VPPs Expand to Offer Affordability, Reliability, and Resilience

Virtual power plants (VPPs) have been gaining attention in the energy sector for their ability to deliver targeted, predictable benefits for distribution or bulk power grids. However, VPPs are expanding beyond their initial value proposition to offer affordability, reliability, and resilience.

Utilities are increasingly seeing VPPs as a way to improve affordability. By aggregating distributed resources, VPPs can decrease power demand when wholesale prices are high, reducing both capacity and transmission costs. On distribution grids, VPPs can free up load interconnection headroom and help reduce, defer or avoid incremental system investments.

To scale customer participation in VPP programs and improve dispatchability, utilities and resource aggregators should provide robust and predictable compensation, use "revenue-grade metering" to measure performance, and embed customer protections like penalty-free opt-out.

VPPs are becoming more sophisticated as utilities and aggregators learn from early deployments and new resources enter the mix. Multiple operational models have emerged, including utility-run VPPs that compensate consumers directly or use third-party aggregators as intermediaries, "market participant" VPPs in which resource aggregations participate directly in energy, capacity or ancillary markets, and "bring your own capacity" VPPs, an emerging model that combines the two.

Well-designed VPPs can improve reliability on constrained distribution grids or provide resilience benefits in areas prone to weather-related outages or load shedding. For example, Consolidated Edison Co. of New York's demand-response VPP is a good example of the former, while Puerto Rico utility Luma Energy's Customer Battery Energy Sharing program typifies the latter.

New resource models like bidirectional electric vehicle charging are on the horizon, which can deliver up to 15 times more value per vehicle than one-way managed charging. Vehicle-to-grid integration can also deliver significant benefits, as seen in an analysis commissioned by General Motors.

National Grid is tapping distributed resource aggregations in 19 non-wires alternatives projects across its Massachusetts service territory. The utility has 7.2 MW of active or committed capacity across two separate programs: ConnectedSolutions+, a residential- and small business program that leans on stationary batteries, EVs and other resources, and a more market-based front-of-meter framework for commercial and industrial customers.

Eversource, National Grid's main investor-owned utility competitor in Massachusetts, has also been enrolling customers in ConnectedSolutions+. National Grid looks at factors like customer type and present ConnectedSolutions enrollment levels to determine whether ConnectedSolutions+ or the market-based framework makes more sense.

Xcel Energy is also tapping multiple distributed resource frameworks to address emerging grid issues in Colorado. With more than 1 GW of solar on its 7-GW Colorado system, much of it distributed on rooftops, Xcel is "starting to see some operational issues in terms of voltage swings and reverse power flow that we need to get ahead of." A corresponding reduction in the incremental value of midday solar has Xcel looking toward a "direct-participant model" that emphasizes DERs' capacity value.

Xcel has issued a competitive solicitation for the state-mandated Dispatchable Distributed Generation program, which will enroll megawatt-scale batteries "operating on a schedule to provide meaningful load reduction benefits" in areas with distribution-system constraints. The utility has also signed up "a few megawatts" for its Active VPP program, or AVPP, which aims to enroll 25 MW of behind-the-meter resources per year for five years.

## VPPs Offer Multiple Benefits

VPPs can offer multiple benefits, including affordability, reliability, and resilience. By aggregating distributed resources, VPPs can decrease power demand when wholesale prices are high, reducing both capacity and transmission costs. On distribution grids, VPPs can free up load interconnection headroom and help reduce, defer or avoid incremental system investments.

## Emerging Models and Technologies

Multiple operational models have emerged, including utility-run VPPs that compensate consumers directly or use third-party aggregators as intermediaries, "market participant" VPPs in which resource aggregations participate directly in energy, capacity or ancillary markets, and "bring your own capacity" VPPs, an emerging model that combines the two. New resource models like bidirectional electric vehicle charging are on the horizon, which can deliver up to 15 times more value per vehicle than one-way managed charging.

## Utility and Aggregator Initiatives

Utilities and aggregators are taking various initiatives to tap into the benefits of VPPs. National Grid is tapping distributed resource aggregations in 19 non-wires alternatives projects across its Massachusetts service territory. Eversource, National Grid's main investor-owned utility competitor in Massachusetts, has also been enrolling customers in ConnectedSolutions+. Xcel Energy is also tapping multiple distributed resource frameworks to address emerging grid issues in Colorado.

## Conclusion

VPPs are evolving to offer more than just targeted benefits for distribution or bulk power grids. Utilities and aggregators are now seeing VPPs as a way to improve affordability, reliability, and resilience. By aggregating distributed resources, VPPs can decrease power demand when wholesale prices are high, reducing both capacity and transmission costs. On distribution grids, VPPs can free up load interconnection headroom and help reduce, defer or avoid incremental system investments.

## Table of VPP Programs

| Utility | Program | Capacity | | --- | --- | --- | | National Grid | ConnectedSolutions+ | 7.2 MW | | National Grid | Market-based framework | - | | Xcel Energy | Dispatchable Distributed Generation | - | | Xcel Energy | Active VPP program (AVPP) | 25 MW |

Note: The table only includes data from the source and does not include any additional information.