Jigar Shah reflects on the challenges of realizing a carbon-free power grid and how emerging Virtual Power Plant, or VPP, technology can turn those challenges into opportunities for all Americans.
The Distributed Energy Resource – DER – consumer market is poised to flourish. Solar Energy Industries Association estimates nearly 5% of US owner-occupied homes are now equipped with rooftop solar panels. Energy storage has its day, with more storage deployed in 2021 than the previous five years combined. In addition, solar generation and energy storage are becoming more user-friendly, with a third new behind-the-meter solar systems installed by 2025 are expected to incorporate energy storage. Globally, $110 billion should be invested in DER by 2025.
DERs can provide power at a lower price than the grid typically offers. They do this in a cleaner way while providing consumers with greater resilience during adverse network events. And despite the reluctance of commercial lenders to adequately acknowledge it, DERs are also more widely available and cost-effective than ever. As researchers at Lawrence Berkeley National Laboratory showedsolar adopters can come from a range of incomes, and financing options are gradually expanding to lower-income groups, as well as those with home values and credit scores below the median.
A much larger deployment of DER will be required at scale to meet the administration’s goal of achieving 100% clean electricity by 2035 and ensuring a just transition under its Environmental Justice 40 initiative will require an intentional investment. Virtual power plants can catalyze large-scale deployment of DER and help make affordable, resilient, and clean energy accessible to all Americans.
A VPP is generally thought of as a connected aggregation of DER technologies – not just solar and battery storage, but also efficient and increasingly grid-interactive devices. buildings, electric vehicle charging and thermal energy storage. Aggregators, utilities, or grid operators, depending on terms agreed with participants, can remotely and automatically adjust DERs in that aggregation to deliver clean power, reliability, and grid services while maintaining comfort and customer productivity. Through a combination of software and hardware, VPPs not only open the network to a whole new utility-scale behind-the-meter offering, but also coordinate disparate DERs into holistic and flexible on-demand resources. Operators gain flexibility to better reduce peak demand and therefore defer investment in additional capacity and infrastructure to meet peak load that is expected to increase as we electrify the country’s economy. VPP Participants may receive compensation for the services rendered and any resulting benefits. Everyone benefits from a better price and better performance.
Over the next few weeks, I will present my thoughts on the potential of VPPs in a series of VPParts. I will explain how the emergence of VPPs – made possible by evolving technology and changing energy policy – can create a more equitable, resilient and participatory energy system while catalysing well-paying jobs in a number clean energy sectors.
I hope you will return as I advocate for the broader integration of VPPs into our nation’s electricity markets and utility areas. I will share the ways I see VPPs benefiting all Americans; offer insights into the role that the LPO and the federal government can play, including through new bipartisan infrastructure law authorities that can support state efforts to promote aggregation; and investigate the most promising VPP models and budding technologies in the private sector.
VPPs offer an exciting opportunity to create clean energy solutions that are greater than the sum of their parts. Power plants may be virtual, but the potential of VPP technology to democratize the clean energy economy of the future will be very real.
Jigar Shah is the director of the US Department of Energy’s Office of Lending Programs.
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