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First, in contrast to some VPP packages which might be structured as bespoke contracts between utilities and particular person corporations,“anybody can take part” in ConnectedSolutions, Sunrun’s Heart stated. That’s an vital characteristic for packages that wish to scale past one-off pilot tasks.
Connected Solutions additionally permits prospects to earn cash from batteries, EV chargers, good thermostats, and different gadgets, slightly than only one kind of distributed power useful resource, she stated. This “technology-agnostic” method avoids creating operational silos inside utilities or disadvantaging prospects who don’t personal the favored know-how.
Flexible participation — permitting prospects to affix VPPs which might be hosted by third-party corporations in addition to utilities themselves — is an apparent level of self-interest for the businesses concerned in crafting the mannequin laws.
Numerous utilities are constructing VPP packages that they management straight — Rocky Mountain Power’s Wattsmart program in Utah is a notable instance. Others together with Duke Energy in North Carolina and Xcel Energy in Minnesota are searching for regulator permission to launch their very own utility-run packages.
But Brand stated that it’s vital for utility regulators to permit the businesses constructing and promoting the photo voltaic panels, batteries, EVs, and controllable gadgets that make up VPPs to compete, as effectively. And the identical goes for the demand response corporations lively in a number of markets throughout the nation.
The roster of corporations moving into the VPP enterprise is rising rapidly, as evidenced by the individuals of the Virtual Power Plant Partnership, a consortium that features photo voltaic and battery distributors sonnen and Sunrun; demand response suppliers CPower, EnergyHub, Renew Home, and Voltus; and auto producers Ford and General Motors, amongst others.
These corporations have a lot of EVs, batteries, and good thermostats and home equipment to faucet into, as this chart from DOE’s report signifies — they usually’re anticipating states and utilities to standardize their approaches to VPPs.
Cisco Devries, govt vice chairman at Renew Home, the corporate shaped by the merger of Google Nest’s good thermostat energy-shifting service Nest Renew and California-based residential demand-response aggregator Ohmconnect, famous that its prospects are taking part in tens of hundreds of thousands of “power shifts and power occasions” — moments once they flip down their air conditioners to economize or relieve grid stress — throughout the nation on a common foundation.
But of the 3 gigawatts of load-shifting potential accessible from Renew Home’s prospects, “solely a few hundred megawatts are tied into utility or grid operations or markets,” he stated. “We’re extraordinarily excited concerning the notion that we might get widespread approaches to standardization and rules, and never must create a snowflake of every separate program.”
What defines “honest” compensation for VPPs?
That brings us to the ultimate precept of Solar United Neighbors’ mannequin tariff, and one of many trickiest to resolve for regulators — establishing the “honest retail export compensation” for the providers that VPPs can present.
Brand laid out a few tips for states to bear in mind in setting these compensation phrases. “There can’t be any disincentives for participation,” he stated, “and it has to replicate the true market worth for the facility to the grid when it’s most costly and most wanted.”
But the way to translate these ideas into apply is a harder matter. For a long time, regulators and utilities have argued with third-party demand response suppliers over the way to calculate the worth that utilities notice when prospects scale back their electrical energy consumption in response to surging grid demand.
Some of the variables at play embody how a lot to pay prospects and the businesses enabling their participation prematurely for making these guarantees, the way to monitor and reward their efficiency in the course of the moments they’re referred to as on, and the way to penalize them in the event that they don’t comply with via.
Heart highlighted the “pay-for-performance” construction of ConnectedSolutions as an vital characteristic for corporations like Sunrun that want to have the ability to predict how a lot they’ll have the ability to provide their prospects for sticking with this system over the lengthy haul.
Programs even have to ascertain limits on how a lot and the way typically they faucet into customer-owned sources, Heart stated. Many legacy demand response packages have failed because of overly aggressive approaches to turning off prospects’ air conditioners in the course of the hottest days of the yr, for instance. VPPs that deplete backup batteries prospects are counting on to guard them within the occasion of energy outages, or that fail to cost up EV batteries, run the danger of alienating prospects as effectively.
On the opposite hand, utilities and regulators have a duty to make sure that they’re not paying prospects who occur to have the ability to afford these gadgets greater than the worth these gadgets are offering to the grid at massive. After all, the core function of VPPs is to scale back the amount of cash that utilities should accumulate from all of their prospects to pay for infrastructure expansions and upgrades.
But, Heart stated, these cost-effectiveness measurements could fail to think about that the earliest efforts at VPPs are more likely to value extra and ship smaller advantages than the identical VPP packages might obtain as soon as they’re capable of scale up.
It’s additionally vital to think about that the prices VPPs will assist utility prospects keep away from paying sooner or later are going to be very completely different from the values that may be established by reviewing historic information, Heart stated. “What are you evaluating the prices to? What are the prices of constructing out the transmission wanted sooner or later? What are the prices of not doing something for outages?”
The panorama for state VPP laws
To date, many of the dozens of VPPs throughout the nation have been developed out of utility proposals or regulatory mandates that construct on pre-existing demand response or load flexibility packages. Relatively few have been spurred by state legal guidelines, and those who have date from the earlier decade, earlier than the fast fall in prices for photo voltaic panels and batteries.
In the previous yr, nonetheless, two states — Colorado and Maryland — have handed payments mandating VPP packages. Of these, Maryland is additional alongside, with state regulators opening a continuing to implement the regulation — one thing Colorado regulators haven’t executed but, Brand stated.
Maryland’s DRIVE Act instructs the Maryland Public Service Commission (PSC) to order the state’s regulated utilities to create a set of packages that reward prospects who personal EVs for shifting once they cost to scale back prices, in addition to novel “bidirectional” charging packages that pay for electrical energy fed from EV batteries again to the grid.
It additionally requires every regulated utility within the state to create pilot packages or momentary tariffs to compensate house owners and aggregators of distributed power sources for “electrical distribution system assist providers,” and offers the PSC the choice of proposing or requiring that utilities provide upfront incentives or rebates to prospects to amass and set up “renewable on-site producing techniques.”
“The onerous half now could be the implementation,” Heart stated. The regulation provides the Maryland Public Service Commission some leeway on the way to go about setting the exact guidelines for finishing up these mandates. “But at the least the laws provides some guardrails,” she stated, reminiscent of a mid-2025 deadline for the PSC and utilities to submit the tariffs it mandates.
Beyond the 4 states it’s focusing on with its new mannequin tariff and laws, Solar United Neighbors can also be concerned in proposing its mannequin tariff in regulatory proceedings having to do with VPPs in a single kind or one other in Pennsylvania, New Jersey, New York, and Wisconsin, Brand stated.
“If [regulators] wish to take it up, that’s terrific,” he stated. “But we all know we’re going to wish state legislative management if we’re going to ascertain these packages rapidly and at a scale that makes a actual impression.”
