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Study finds virtual power plants could provide resource adequacy and save utilities billions

Study finds virtual power plants could provide resource adequacy and save utilities billions
(Solar rooftop homes in Austin, Texas. Image: 123rf)

Incorporating virtual power plants into resource adequacy plans could save utilities billions of dollars in capacity investments, according to a new study.

Brattle Group conducted the study on behalf of Google to explore the cost and ability of virtual power plants -- aggregated distributed energy resources, like residential solar, batteries, and electric vehicles -- to serve resource adequacy needs in lieu of conventional options.

The study compared the net cost of providing 400 MW of resource adequacy from three resource types: a natural gas peaker, a transmission-connected utility-scale battery, and a VPP composed of residential demand flexibility technologies.

"Virtual power plants are no longer a virtual reality," Ryan Hledik, a Brattle principal and co-author of the study, said. "There is real potential to leverage these technologies to improve reliability, enable decarbonization, and reduce costs to consumers. But barriers still need to be overcome."

Source: Brattle Group

Brattle determined that a VPP leveraging commercially-proven residential load flexibility technologies could perform as reliably as conventional resources. The net cost to the utility of providing resource adequacy from a VPP is roughly 40–60% of the cost of the alternative options, the authors said.

Based on that analysis, 60 GW of VPP deployment could meet future US resource adequacy needs at $15–$35 billion less than the cost of the alternative options over the ensuing decade. Cost savings under the projections do not include societal benefits, such as emissions reduction and resilience.

DER ownership is likely to grow by several multiples within the next decade in the U.S., the Brattle study said, due to declining costs, technological advancements, incentives for clean energy adoption within the Inflation Reduction Act, and implementation of FERC Order 2222, which required grid operators to allow aggregated DERs to participate in wholesale markets.

Modeling virtual power plant performance

Brattled modeled VPPs for resource adequacy based on a hypothetical, mid-sized utility, using publicly-available data.

Each resource needed to provide 400 MW of resource adequacy, or approximately 7% of the gross system peak for the utility. The resources needed to perform at the required level for 63 hours of the year, spanning both summer and winter seasons.

The utility has a residential customer base of 1.7 million with 5,700 MW gross peak demand — 3,600 MW peak demand net of expected wind and solar generation — with power generation expected to be 50% renewable by 2030.

In addition to analyzing the resource adequacy potential for the resources modeled, Brattle also simulated non-resource adequacy value that could be provided by each resource. Estimated costs for each resource included CapEx, fuel, and ongoing program costs.

Brattle determined, based on its models, that VPPs could provide resource adequacy at 40% of the net cost of a gas peaker and 60% of the net costs of a battery, even without factoring in societal benefits.

Deploying 60 GW of virtual power plants would save utilities $15 billion to $35 billion over the next decade in addition to $20 billion in societal benefits.

GO DEEPER: Amy Heart, Sunrun's VP of policy, appeared on Episode 2 of the Texas Power Podcast to discuss Winter Storm Uri, Texas’ interest in virtual power plants, and more. Subscribe to the Texas Power Podcast wherever you get your podcasts.

Barriers facing virtual power plant deployment

While, DER technology is widely available, and affordable, virtual power plant deployment is heavily-dependent on market design and incentive structures, which present some near and long-term challenges.

Brattle identified a series of key barriers for VPPs, which included lacking communications standards, complex wholesale market designs, and utility regulatory models that don't financially incentivize participation.

Utilities can pursue "low-risk actions" to spur VPP adoption and integration, the authors said, like setting procurement targets, establishing pilots, and reviewing existing policies to account for the value of VPPs.

Read the full Brattle report here.