The Development of ‘Virtual Power Plants’ is Strengthening Electric Grids and Empowering Consumers

Virtual Power Plant

Source: Yale Environment 360

The traditional concept of a “power plant” is getting a makeover as the world pushes to decarbonize and increasingly integrate new resources and technologies in its energy grid.

Since the dawn of electricity in the early 20th century, our energy supply has been heavily centralized; power was generated in a single facility, such as a coal-fired plant, and then transmitted over a network of wires and poles to homes and businesses.

Now, electric grids are increasingly decentralizing, giving rise to cloud-based systems that pool resources to meet fluctuating consumer demand.

Virtual Power Plants (VPPs) are networks of distributed energy resources (DERs) such as solar power plants, power grids, wind farms, rooftop solar systems, and storage batteries, which are harnessed as a collective energy source. VPPs, through a central control space and distributed energy resource management systems (DERMs), distribute and exchange power generated by individual units, depending on periods of peak load.

VPPs and DERs are providing clean energy at reduced costs, providing greater consumer access to renewable power. As heating and cooling are becoming more and more electrified, and climate change produces extreme temperatures and weather events, precise forecasting of local production and consumption of energy is becoming increasingly important for its dependability and flexibility. In addition to strengthening grid resilience and reliability, consumers are empowered.

 “The DER is primarily being driven by individual commercial, industrial, and residential customers rather than the utilities, regulators or policymakers,” said Gene Wolf, a fellow of the Institute of Electrical and Electronics Engineers.

In other words, individuals have more control, and customers are even able to sell electrical output back to the grid.

“A large variety of resources can be incorporated into a virtual power plant (VPP). The interconnected units can then be dispatched using special software and traded intelligently on the energy market,” explained Sleman Saliba, a global product manager with ABB Energy Industries. “The goal of a VPP operator is to run the pool of units optimally and generate maximum revenues for its participants by bidding smartly on the energy trading market.”

As the availability and affordability of solar panels, storage systems, and other flexible resources increases, so too does the potential of VPPs and DERs. In fact, DERMS technology global revenue is predicted to increase between now and 2029 from $800 million (currently) to almost $6 billion, and Wood Mackenzie predicts DER capacity reaching 387 GW by 2025. Another report, from Navigant, foresees capacity reaching over 500 GW by 2028. Even in the midst of the debate over whether the control of DERMs will fall to utilities or third-party aggregators, more of those utilities are investing in VPP and DER technology and starting to pursue the VPP model. 

It seems that VPPs will disrupt energy marketplaces in ways that not only benefit consumers and their wallets, but also help policymakers meet the challenges of climate chan

California’s Community Choice Aggregators Rising to the Occasion

Recently, in the middle of a record-breaking heatwave, hundreds of thousands of California consumers lost power for the first time in nearly two decades. The situation has, unfortunately, created unwarranted scrutiny of renewables and the state’s overall energy transition. 

But California's Independent System Operator, a nonprofit agency that manages the state's power supply, says that capacity shortfalls are the issue this time, as well as California's reliance on importing resources. So, this is clearly a management and planning problem; regulators admit that they need to do better with forecasting demand and production from all energy resources.

However, newer models of power delivery are proving to be an asset in dealing with such problems. Community Choice Aggregators (CCA) are public, nonprofit agencies created to offer local communities cleaner and more affordable options for consumer-facing energy generation. 

There are currently 21 CCAs in the state, serving more than 10 million ratepayers. Local governments run CCAs. Due to these agencies' flexibility, they are well-positioned to help communities increase their energy resilience to curb the likelihood of massive blackouts.

Every CCA is a reflection of the local community that forms the agency. Because CCAs work so closely with their consumers, they have a ground-level view of the difficulties their consumer deal with, and CCAs can use a mix of power generation to address those difficulties, including using solar and battery capabilities to boost energy resiliency in areas where homes are at risk for power shut-offs. 

MCE, California’s first CCA, has worked closely with the communities they serve to address these issues from the ground floor. MCE’s elected board consists of mayors, council members, and county supervisors, representing their communities’ energy needs. 

"Our elected officials tend to be very well-informed about what the local needs are and what the local resources are, so we can really combine efforts where feasible," said MCE CEO Dawn Weisz.

At the end of July, three California CCAs announced a new agreement with solar and battery company Sunrun to create an energy resiliency program. East Bay Community Energy (EBCE), Peninsula Clean Energy, and Silicon Valley Clean Energy (SVCE) are the CCAs who partnered with Sunrun. 

The “emissions-free resiliency agreements” will see the creation of up to 20 megawatts (MW) of emission-free solar and battery backup power that will help 6,000 households that are vulnerable to the power shut-offs occurring during peak wildfire season.

“The wildfires that disrupted our power and lives last fall have given us an opportunity to find ways to better protect our most vulnerable customers from losing essential supplies and comfort during emergency outages,” said Peninsula Clean Energy CEO Jan Pepper. “This innovative approach and partnership also establish a new model for a cleaner and more reliable electricity grid for all our residents.”

The partnership is focused on increasing power generation from renewables. The new power-generation capabilities aim to reduce the overall peak demand and improve the reliability of the grid. The increased capacity is expected to come online incrementally starting this year, with the completion date scheduled for 2022.

“In addition to providing needed resiliency to the members of our community most impacted by power shut-offs, this program is instrumental in shifting away from a centralized, fossil fuel-based grid to one that is distributed, decentralized and decarbonized,” SVCE CEO Girish Balachandran said. “Historically, reliability is provided by centralized gas plants. We are at a pivotal moment where it has tipped toward battery storage systems and local resources.”

Dealing with the multiple environmental challenges California must overcome requires carefully integrating and managing renewables, and that requires a power supplier who knows their community and is accountable to them. As CCAs gain more traction in the state and begin serving more customers, California’s energy landscape will start to shift with the people, allowing CCAs to rise to the occasion by providing clean, reliable power.

New Renewables Lobbying Group Comes to Washington

In a letter released to its members this morning, The American Wind Energy Association (AWEA) announced its intention to make renewables “the dominant power source in America.”

AWEA will be joining forces with the likes of NextEra Energy Inc., Avangrid Inc., and Berkshire Hathaway Energy to create a new lobbying group called the American Clean Power Association. No matter the outcome of the November election (although they are preparing for both possibilities), renewable energy groups such as the American Clean Power Association are planning major policy pushes for the next presidential administration.

As we have previously mentioned, the coronavirus pandemic and the associated economic shutdowns have wreaked havoc on an otherwise booming industry. Just today, Bloomberg reported that wind and solar made up the majority of Earth’s new power generation for the first time in 2019. While promises of renewable energy becoming as cheap and reliable as oil and gas are nothing new, we were on the precipice of that dream becoming a reality until the pandemic struck.

While our friends at the Solar Energy Industries Association are not joining, they are planning on working with the new group on key policy areas.

As we all know well, more options for power generation are better for consumers and producers alike. We at ECC are excited to see what the future will bring.

FERC Ruling Keeping Net Metering Oversight with the States a Win for Consumers

In June, we wrote a blog post about a potential ruling by the Federal Energy Regulatory Commission (FERC) that would have effectively ended net-metering, a practice that encourages rooftop solar installation.  

The threat was due to an April petition filed by a grasstops organization called the New England Ratepayers Association (NERA), which asked the commission to take net-metering out of the hands of the individual states and place it under federal oversight. FERC received tens of thousands of letters from consumers strongly opposed to the change – including many from our own advocates—and that effort has now paid off.

The Energy Choice Coalition (ECC) is pleased to report that FERC voted unanimously against the request from NERA, which is a big “win” for consumer choice. 

Under FERC’s previous ruling, states can set their own guidelines for net-metering programs within their jurisdictions. Net-metering allows people with rooftop solar to sell excess energy generation back to their utilities at a fair, retail rate. The popular program has driven the proliferation of solar generation thanks to state regulators carefully managing these programs to encourage installation.

Reversing that decision and putting the federal government in charge would have had profound consequences for the renewable energy industry and consumers. Disrupting the sale and installation of new rooftop solar could have led to massive job losses in the industry during a time when it has already had issues thanks to the economic downturn and social distancing measures.

Solar energy has contributed more than $100 billion to the U.S. economy and helped to create hundreds of thousands of jobs nationwide. Millions of consumers have already invested their own money in rooftop solar thanks in part to the promise of returns from net metering. FERC’s decision unequivocally protects these solar owners.

FERC’s decision is being widely applauded by consumer groups, energy experts, environmental advocates, and state officials, among others. Ahead of the ruling, FERC received just 22 public comments in support of the NERA petition, while 57,000 comments were submitted in opposition. The ECC commends FERC for making the right decision in this case and supporting consumers.

Congress May Finally Offer Support for the Energy Sector in Summer Stimulus Legislation

Congress has spent more than three trillion dollars so far in its efforts to stimulate the economy. Curiously, none of that money has been directed toward the nation’s energy sector—other than some independent operations that may have qualified as small businesses. It is strange because the government has, in past downturns, recognized the role of energy in accelerating growth, from the New Deal-era Rural Electrification Administration to a $90 billion investment in renewables in President Obama’s stimulus package in 2009.

Moreover, clean energy industries have demonstrated such outstanding growth potential the past decade but have been devastated by the pandemic. A recent report from the analysis of U.S. Department of Labor data found that 620,590 workers in clean energy occupations, representing 18.5 percent of the industry’s workforce, filed for unemployment benefits in March, April, and May. The number of jobs lost is more than double the number of clean energy jobs created since 2017, but many of them could quickly recover.

What is frustrating is that an ideal bill had been queued up even before the pandemic that had enjoyed strong bipartisan support. The American Energy Innovation Act (AEIA), a legislative package comprised of over 50 bills reported to the Senate in 2019, was introduced in February by Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-AK) and Ranking Member Joe Manchin (D-WV). But it was derailed by disagreements after a bill was added that would have reduced hydrofluorocarbon use.

That bill may be back and could be the heart of the next stimulus package. During a webinar hosted this week by Citizens for Responsible Energy Solutions, Lucy Murfitt, chief counsel for the Senate Energy and Natural Resources Committee, assured participants that Chairman Murkowski will make a major push to pass the AEIA in July.

"I want to make sure that you understand, because I think if Senator Murkowski were on this call right now, she'd be telling you this—she is absolutely 110% committed to this bill," Murfitt said. "She has not wavered at all on that. And she's gonna fight until there's just simply no path forward left for the bill."

Another existing bill that could be a practical option to help stimulate the nation’s energy sector is America’s Transportation Infrastructure Act (ATIA), which would help streamline federal approval of clean-energy infrastructure projects, helping us lower carbon emissions, increase our carbon-capture capabilities, and fund sustainable energy projects.

In recent days, Democrats have offered partisan bills that would seem to have less opportunity for passage because of their plainly political goals.

The House of Representatives is planning to bring the Democrats’ GREEN Act to the floor this week as part of a larger $1.5 trillion green stimulus dubbed the Moving Forward Act, which is over 2,300 pages and includes federal tax incentives for solar, storage, offshore wind, electric vehicles, among others.

Meanwhile, the New York Times reports that the Democrats’ new climate agenda is “tying [the] environment to racial justice.” It features ambitious goals, such as ensuring that every new car sold by 2035 emits no greenhouse gases and eliminating overall emissions from the power sector. But it also explicitly cites the police killing of George Floyd in its opening paragraph and goes on to argue that communities of color are at greater risk from the effects of climate change. 

From a pure consumer perspective, social justice benefits are dubious and will only weaken tangible choices. Boosting innovation and emerging energy industries is good, but only if the solutions are practical and actionable. Considering the Green New Deal already fell flat on its face when it was wheeled out a few years ago, these latest efforts by the Democrats seem once again far too politicized to gain support in the Senate. Cynics might suggest they want to keep the issue alive for the election rather than get behind something that can actually pass, like the AEIA. 

Regardless, there does seem to be real hope for some sort of action in the next round of stimulus packages. The Energy Choice Coalition will follow developments carefully and stand up for consumers.

IRS Extends Renewables Tax Credit Deadline By A Year

The Internal Revenue Service on Wednesday issued guidance extending the placed-in-service deadline for both the production tax credit for renewable energy facilities under section 45 of the Internal Revenue Code and the investment tax credit for energy property under section 48.

The new guidance gives wind and solar developers an extra year to meet so-called safe harbor requirements to qualify for the tax credits. The Treasury Department decision applies to projects that get under

The IRS notice is here.

“Treasury’s decision is welcome news for the renewable energy sector, which has been struggling with the government-mandated shutdowns along with the rest of the country,” said Robert Dillon, executive director of the Energy Choice Coalition. “This provides sorely needed flexibility for an industry that has lost an estimated 600,000 jobs in the past three months.”

The notice extends the safe harbor requirement from four to five years for projects that started construction in 2016 or 2017, which is beneficial for projects that have been delayed by supply chain or financing delays.