DERs Serving the Macro Grid: Momentum Continues to Grow for Virtual Power Plants

For an increasing number of utilities, such as Rocky Mountain Power and Xcel Energy, virtual power plants (VPPs) are becoming essential tools for managing energy market volatility, ensuring the grid’s integrity and reliability, and keeping electricity costs as low as possible.

The energy industry is facing considerable challenges in the coming years. Data centers and various electrification initiatives are driving up electricity demand. However, due to rapid technological advancements and shifting policies, there is uncertainty regarding how much power will be needed and when. Additionally, Mother Nature poses its own challenges. Increasingly severe weather patterns, including wildfires, hurricanes, winter storms, and prolonged tornado seasons, are causing significant disruptions to grid infrastructure, leading to more frequent and longer storm-related outages. Aging infrastructure further compounds these issues, as much of the traditional power plant fleet and transmission and distribution systems are operating well past their prime and are slated for retirement. The U.S. is expected to retire 5.2 GW of capacity in 2024, largely from coal and natural gas plants, while nearly 5 GW of U.S. nuclear capacity has been retired since 2017, according to the U.S. Energy Information Administration. Although some nuclear plants are being considered for restart, resource adequacy is still projected to fall short of the energy demands of the 21st century.

Renewable energy resources are coming online to replace some of the retired capacity, but their intermittent nature adds complexity to the system. For a growing number of utilities—including Rocky Mountain Power, Xcel Energy in Colorado, San Diego Gas & Electric in California, NRG Energy in Texas, and Puget Sound Energy in Washington—VPPs are emerging as a vital solution for managing this volatility while maintaining grid integrity and reliability, and minimizing electricity costs.

Why VPPs?

VPPs utilize advanced software and communication technologies to manage, optimize, and coordinate the output of numerous distributed energy resources (DERs) into a single, aggregated dispatchable resource. This resource can be deployed to support the grid during peak demand periods. VPPs can leverage three categories of DERs: rooftop solar and energy storage systems, smart thermostats, and smart devices that can be controlled to reduce load when the grid is congested. Each DER connected to a VPP must be dispatchable, meaning it can quickly adjust the amount of electricity it sends to or draws from the grid. Since solar energy is intermittent, it is only dispatchable when paired with an energy storage system, typically a battery.

VPPs can be seen as the opposite of microgrids. While microgrids connect and control DERs to serve nearby customers, VPPs consist of an array of DERs deployed to support the larger grid during times of need. However, not everyone is in favor of VPPs. Critics argue that they complicate grid management and operations, suggesting that efforts should focus on simplifying the grid rather than complicating it further. Supporters, on the other hand, view VPPs as a means to democratize energy, maintain grid balance, and keep consumer energy bills low. The U.S. Department of Energy highlighted the advantages of VPPs in its latest Liftoff Report, calling them a low-cost solution that can be rapidly deployed to address the challenges facing the grid.

Recent Developments in VPPs

In recent weeks, several utility-based VPP projects have been announced, reflecting the growing interest in this technology.

Rocky Mountain Power Expands VPP Program
Utah-based Torus, a provider of energy storage solutions, recently unveiled the technical details of a new 70 MW VPP initiative in collaboration with Rocky Mountain Power (RMP). This VPP is expected to be operational within the next 12-18 months and will utilize Torus’ Nova Spin, a flywheel energy storage device with twice the operational lifespan of conventional battery systems. Additionally, the company’s Nova Pulse lithium-iron phosphate battery energy storage system will support the VPP. The American-made energy storage systems will be installed at commercial and industrial facilities in Utah, including data centers, providing benefits to both the facilities and the grid. Each installation will be tailored based on the facility’s power requirements, backup needs, and grid service capabilities. The VPP will contribute to Utah’s goal of doubling its power production in the next decade through an initiative known as Operation Gigawatt.

VPP Initiatives Expand Across Regions
Utilities in Puerto Rico, Colorado, and Nova Scotia, Canada, are also expanding access to VPP programs. In partnership with Enphase Energy, Luma Energy in Puerto Rico, Xcel Colorado, and Efficiency Nova Scotia are increasing consumer access to VPPs by offering incentives to residents who install Enphase’s IQ Battery 5P. In Colorado, Xcel Energy customers can receive a $350/kW upfront incentive with a cap of $5,000 per site for installing an IQ Battery 5P. Those who install three batteries can earn $4,032 upfront along with an annual payment of $100 over a five-year participation period. Luma Energy in Puerto Rico offers participants with three IQ Battery 5Ps approximately $1,000 annually, contingent on their batteries delivering up to 80% of capacity during demand response events. Efficiency Nova Scotia is piloting a program featuring the IQ Battery 5P, where participants with a 15 kWh Enphase battery system can receive $1,500 in annual performance incentives, also contingent on delivering up to 80% capacity during demand response events.

Sunrun’s VPP Expansion
Sunrun recently announced that over 20,000 customers participated in 16 VPP programs across nine states and territories in 2024. The company’s VPP portfolio, based on its fleet of residential solar and battery storage systems, boasts a combined instantaneous peak of nearly 80 MW. “Our largest and most successful programs are in Puerto Rico and California—places with vastly different power grids—but both equally benefiting from Sunrun customers’ solar-plus-storage systems being networked together to augment supply,” stated Chris Rauscher, head of Grid Services at Sunrun. The company’s VPP initiatives in California represent the largest single-owner VPP in the U.S., with 16,000 solar and storage customers participating. Additionally, Sunrun has partnered with Tesla Electric and Vistra on two VPPs in Texas and collaborates with Orange and Rockland Utilities in New York on the state’s largest residential VPP. In Maryland, Sunrun is working with Baltimore Gas and Electric to create a bidirectional electric vehicle-to-home VPP.

As utilities face increasing electricity demand, the integration of VPPs is becoming more critical. “Utilities are at a point where they can’t grow fast enough to meet the rising demand for electricity,” said Sunrun CEO Mary Powell. “Our power plant portfolio is at an inflection point because we have the resources and expertise to quickly develop, deploy, and scale programs that provide smart, controllable load. Combining solar with storage not only offers American families energy independence and peace of mind but also the ability to support the grid when it’s needed most.”

Learn more about integrating microgrids as DERs and VPPs at the Microgrid Knowledge Conference from April 15-17 at the Sheraton Dallas in Texas.

About the Author

Kathy Hitchens is a writer and special projects editor for Microgrid Knowledge. With over 30 years of writing experience across various sectors, including renewable energy, electric vehicles, and utilities, she holds a BFA in Media Arts from the University of Arizona and an MBA from the University of Denver.