Tripling Virtual Power Plant Capacity by 2030 Could Save $10B, Meet 20% Peak Demand: DOE

With electric vehicles and other distributed resources surging, virtual power plants may be at an inflection point, the Department of Energy said.

Roughly tripling virtual power plant capacity to 80 GW to 160 GW by 2030 could save about $10 billion a year in grid costs, while redirecting spending on peaking power plants to distributed energy resources at a lower cost, the Department of Energy said in a report released Tuesday.

Depending on how it is defined, there is 30 GW to 60 GW of U.S. VPP capacity, which is mainly made up of demand response programs, DOE said in its report on pathways to commercial liftoff for VPPs. If tripled, VPP capacity could meet about 10% to 20% of peak demand, the department said.

VPPs are groupings of distributed resources, such as energy storage, rooftop solar and electric vehicle chargers, that can balance electricity loads and provide grid services like a power plant, DOE said.

A confluence of market factors, including advances in DER control technologies, has put VPP growth at a potential inflection point, DOE said.

DOE expects a surge in annual DER additions from 2025 to 2030, including 20 GW to 90 GW of demand capacity from EV charging infrastructure and 300 GWh to 540 GWh of storage capacity from EV batteries. It expects smart thermostats, smart water heaters and non-residential DER will contribute an additional 5 GW to 6 GW of flexible demand annually, distributed solar and fuel-based generators will add 20 GW to 35 GW a year and up to 24 GWh of capacity a year from stationary batteries.

"Rather than viewing the massive adoption of EV and other DERs just as load to serve, utilities and regional grid operators can view this as an opportunity to increase the flexibility of the grid and more efficiently use existing resources and infrastructure," DOE said.

Buying peaking capacity from a VPP made of residential smart thermostats, smart water heaters, home managed EV charging, and behind-the-meter batteries can be 40% lower net cost to a utility than buying capacity from a utility-scale battery and 60% lower than from a gas peaker plant, DOE said, citing a May report by The Brattle Group.

Besides their financial benefits, VPPs can increase grid resilience, cut greenhouse gas emissions and air pollution, reduce grid congestion and empower communities, DOE said.

VPPs can also help make electricity less expensive and more reliable for disadvantaged communities while reducing pollution from peaker power plants, according to DOE. Two-thirds of U.S. peaker power plants are near communities with a higher than average percentage of low-income households, the department said.

However, VPPs face major hurdles such as their limited integration into power system planning, operations, and market participation, according to the department. Also, in most jurisdictions, grid planning requirements and cost-benefit assessments undervalue VPP benefits, deterring investment in programs and grid upgrades that would support them, DOE said.

DOE sees five key steps for boosting VPPs:

• Expanding DER adoption with equitable benefits;
• Simplifying VPP enrollment;
• Increasing standardization in VPP operations;
• Integrating VPPs into utility planning and incentive programs; and,
• Integrating them into wholesale power markets.

DOE recommended measures to support VPP development, including conducting a comprehensive evaluation of their benefits to improve cost-benefit assessments.

Grid operators should be supported in efforts to speed up information technology upgrades and boost personnel so they can integrate high volumes of DERs into bulk power systems, according to the department.

DOE also suggested automatically enrolling customers into VPPs when they buy DERs, but with the choice to opt out.

Companies involved in VPPs include AutoGrid, CPower, General Motors, Leap Energy, NORESCO, OhmConnect, Sunnova, Sunrun, Tesla and Voltus, according to the report.

Local Solar for All, a coalition of solar energy and storage companies and advocacy groups, praised DOE for providing access to technologies that can be used in VPPs.

"Local solar and storage, when configured as VPPs, can simplify the transition to all-electric buildings and electric vehicles while slashing climate pollution and improving our environment," Robin Dutta, Local Solar for All campaign director, said in a statement.