In late Nov 2023, Puget Sound Energy (PSE), the state of Washington’s largest utility with 1.2 million customers and AutoGrid announced that they were joining forces to launch a virtual power plant (VPP) that would grow to 100 MW by 2025, according to Aaron August, PSE’s Sr. VP & chief customer and transformation officer. The motivations facing PSE are like those facing many other utilities with ambitious plans to add more renewable capacity and with hundreds of thousands of customers with underutilized distributed energy resources (DERs).
With plans to add some 15 GW of renewable energy resources to its system by 2045, PSE will need to develop some 3.6 GW of demand-side and DERs while scaling up its VPP portfolio over time consisting of 5 key elements:
- Energy efficiency;
- Demand response;
- Distributed energy resources (DERs) including rooftop solar;
- Energy storage; and
- Electric vehicles (EVs).
The bundle will be used as an integrated resource. The magic sauce is to aggregate and manage the assembled resources. August calls it energy orchestration, “… where you’ve got decentralized systems that if you can create the right engagement mechanism with customers, you can literally transform when and how customers use energy.”
Such an assembled portfolio of resources can balance electricity loads and provide grid services faster, better, and cheaper than physical power plants with minimal carbon footprint. And in the coming years, a confluence of market factors driven by the rapid growth of DERs will make VPPs not only feasible but lucrative.
PSE and AutoGrid have been collaborating since 2021 to develop the essential components of a VPP, namely a centralized system where qualified customers with desirable DERs can be recruited, enrolled, and integrated so that their individual devices can be remotely monitored and dispatched using AutoGrid Flex, an artificial intelligence-driven DER management system.
Initially PSE plans to attract residential customers with controllable devices such as smart thermostats and heat pump water heaters by offering incentives. These devices can be utilized to adjust loads when the grid is stressed, especially on hot or cold days. The scheme will be scaled up to include EVs, battery storage and other resources.
Everyone agrees that there is an enormous amount of flexible demand, storage, and distributed generation, which will continue to grow on the customers’ premises. According to August,
“We’re talking about how do we fully unleash the potential of that energy? It’s going to take utility programs, it’s going to take software, like AutoGrid’s, that allows all these things to start to come together, but it’s no longer energy efficiency as a silo, demand response as a silo, EVs as a silo.”
The key will be to eventually integrate the bundled DERs into the utility’s supply-side resources, it is called integrated DERs or iDERs. PSE’s interest in VPPs – identical to many other utilities around the world – is driven by the growing need for resiliency in the face of increasingly extreme weather combined with the evolving grid and advances in technology, according to August.
For AutoGrid, which was acquired by Schneider Electric, the collaborating with PSE offers a great opportunity to apply its software and expand its footprint. According to Scott McGaraghan, AutoGrid’s chief revenue officer, the company already manages roughly 8 GW of VPPs in the US and elsewhere.
The contract with PSE, which runs for 5 years, provides sufficient continuity for AutoGrid to develop, fine-tune and expand the VPP scheme. McGaraghan expects the concept to move beyond residential demand response programs to commercial and industrial customers, water treatment and water pumping plants, manufacturing facilities including in-front-of-the-meter assets like grid-scale batteries. The potential for growth is literally boundless for anyone who can master the science and the art of the DER orchestration.
According to McGaraghan, over time VPPs will evolve into reliable, cheap, and fast capacity resources, which can be dispatched to manage wholesale market risk, mitigate price volatility or take advantage of arbitrage opportunities while providing ancillary services and locational benefits. As he sees it, VPPs will eventually become “a true resource that a utility control room operator looks at alongside all the other resources they have at their disposal.”
AutoGrid is not alone in pursuing the pot of gold at the end of VPP rainbow. The commercial applications of VPPs are simply too compelling to ignore.
This article originally appeared in the Feb 2024 issue of EEnergy Informer, a monthly newsletter edited by Fereidoon Sioshansi who may be reached at [email protected]"