on five imperatives.
Those imperatives are:
- Prioritizing equitable benefits, including electricity bill savings, grid reliability and resilience, air quality improvements, job opportunities, and offering low-cost financing and rebates for energy-efficient, VPP-enabled devices;
- Simplifying and streamlining VPP enrollment with measures such as consumer education and automatic enrollment into VPPs with opt-out options;
- Increasing standardization of operations to make VPPs more repeatable and shorten the design and pilot stages of individual VPP deployments.
- Integration of VPPs into utility planning and incentives such as procurement and ratemaking processes;
- Integration of VPPs into wholesale markets with targeted support for the timely and inclusive integration into system planning and marketplaces as outlined in Federal Energy Regulatory Commission Order 2222.