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Pathways to

Commercial Liftoff:

Virtual Power Plants

SEPTEMBER | 2023

Neither the United States Government nor any agency

thereof, nor any of their employees, nor any of their

contractors, subcontractors or their employees, makes any

warranty, express or implied, or assumes any legal liability

or responsibility for any third party’s use or the results of

such use of any information, apparatus, product, or process

disclosed, or represents that its use would not infringe

privately owned rights. Reference herein to any specic

commercial product, process, or service by trade name,

trademark, manufacturer, or otherwise, does not necessarily

constitute or imply its endorsement, recommendation, or

favoring by the United States Government or any agency

thereof or its contractors or subcontractors.

Comments

The Department of Energy welcomes input and feedback on the contents of this Pathway to Commercial

Lifto Report. Please direct all inquiries and input to lifto@hq.doe.gov. Input and feedback should not

include business sensitive information, trade secrets, proprietary, or otherwise condential information.

Please note that input and feedback provided is subject to the Freedom of Information Act.

Authors

Jennifer Downing, Loan Programs Oce (Lead)

Nicholas Johnson, Oce of Policy

Mailinh McNicholas, Oce of Technology Transitions

David Nemtzow, Loan Programs Oce

Rima Oueid, Oce of Technology Transitions

Joseph Paladino, Oce of Electricity

Elizabeth Bellis Wolfe, Loan Programs Oce

Acknowledgements

Cross-cutting Department of Energy leadership for the Pathways to Commercial Lifto eort:

Loan Programs Oce: Jigar Shah, Jonah Wagner

Oce of Clean Energy Demonstrations: Kelly Cummins, Melissa Klembara

Undersecretary for Infrastructure: David Crane

Oce of Technology Transitions: Vanessa Chan, Lucia Tian

Oce of Policy: Neelesh Nerurkar

Department of Energy advisory and support for the VPP Lifto report:

Oce of Electricity: Gene Rodrigues

Oce of Energy Eciency and Renewable Energy: Alejandro Moreno, Rebecca Albertus-Jones,

Carolyn Snyder, Paul Spitsen, Ram Narayanamurthy, Julia Miller, Gabriel Klein, Garrett Nilsen,

Cecilia Johnson

Oce of State and Local Energy Programs: Henry McKoy, Chris Castro, Michael Forrester

Oce of Cyber Security, Energy Security, and Emergency Response: Puesh Kumar, Elaine Ulrich,

Christopher Sweeney

Oce of Economic Impact and Diversity: Shalanda Baker, Tony Reames, Malcolm Miller,

Isaac Lertola

Loan Programs Oce: Sean Sevilla, Michael Schweitzer, Amy Peterson, Sandhya Jetty

Oce of Policy: Carla Frisch, Noel Crisostomo, John Agan

Grid Deployment Oce: Maria Robinson

Analytical support from The Brattle Group:

Ryan Hledik, Kate Peters

/79

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PathwaystoCommercialLiftoff:VirtualPowerPlantsSEPTEMBER2023NeithertheUnitedStatesGovernmentnoranyagencythereof,noranyoftheiremployees,noranyoftheircontractors,subcontractorsortheiremployees,makesanywarranty,expressorimplied,orassumesanylegalliabilityorresponsibilityforanythirdparty’suseortheresultsofsuchuseofanyinformation,apparatus,product,orprocessdisclosed,orrepresentsthatitsusewouldnotinfringeprivatelyownedrights.Referencehereintoanyspecificcommercialproduct,process,orservicebytradename,trademark,manufacturer,orotherwise,doesnotnecessarilyconstituteorimplyitsendorsement,recommendation,orfavoringbytheUnitedStatesGovernmentoranyagencythereoforitscontractorsorsubcontractors.CommentsTheDepartmentofEnergywelcomesinputandfeedbackonthecontentsofthisPathwaytoCommercialLiftoffReport.Pleasedirectallinquiriesandinputtoliftoff@hq.doe.gov.Inputandfeedbackshouldnotincludebusinesssensitiveinformation,tradesecrets,proprietary,orotherwiseconfidentialinformation.PleasenotethatinputandfeedbackprovidedissubjecttotheFreedomofInformationAct.AuthorsJenniferDowning,LoanProgramsOffice(Lead)NicholasJohnson,OfficeofPolicyMailinhMcNicholas,OfficeofTechnologyTransitionsDavidNemtzow,LoanProgramsOfficeRimaOueid,OfficeofTechnologyTransitionsJosephPaladino,OfficeofElectricityElizabethBellisWolfe,LoanProgramsOfficeAcknowledgementsCross-cuttingDepartmentofEnergyleadershipforthePathwaystoCommercialLiftoffeffort:LoanProgramsOffice:JigarShah,JonahWagnerOfficeofCleanEnergyDemonstrations:KellyCummins,MelissaKlembaraUndersecretaryforInfrastructure:DavidCraneOfficeofTechnologyTransitions:VanessaChan,LuciaTianOfficeofPolicy:NeeleshNerurkarDepartmentofEnergyadvisoryandsupportfortheVPPLiftoffreport:OfficeofElectricity:GeneRodriguesOfficeofEnergyEfficiencyandRenewableEnergy:AlejandroMoreno,RebeccaAlbertus-Jones,CarolynSnyder,PaulSpitsen,RamNarayanamurthy,JuliaMiller,GabrielKlein,GarrettNilsen,CeciliaJohnsonOfficeofStateandLocalEnergyPrograms:HenryMcKoy,ChrisCastro,MichaelForresterOfficeofCyberSecurity,EnergySecurity,andEmergencyResponse:PueshKumar,ElaineUlrich,ChristopherSweeneyOfficeofEconomicImpactandDiversity:ShalandaBaker,TonyReames,MalcolmMiller,IsaacLertolaLoanProgramsOffice:SeanSevilla,MichaelSchweitzer,AmyPeterson,SandhyaJettyOfficeofPolicy:CarlaFrisch,NoelCrisostomo,JohnAganGridDeploymentOffice:MariaRobinsonAnalyticalsupportfromTheBrattleGroup:RyanHledik,KatePetersTableofContentsPurposeofLiftoffreports1ObjectivesandScopeofthisLiftoffreportonVirtualPowerPlants1ExecutiveSummary2ChapterOne:Introduction61.i.Virtualpowerplantdefinition61.ii.Distributedenergyresourcedefinition61.iii.VPPvalueproposition8ChapterTwo:CurrentStateTechnologiesandMarket132.i.DERadoption132.ii.VPPoperations162.iii.VPPparticipationinelectricitymarkets192.iv.VPPdeploymentbystate212.v.VPPbusinessmodeleconomics232.vi.AninflectionpointforVPPs31ChapterThree:PathwaytoVPPLiftoff323.i.VPPpotentialin2030323.ii.PathwaytoVPPliftoff333.iii.Broaderimplications35ChapterFour:ChallengestoLiftoffandPotentialSolutions384.i.ExpandDERadoptionwithequitablebenefits384.ii.SimplifyVPPenrollment414.iii.IncreasestandardizationinVPPoperations434.iv.Integrateintoutilityplanningandincentives484.v.Integrateintowholesalemarkets51ChapterFive:MetricstoTrackProgress53Appendix56I.Keyconceptsandtermsinthisreport56II.Illustrative24-hourelectricalloadcurvein2024,2030,205057III.FERCdefinitionofDERandDERAggregator57IV.VPPEvolution58V.VariationacrossVPPs59VI.EnablinggridsoftwareandhardwaretechnologiesforVPPs60VII.Potentialgridservices63VIII.OverviewofVPPBusinessmodelcostandrevenuedrivers65IX.CostandrevenuedetailforexamplesmartthermostatdemandresponseVPP66X.2030flexibledemandcapacityandgridsavingspotentialdetail67XI.ModelingtoolsavailablefromselectDOE-partnerednationallaboratories69XII.Recommendationsforfurtheranalysis71References721PathwaystoCommercialLiftoff:VirtualPowerPlantsPurposeofLiftoffreportsLiftoffreportsdescribethemarketopportunity,currentchallenges,andpotentialsolutionsforthecommercializationofinterdependentcleanenergytechnologies.Liftoffreportsareanongoing,DOE-ledefforttoengagedirectlywithenergycommunitiesandtheprivatesectoracrosstheentireclean-energylandscape.Theirgoalistocatalyzerapidandcoordinatedactionacrossthefulltechnologyvaluechain.Reportswillbeupdatedregularlyaslivingdocumentsandarebasedonbest-availableinformationattimeofpublication.Formoreinformation,seeLiftoff.Energy.gov.ObjectivesandScopeofthisLiftoffreportonVirtualPowerPlantsThisreportismeantforadiverseaudienceofstakeholderswhocanhelpaccelerateliftoffforvirtualpowerplants(VPPs).FortheaudienceunfamiliarwithVPPs,thisreportaimstobuildfoundationalunderstandingoftheirvaluepropositionandtheassociatedbusinessmodelsandtechnologyinusetoday.Amongmoreexperiencedaudiences,thereportaimstocatalyzeandorganizeadialoguebetweenDOE,stateandnationalregulators,policymakers,utilities,ISOs/RTOs,corporations,researchorganizations,advocacygroups,andmorearoundchallengesandpotentialsolutionsforliftoff.Buildingonthisreport,futureeffortscanincludenear-term,no-regretsactionsaswellasthedevelopmentofmoredetailed,longer-termroadmapsfortherapid,safe,equitable,andcost-effectivedeploymentofVPPs.Thisreportisorganizedasfollows:ĥChapter1:IntroductiondefinesVPPsanddistributedenergyresources(DERs)andsummarizestheVPPvalueproposition.ĥChapter2:CurrentStateTechnologiesandMarketprovidesanoutlookforDERgrowth,explainsfoundationalconceptsofhowVPPsoperate,reviewshowVPPsparticipateinelectricitymarketsandcurrentdeploymenttrends,andpresentsexamplesoftheeconomicsofVPPbusinessmodels.ĥChapter3:PathwaytoVPPLiftoffdescribesthepotentialopportunityforVPPsin2030,outlinesfiveimperativesforacceleratinggrowth,anddiscussesbroaderimplications.ĥChapter4:ChallengestoLiftoffandPotentialSolutionsdiscusseschallengesassociatedwiththefiveimperatives,prioritypotentialsolutions,andassociatedactionsstakeholderscantake.ĥChapter5:MetricstoTrackProgresssuggestsmetricsforleadingindicators,laggingindicators,andgoaloutcomesofVPPliftoff.2PathwaystoCommercialLiftoff:VirtualPowerPlantsExecutiveSummaryWithelectricitydemandgrowingforthefirsttimeinadecadeandfossilassetsretiring,deploying80-160GWofvirtualpowerplants(VPPs)—triplingcurrentscale—by2030couldsupportrapidelectrificationwhileredirectinggridspendingfrompeakerplantstoparticipantsandreducingoverallgridcosts.Between2023and2030,theU.S.willneedtoaddenoughnewpowergenerationcapacitytosupplyover200GWofpeakdemand;1weretheU.S.tofollowapathtowards100%cleanelectricityby2035,newcapacityneedscouldnearlydouble.iInallscenarios,themixofweather-dependentrenewablegenerationwillbeunprecedented,leadingtomorevariableelectricitysupplyandhigherdemandfortransmissioncapacity.Transmissioninterconnectionbacklogs,whichhavestretchedtoanaverageoffiveyears,posepotentialresourceadequacychallenges.iiLarge-scaledeploymentofVPPscouldhelpaddressdemandincreasesandrisingpeaksatlowercostthanconventionalresources,reducingtheenergycostsforAmericans–oneinsixofwhomarealreadybehindonelectricitybills.iiiVPPsareaggregationsofdistributedenergyresources(DERs)suchasrooftopsolarwithbehind-the-meter(BTM)batteries,electricvehicles(EVs)andchargers,electricwaterheaters,smartbuildingsandtheircontrols,andflexiblecommercialandindustrial(C&I)loadsthatcanbalanceelectricitydemandandsupplyandprovideutility-scaleandutility-gradegridserviceslikeatraditionalpowerplant.VPPsenrollDERowners–includingresidential,commercial,andindustrialelectricityconsumers–inavarietyofparticipationmodelsthatofferrewardsforcontributingtoefficientgridoperations.Virtualpowerplant1PeakdemandintheU.S.isexpectedtogrowapproximately8%intheU.S.between2023and2030–from743GWto802GW—anincremental59GW(estimatedbyTheBrattleGroupbasedontotalelectricityconsumptionprojectionsfromOfficeofPolicyNationalEnergyModelingSystemmid-caseelectrificationscenario).Itisestimated162GWto183GWofgenerationwillberetiredbetween2023-2030.Ifretiringassetswereoperatingatfullcapacity,theretirementscombinedwithpeakdemandgrowthwouldimplyasupplygapof221to242GW.However,themajorityofrecentandexpectedretirementsareagingcoalplants,withsomeoilandnaturalgasplantsretiringaswell;retiringassetswilllikelybeoperatingbelowfullcapacity.Forthisreason,theneedisestimatedconservativelytobe~200GW(~60GWnewpeakdemand+~140GWpeakdemandnolongerservedbyassetsretired).3PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPsarenotnewandhavebeenoperatingwithcommerciallyavailabletechnologyforyears.Mostofthe30-60GWofVPPcapacitytodayisindemandresponseprogramsthatareusedwhenbulkpowersupplyislimited;theseprogramsturnoffordecreaseconsumptionfromDERssuchassmartthermostats,waterheaters,andcommercialandindustrialequipment.However,VPPshavethetechnicalpotentialtoperformawiderarrayoffunctions.ExamplefunctionsofVPPsonthemarkettodayincludeshiftingthetimingofEVchargingtoavoidoverloadinglocaldistributionsystemequipment,supplyinghomeswithenergyfromon-sitesolar-plus-storagesystemsduringpeakhourstoreducedemandonthebulkpowersystem,chargingdistributedbatteriesatopportunetimestoreduceutility-scalesolarcurtailment,dispatchingenergyfromcommercialEVbatteriesbacktothegrid,andcontributingancillaryservicestomaintainpowerquality,allwhileminimizingimpacttotheDERowner.VPPscancontributetoresourceadequacy2atalowcost;equallyasimportantastheirfinancialbenefits,VPPsinvariousformscanincreaseresilience,reducegreenhousegasemissionsandairpollution,reduceT&Dcongestion,empowercommunities,andbeadaptedtomeetevolvinggridneeds.AVPPmadeupofresidentialsmartthermostats,smartwaterheaters,EVchargers,andBTMbatteries,forexample,couldprovidepeakingcapacityat40to60%lowernetcosttoautilitythanalternatives(autility-scalebatteryandanaturalgaspeakerplant).ivRatherthanusingnaturalgaspeakerplantstoburnfuelandtransportelectricityovertransmissionanddistribution(T&D)lines,utilitiescanuseVPPstopayparticipatingend-usersforbalancingdemandonthegridlocallywithDERsandsupportingsystems.VPPvaluepropositionLimitedintegrationofVPPsintoelectricitysystemplanning,operations,andmarketparticipationhasinhibitedgrowthtodate.Regulation-drivengridplanningrequirementsandcost-benefitassessmentsundervaluethepotentialbenefitsofVPPsinmostjurisdictions,deterringinvestmentinprogramsandpotentialgridupgradesthatenableVPPs.ToolsandprotocolsforVPPplanning,operations,measurement,andvaluationthatarenecessaryforutilitiesandregionalgridoperatorstointegrateVPPsintodistributionsystemsandbulkpowersystemshaveemerged,butvarybyserviceproviderandjurisdiction.ThiscomplexityandfragmentationhascontributedtoalackofconfidenceinthedependabilityofVPPsamongutilities,whichhasinturnledtomanyyearsofcollectingdatawithpilotsthat–despitetheirsuccess–haveyettoscaleup.Deploying80-160GWofVPPsby2030tohelpaddressnationalcapacityneedscouldsaveontheorderof$10Binannualgridcostsandwilldirectgridspendingbacktoelectricityconsumers.3Atthisscale,VPPscouldcontributeapproximately10-20%ofpeakdemand,withlocalvariationbasedonconditionssuchasDERavailabilityandmixofutility-scalerenewablegeneration.PotentialDERcapacitythatcanbeenrolledinaVPPisgrowingatanacceleratingrate,withEVsrepresentingthevastmajorityofgrowthwithhighlyflexibledemand.Eachyearfrom2025to2030,thegridisexpectedtoadd:20-90GW2Resourceadequacyreferstotheabilityoftheelectricgridtosatisfytheend-userpowerdemandatanygiventime;Itisanassessmentofwhetherthecurrentorprojectedresourcemixissufficienttomeetcapacityandenergyneedsforaparticulargrid.3Savingsestimatesfor80GW($6B)to160GW($11B)ofVPPcapacityareestimatedbasedonthesavings-per-GWratiosofBrattle(2023)andClack(2021)analysisofpeak-coincidentflexibledemand/DERcapacity(est.$0.07BperGWinbothstudies).4PathwaystoCommercialLiftoff:VirtualPowerPlantsofnameplate4demandcapacityfromEVcharginginfrastructurev,viand300-540GWhofnameplatestoragecapacityviifromEVbatteries;anadditional5-6GWofflexibledemandfromsmartthermostats,smartwaterheaters,andnon-residentialDER;viii20-35GWofnameplategenerationcapacityfromdistributedsolarandfuel-basedgenerators;ix,xand7-24GWhofnameplatestoragecapacityfromstationarybatteries.xiVPPliftoffNotes:2023VPPcapacitybasedonestimatesfromWoodMackenzie(2023)andFERC(2021).2030VPPcapacitypotentialandsavingspotentialbasedonindustryinterviewsandanalysisbyTheBrattleGroup(2023)andClacketal.(2021).Seefootnote1fordetailonassetretirementsandpeakgrowthestimates.ThisreportrepresentsanurgentcalltoactionforadiverserangeofstakeholderstoaccelerateVPPliftoff.ItismeanttoinitiateandorganizeadialoguebetweentheDepartmentofEnergy(DOE),otherpublicsectorleaders,andtheprivatesectoronchartingthepathforward.Thisincludesprogressonfiveimperatives.ImperativesforVPPliftoff4ConversionofDERnameplatecapacitytoDERcontributiontoVPPintermsofflexibledemand,generation,andstoragecapacityvariesbyDERtype(e.g.,EVbattery&EVchargercontributionsdependonVPPparticipationrates,stateofcharge,drivingpatterns,andloadmanagementapproach).Estimatesofcapacityfromsmartthermostats,waterheaters,andnon-residentialdemandreflectflexiblecapacity.5PathwaystoCommercialLiftoff:VirtualPowerPlants1.ExpandDERadoptionwithequitablebenefits:Governments,nonprofitorganizations,utilities,DERmanufacturers,andVPPplatformscancollaborateonholisticsupportforDERadoptionandVPPdeploymentthatprioritizesequitablebenefits,includingelectricitybillsavings,gridreliabilityandresilience,airqualityimprovements,andjobopportunities.Offeringlow-costfinancingandrebatesforenergy-efficient,VPP-enableddevices,forexample,caninduceconsumerstoshiftspendingonequipmentorvehicleupgradestowardDERswithgreaterpotentialsystembenefits.2.SimplifyVPPenrollment:Utilities,DERmanufacturers,VPPplatforms,consumeradvocates,andregulatorscandevelopaphasedapproachtostreamlineVPPparticipantenrollment.Measuresincludeconsumereducation,automaticenrollmentofDERsintoVPPsatthepointofpurchasewithopt-outoptions,andwiderVPP-enablementofDERdevices.3.IncreasestandardizationinVPPoperations:Privatesectorandpublicsectorstakeholderscanimprovecoordinationandresourcingforthedevelopmentofguidelines,standards,and/orrequirementsthatmakeVPPsmorerepeatableandshortenthedesignandpilotstagesofindividualVPPdeployments.PriorityareasincludeimprovedDERandVPPforecastingtools,standardizedserviceagreementcontracts,andmeasurementandverification(M&V)methods.Standardizationofdistributiongridoperationsoverall(i.e.,includingandbeyondVPPs)willaccelerateliftoff;keyareasincludedistributionsystemreliabilitystandardsandformalizedgridcodestogovernsystemparticipants,DERinterconnectionanddatastandards,andcybersecurity.Increasedstandardization(Imperative3)willaccelerateVPPintegrationintoretailandwholesalemarkets(Imperatives4&5).4.Integrateintoutilityplanningandincentives:Governments,utilities,andnonprofitorganizationscanincreaseresourcesandpersonnelsupportforutilityregulators(e.g.,publicutilitycommissions,boardsofcooperatives,andmore)toreviseorintroducenewdistributionsystemplanningrequirements,procurementprocesses,ratemaking,andcustomerprogramsthatpromotecost-effectiveDERadoptionandVPPdeploymentwhileaccountingforpotentialnecessarygridupgrades.5.Integrateintowholesalemarkets:Inrestructuredmarkets,5ISOs/RTOsmaybenefitfromtargetedsupportforthetimelyandinclusiveintegrationofVPPsintosystemplanningandmarketplacesasoutlinedinFERCOrder2222.AsaparallelpathtoscalingupexistingDERandVPPtechnologiesandbusinessmodelsoperatingtoday(thefocusofthisreport),investmentsshouldcontinueinnext-generationDERandVPPinnovation.DOEanditscollaboratorshaveover20complementaryprogramsunderwaytoaccelerateVPPliftoff.ExistinginitiativesrangefromfinancingsupportforDERandVPPdeployment,thedevelopmentofVPPmodelingandplanningtools,demonstrationprojects,guidanceongridmodernizationstrategies,andmore.Additionalinitiativesmaytakeshapeinresponsetoindustryengagementthatthisreportaimstocatalyze.5SeeChapter2forexplanationofrestructuredmarkets.ISO=Independentsystemoperator;RTO=Regionaltransmissionoperator;FERC=FederalEnergyRegulatoryCommission.6PathwaystoCommercialLiftoff:VirtualPowerPlantsChapterOne:IntroductionKeytakeawaysĥBetween2023and2030,theU.S.gridwilllikelyneedtoaddenoughnewcapacitytosupplyover200GWofelectricitydemandduringpeakhours.ĥVPPsareaggregationsofdistributedenergyresources(DERs)thatcanbalanceelectricitydemandandsupplyandprovideutility-scaleandutility-gradegridservicesasanalternativeorsupplementtocentralizedresources.ĥByusingDERssuchaswaterheaters,EVchargers,behind-the-meterbatteriesandrooftopsolarindifferentways,VPPscanexpandthegrid’scapacitytoserverisingpeakdemandatalowcost.ĥEquallyasimportantastheirfinancialbenefits,VPPsinvariousformscanincreaseresilience,reducegreenhousegasemissionsandairpollution,reducetransmissionanddistributionsystemcongestion,giveconsumersgreaterfreedomovertheirelectricitysupplyandcost,createandretaingoodjobs,andbeadaptedovertimetomeetevolvinggridneeds.1.i.VirtualpowerplantdefinitionVPPsareaggregationsofDERsthatcanbalanceelectricalloads6andprovideutility-scaleandutility-gradegridserviceslikeatraditionalpowerplant.DOEusesabroaddefinitionofVPPsthatincludesavarietyofmechanismsforaggregatingandorchestratingDERs,discussedindetailinChapter2.Fundamentally,VPPsareatoolusedforflexingdistributeddemandandsupplyresourceswithalevelofdexteritythathashistoricallyonlybeenpossibleinflexingcentralizedsupply.Justasdifferenttypesoftraditionalpowerplantscontributetothegridindifferentways(e.g.,nuclearplantsprovidebaseloadgeneration,andwindfarmsprovidevariablegeneration),sotoododifferentconfigurationsofVPPs.7Forexample,themajorityofVPPstodaystrictlyshapethedemandfeltbytheelectricalgridbyorchestratingDERsthatconsumeelectricityand/orDERsthatgenerateandstoreelectricitythatstaysbehindthemeterforon-siteuse(demand-shapingVPPs).AminorityofVPPssupplyelectricitybacktothegridfrombehindthemeter(exportingVPPs).Seeappendixforalistofgridservicesandtheirdefinitions,andforamorecomprehensiveoverviewofvariationacrossVPPs.1.ii.DistributedenergyresourcedefinitionDERsareequipmentlocatedonornearthesiteofend-usethatcanprovideelectricitydemandflexibility,electricitygeneration,storage,orotherenergyservicesatasmallscale(sub-utilityscale)andaretypicallyconnectedtothelower-voltagedistributiongrid.Inthisreport,DERsaregroupedintothreecategories:demand,generation,andstorage.ExamplesofdemandDERsincludeEVchargers,smartthermostatspairedwithelectricheating,ventilation,andairconditioningsystems(HVAC)suchasheat6Theterm‘electricalload’generallyreferstothedemandforelectricitynetofanylocallysuppliedelectricityfromdistributedgenerationorstoragethatreducetheamountofelectricitythegridneedstoprovidefromcentralizedassets.VPPsaredistinguishedfromotherloadbalancingstrategiesbytheiruseofaunifyingarchitecturethattranslatesasetofdistributedassetsactingindependentlyintooneutility-scaleresourcethat,onthewhole,canbepredictablyincorporatedintoactivemanagementofgridconditions.7Theterm‘VPP’isusedinthisreporttorefertoacollectionofdifferentpotentialtypesofVPPs(andexamplesarespecifiedinChapter2),butitisimportanttoacknowledgethatdifferentVPPswillperformdifferentservicesanddeliverdifferentbenefits.Forexample,VPPscanintegratedistributedsolarandstorage,butnotallwill.ThevaluepropositionofVPPsinthischapterdescribeswhatcanbeaccomplishedwithdifferentVPPconfigurationsandisnotmeanttosuggestthateveryVPPwill,orshould,achieveeverygoal.7PathwaystoCommercialLiftoff:VirtualPowerPlantspumps,electricwaterheaters,andC&Iequipment.StorageDERsincludeBTMbatteriesandEVbatteries.GenerationDERsincludedistributedsolar(whichbecomesdispatchablewhenpairedwithstoragesystemssuchasbatteries)andfuel-basedgenerators.8Inthevastmajorityofcases,consumersandcompaniesbuyandinstallDERsforavarietyoffunctionsunrelatedtogridservices;theybuyEVsfortransport,heatpumpsfortemperaturecontrol,andbatteriesforbackuppower,forexample.Withoutunduedisruptiontotheirprimaryfunctions,DERscanbeusedstrategicallytoshiftdemandfrompeaktooff-peakhours,sheddemandonthegridduringsupplyshortages(eitherbyreducingconsumptionorbyservingconsumptionwithanon-siteDER),reshapeandreducebaseloadconsumption,orprovideancillaryservices9tosatisfytheneedsofthedistributionortransmissiongrid.Theseeffectsaresometimesreferredtoasloadshift,shed,shape,andshimmy.DifferenttypesofDERsplaydifferentrolesinaVPP.FourexampleDERtypesare:ExampleDERCommonuseinVPPsSmartThermostatsInternet-connectedtemperaturecontrolscanincreaseordecreaseelectricitydemandfromHVAC,particularlywhenseasonaldemandishigh(e.g.,hotsummerafternoonsandcoldwintermornings.)Toavoidparticipantdiscomfort,buildingsandhomescanbepre-heatedorpre-cooledduringoff-peakhours,andreductionsindemandcanbestaggeredoveratwotofourhourwindow.SmartWaterHeatersHeatpumporresistivewaterheaterscanbecontrolledremotely,forexampletopre-heatwaterwhencleanenergysupplyisabundantortoavoidheatingduringpeakdemand.Controlsmaybeembeddedinorexternaltothewaterheater.Changesindemandtimingaretypicallyimperceptibletotheowner.EVChargersManagedor‘smart’EVchargersinbuildings,homes,andchargingstationscanadjustchargingpowerlevelsordelaychargingsessions.xiiCharginginfrastructuremaybeunidirectional(chargesthebattery)orbidirectional(canalsodispatchelectricityfromthebatteryoutthroughthechargertoabuildingorbeyondthemetertothegrid).Unidirectionalchargerscantime-shiftdemand;EVownerswholeavetheirvehiclepluggedinathomeovernight,forexample,willnotnoticechangesinchargetimingaslongasthevehicleissufficientlychargedinthemorning.Bidirectionalchargers–calledvehicle-to-XorV2X–mayprovideelectricityakintoaBTMbatterywhenanEVispluggedin.BTMBatteries(withsolar)Distributedbatteryelectricitystoragesystemsprovideback-uppowerduringgridoutages.Theyarechargedwhenelectricityisabundant–oftenwithcleanenergyfrompaireddistributedsolargeneration–anddispatchedwhenelectricityfromthegridisscarce.Dispatchtothebuildingwherethebatteryissitedreducesdemandontransmissionlinesandintermediateinfrastructureonthedistributiongrid,suchassubstations.Batteriescanalsoprovideancillaryservicestobalancethegrid,suchasfrequencyregulation.Whenenergyisdispatchedbeyondthemeterwherethebatteryissited(lesscommontoday),thebatterycanhelppowerotherassetsonthelocalgrid.8Theterm‘DER’mayalsorefertoacombinationofdevices,suchasamicrogrid.Front-of-themeterassets,suchasstoragesystems,canalsobepartofVPPconfigurations.9Ancillaryservicesincludefrequencyandvoltageregulation.Seeappendixforalistofgridservicesandtheirdefinitions.8PathwaystoCommercialLiftoff:VirtualPowerPlantsWaysinwhichDERscanshapedemandonthegridNote:LoadshedforsomeDERsresultsinloadshiftingtolaterhoursasasystem(e.g.,HVAC)recoversfromanevent.Distributedsolarwithstoragereducesdemandonthegridwithoutimpactingtheenergyconsumedbehindthemeter.Source:AdaptedfromLawrenceBerkeleyNationalLaboratoryandNASEO-NARUCGrid-InteractiveBuildingsWorkingGroup.xiii1.iii.VPPvaluepropositionVPPsarefit-for-purposegridresourcesthatcanhelpmanagehighandvariabledemandatalowcost.ThescaleandcompositionofVPPsarehighlyconfigurabletomeettheneedsofthelocaldistributionorregionaltransmissiongrid.ByreshapingdemandcurvesandprovidingothergridservicesfromDERsinvariousmodels,VPPshavethepotentialtoincreasetheresourcesandflexibilityofthegridatalowercostthancentralizedassets.Beyondcontributingtoresourceadequacyandaffordability,VPPscanincreaseresilience,reducegreenhousegasemissionsandairpollution,reduceT&Dcongestion,giveconsumersgreaterfreedomovertheirelectricitysupplyandcost,createandretaingoodjobs,andbeadaptedovertimetomeetevolvinggridneeds.9PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPValuePropositionResourceadequacyBetween2023and2030,theU.S.willlikelyneedtoaddenoughnewpowercapacitytomeetover200GWofpeakdemand;10weretheU.S.tofollowapathtowards100%cleanelectricityby2035,newcapacityneedscouldbenearlydouble.xivInallscenarios,themixofweather-dependentrenewablegenerationwillbeunprecedented,leadingtomorevariableelectricitysupplyandhigherdemandfortransmissioncapacity.Combinedwithdemandgrowthfromelectrificationandanticipatedgenerationassetretirements,interconnectionbacklogs—whichhavestretchedtoanaverageoffiveyearsxv—posepotentialresourceadequacychallenges.VPPscanincreasethegrid’scapacitytoservegrowingelectricityconsumptionbyshiftingorsheddingdemandtoshrinkpeaksandreducetheneedforpeakinggenerationassets.Theycanalsoadddistributedgenerationcapacityanddistributedstoragecapacityintogridoperations–forexample,fromrooftoporcommunitysolarwithstorageDERs.VPPscanaddresssystemconstraintsatboththetransmissionlevel(e.g.,reducepeakswhensupplyfromutility-scalegenerationresourcesislimited)anddistributionlevel(e.g.,reducepeakdemandthatthreatenstoexceedthesafetylimitsoflocalequipment).10PeakdemandintheU.S.isexpectedtogrowapproximately8%intheU.S.between2023and2030–from743GWto802GW—andincremental59GW(estimatedbyTheBrattleGroupbasedontotalelectricityconsumptionprojectionsfromOfficeofPolicyNationalEnergyModelingSystemmid-caseelectrificationscenario).Itisestimated162GWto183GWofgenerationwillberetiredbetween2023-2030.Ifretiringassetswereoperatingatfullcapacity,theretirementscombinedwithpeakdemandgrowthwouldimplyasupplygapof221to242.However,themajorityofrecentandexpectedretirementsareagingcoalplants,withsomeoilandnaturalgasplantsretiringaswell;retiringassetswilllikelybeoperatingbelowfullcapacity.Forthisreason,theneedisestimatedconservativelytobe~200GW.10PathwaystoCommercialLiftoff:VirtualPowerPlantsU.S.systempeakdemand,historicalandprojected,GW(1995-2050E)Note:NationalcoincidentpeakdemandisbasedonsumofpeaksacrossFERCregions.Source:HistoricalenergydemandsourcedfromAEO.Coincidentpeakdemand(point-in-timepeak,nottotalenergyconsumption)estimatedbyTheBrattleGroup(2023)basedonforecastedtotalenergyconsumptionsourcedfromOP-NEMSmid-casescenario.Thismid-casescenarioincludesincreasingconsumptionfromindustrialelectrificationandelectrificationofHVAC;however,theEVscontributethemostdemandtocoincidentpeakaccordingtoestimatedhourlyconsumptionpatternsthatwillvarybyregion.AffordabilityAttheendofJanuary2023,over20millionAmericanhouseholds–oneinsix–werebehindonelectricbills.xviAslower-costoptionsforincreasinggridcapacity,VPPscanmoderatethecostburdenonratepayers.TheyprovideservicesfromDERsavailableonthedistributiongridinwaysthatcanbemorecost-effectivethanincreasingbulksystemresources.ProcuringnewpeakcapacityfromaVPPcomprisedofresidentialsmartthermostats,smartwaterheaters,homemanagedEVcharging,andBTMbatteriescanbe40%lowernetcosttoautilitythanprocuringnewcapacityfromautility-scalebatteryand60%lowernetcostthananaturalgaspeakerplant,accordingtoastudyofarepresentativeutilitysystemin2030.xviiTheVPPincursthelowestassociatedT&DcostsofthethreeresourcesmodeledbecausetheVPPreducespeakdemandandtheassociatedstrainonT&D(ratherthanincreasingthesupplyofelectricityrunningthroughtheT&Dsystem).AccountingforthesocietalvalueofemissionsreductionswouldfurtheradvantageVPPs.Jurisdiction-specificstudiesinmultiplestateshavedemonstratedthepotentialtoreducegridcostswithVPPsandrelatedprogramsthatrelyonDERs.InCalifornia,whereelectrificationanddecarbonizationareprogressingrapidly,analystsestimatethatrequireddistributiongridinvestmentsmaybeupto$50billionby2035,butcouldbeasmuchas~70%lower(aslowas$15B)ifmeasuresaretakentomanageflexibledemand.11,xviii,xixInTexas,wherepeakdemandgrewby9%from2018to2022,analysissuggeststhatwiderdeploymentofdemandmanagementwithsmartthermostats,heatpumps,EVcharging,waterheaters,andotherDERscouldsavecustomersover$150peryearonaverageby2030andachievemorereliableservice.xxInNewYork,distributionsystemupgradecostsrequiredfortransportationelectrificationareestimatedtobe$1.4billionifEVchargingismanagedand$26.8billionifnot(netpresentvalue).xxi11TheCaliforniaPublicUtilitiesCommissionestimatedupto$50billionwillbeneededfordistributiongridinvestmentsby2035ifnewmeasuresarenottakentomanageflexibledemand.SubsequentpreliminaryresearchbytheCaliforniaPublicAdvocatesOfficessuggestedthatlowerpeakachievedwithmoreevenEVchargingdemandthroughoutthedaywoulddecreaseinvestmentcoststo$15-20Bby2035.11PathwaystoCommercialLiftoff:VirtualPowerPlantsMorecost-effectiveuseofgridresourceswillhelpreduceenergybillsforallconsumers.Inadditiontobenefittingfromavoidedgridcosts,AmericanswillbenefitfromspendingonVPPsbecausethemajorityofVPPcostsflowtoparticipatingenergyconsumersintheformofincentivepayments(insteadofpayingforfuelandcapitalinvestmentsinutility-scaleinfrastructure).Netcosttoautilityofprocuringpeakingcapacity,NetcostperkW-yrNote:Netcosttoautilityofprocuring400MWofpeakingcapacityareshownin$/kW-yrin2022dollars.Inthechart,thedeferredT&DcostsarerepresentedasbenefitsoftheVPP.Benefitsofemissionsreductionandresiliencearenotshown;whenincluded,VPPnetcostislower,thoughactualemissionsimpactwillvarybylocalgridmix.VPPinanalysisconsistsofsmartthermostats,smartwaterheating,homemanagedEVcharging,andBTMbatterydemandresponse.Utilitystudiedisassumedtohave50%renewablegenerationmix,withresourceadequacyneedsinsummerandwinter.DERpenetrationassumptionsandVPPparticipationratesreflectnationalaveragesandutilityexperience.8760hourswereconsideredandresourcesmustbeabletooperatein63peakhours(whentop400MWareneeded)spanning7months,for7consecutivehoursatatime.Costsexcludeenablinggridsoftwareandhardwaresuchassensorsandmeteringthatwouldalsocontributenon-VPPservicessuchasreducingrelianceonmeterreaders,enablingtime-varyingrates,anddatacollectionforenergyuseanalytics.Fordetailonenablinggridsoftwareandhardware,seeappendixSource:TheBrattleGroup,RealReliability:TheValueofVirtualPower(2023).Reliability&resilienceBetween2011and2021,theaverageannualnumberofweather-relatedpoweroutagesintheU.S.increasedbyroughly78%comparedto2000-2010.xxiiInspringof2023,theNorthAmericanElectricReliabilityCorporation(NERC)issueditshighestalertlevelever,urginggenerationandtransmissionownerstotakemeasurestoprepareforextremewinterconditions,includingplansforcustomerdemandmanagementtopreventuncontrolledloadsheddingandcascadingoutages.xxiiiResourceadequacyiscentraltogridreliability,andVPPscontributeinwaysdescribedabove.SeveralpotentialcharacteristicsofVPPscanfurtherincreaseresilience:ageographicallydiversefootprintofgenerationsites,ahighernumberofstorageassets,andtheabilityto‘island’sectionsofthegridintomicrogridsinresponsetoadverseeventssuchasextremeweatherandotherthreats.Decarbonization&airpollutionreductionTwo-thirdsoffossilfuel-poweredpeakerplantsintheU.S.arelocatednearcommunitieswithahigherpercentageoflow-incomehouseholdsthannationalaverage,andnitrogenoxideemissionsratesarehigherforpeakerslocatednearthesecommunities.xxivFactorslikethesedemonstratethatthetransitiontocleanenergyisbothaclimateimperativeandanenergyjusticeimperative.12PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPshavethepotentialtoavoidgreenhousegasemissionsandreduceairpollutionthroughseveralmechanisms.Byshiftingdemandfrompeakhoursservedbypeakerplantstooff-peakhoursservedbysolar,wind,ornuclear,theycanreduceemissionsfrompeakerplantsandreducecurtailmentofutility-scalecleangeneration.Thiscanincreasetheyieldoninvestmentsincleanassetsandasaresultincreasetheirdeploymentlong-term.Additionally,theycanreducerelianceonfossilbaseloadgenerationbyaddingdistributedrenewablegenerationresourcespairedwithdistributedstorage.12TransmissionanddistributioninfrastructurereliefRegionaltransmissioncapacitywouldneedtoincreaseby26-119%acrossU.S.regionsby2035tomeetprojectedgenerationanddemandgrowth.xxvAtthesametime,transmissioninterconnectionbacklogsforgenerationassetshaveextendedaveragetimespentinqueuesto5years.xxviUtilitiesfacesimilarchallengesmanagingdistributionsystemconstraints,particularlyinserviceareaswithhighDERgrowth.VPPscanhelpovercomeT&Dcongestionchallenges,especiallyinhighloadconditions,andincreaseoverallgridefficiencybyreducingandshiftingpeakloads.13,xxviiThisinturncanhelpdeferoravoidtheneedtoupgradeequipmentand/orcansupporthigherDERadoptiononthelocaldistributionsystemwithexistingequipment.xxviiiWithamoreconsistentflowofpower,T&Dassetscanachievehigheraverageutilization.WhenVPPaggregationsofDERsinhigh-loadareasdispatchelectricityfromdistributedgenerationorstorageassets,localdemandcanbemetwithlesspowertravelingovertransmissionlines,furtherreducinglinecongestion.CommunityempowermentVPPsofferopportunitiesforconsumerstocontributelocalresourcestothereliabilityandresilienceoftheirlocalelectricitygrid,andtothebroadercleanenergytransformation.Participationis,andwillcontinuetobe,adecisionmadebyindividualenergyconsumerswhohavethefreedomtooptimizebetweencost,convenience,andsourceofenergy.14,xxixAggregatingtheinstallationandservicingofDERsaspartofVPPdeploymentsalsopresentsanopportunityforutilitiestoestablishthelabormarketconditionsformorestable,predictable,andhigher-payingjobsthanthedisaggregatedDERindustry.ThiscontributestoensuringnewpositionsaregoodjobsxxxandcreatespathwaysforincumbentutilityworkerstomoveintoVPPimplementation,thusretainingtheirskillsandexpertiseintheevolvingpowersector.Flexibility&versatilityTheopportunitiesandchallengesfacingutilitiesandregionalgridoperatorsarehighlylocation-specificandrapidlyevolving.Ataregionallevel,gridoperatorshavediversepriorities,suchasaddingstoragecapacitytocomplementanincreasingmixofwindandsolargeneration(e.g.,California,Texas)xxxiandincreasingtransmissioncapacityforbalancingsupplyanddemandacrossdistances(e.g.,theMidwest)xxxii,xxxiiiAtalocallevel,utilitiesareseeingdemandincreaseatvaryingratesacrosscommunitiesinresponsetolocalelectrificationpolicies(e.g.,NewYork)xxxiv,xxxvandaremanagingequipmentconstraintsonaneighborhoodorevenhouseholdlevel.VPPshavethepotentialtoaddressandovercometheshiftingchallengesofarapidlyevolvinggridbyactingasahighlyconfigurableandever-adaptableresource.BasedontheavailabilityofDERsintherelevantservicearea,themixandsizeofVPPportfolioscanbedesignedtodeliverarangeofgridservicestailoredtothetime,location,andscalethatismostvaluable.EvenafteraVPPhasbeenestablished,theportfolio—andhowitoperates—canbeadaptedtomeetchanginggridneeds.12Locallydeliveredpoweralsoexperienceslesstransmissionlinelossthanelectricitytravelinglongerdistances,whichfurtherreducestheamountofenergygenerationrequiredforagivenamountofdemand.13Forexample,ananalysisof5,000SouthernCaliforniaEdisoncustomers’electricityconsumptionandcommutingbehaviorsuggeststhatresidentialpeakloadscanbecompletelybalancedbytime-shiftingovernightEVchargingwhenparticipatingEVscomprise10%oftotalvehicles.14Forexample,in2022,NimiipuuEnergy-autilityco-opoperatedbytheNezPerceTribe-announcedplanstoreducerelianceonoutsideenergysourcesbyinstallingandaggregatingagrowingnumberofdistributedenergysystemsintoaVPP.13PathwaystoCommercialLiftoff:VirtualPowerPlantsChapterTwo:CurrentStateTechnologiesandMarketKeytakeawaysĥVPPsarenotnew;theyoperatetoday(est.30-60GWnationally)withcommerciallyavailabletechnologyandareconcentratedinstateswithfavorableregulatoryframeworksandmarketstructures.ĥAcceleratingincreasesinnewnon-residentialDERsdramaticallyincreasesthepotentialcapacitythatVPPscanaggregate.Eachyearfrom2025to2030,thegridisexpectedtoadd:20-90GWofnameplatedemandcapacityfromEVcharginginfrastructureand300-540GWhofnameplatestoragecapacityfromEVbatteries;anadditional5-6GWofflexibledemandfromsmartthermostats,smartwaterheaters,andnon-residentialDER;20-35GWofnameplategenerationcapacityfromdistributedsolarandfuel-basedgenerators;and7-24GWhofnameplatestoragecapacityfromstationarybatteries.ĥRatherthanviewingthemassiveadoptionofEVsandotherDERsasloadtoserve,utilitiescanviewthisasanopportunitytoincreasetheflexibilityofthegrid.ĥAwiderangeofinnovativeandfinanciallyviableVPPbusinessmodelshaveemergedamongVPPcompanies,utilities,DERmanufacturers,andsoftwareplatforms,asindustryactorsrecognizethevaluecreationopportunity.ĥAcrossbusinessmodels,themajorityofVPPcostcomesfrompaymentstoparticipants;revenuesvarywidelybygridservice,off-taker,andjurisdiction.CurrentflexiblecapacityofVPPsnationallyisestimatedtobe30-60GW,thoughmarketdataislimitedandestimatesvarybyVPPdefinition.15,xxxvi,xxxviiDeploymentreliesontheavailabilityofVPP-enabledDERscombinedwithmarketstructuresandregulationsthatallowVPPstoparticipateandaccountfortheirsystemvaluefairly.ThischapterpresentsthecurrentstateofthemarketintermsofDERadoptiontrends,generalizableelementsofVPPoperations,thedifferentwaysVPPsarecurrentlyparticipatinginpowermarkets,andinfluentialregulatoryfactors.Simplifiedbusinessmodelexamplesareprovidedfromreal,financiallyviableVPPsoperatingtoday.2.i.DERadoptionTheU.S.isexperiencingunprecedentedgrowthinDERadoptionacrosshouseholdsandbusinesses,whichdramaticallyincreasesthepotentialcapacitythatVPPscanaggregate.16ThisgrowthinDERadoptionisoccurringacrossDERsthatgenerate,demand,andstoreelectricity.Eachyearfrom2025to2030,thegridisexpectedtoadd:20-90GWofnameplate17demandcapacityfromEVcharginginfrastructurexxxviii,xxxixand300-540GWhofnameplatestoragecapacityxlfromEVbatteries;anadditional5-6GWofflexibledemandfromsmartthermostats,smartwaterheaters,andnon-residentialDERs;xli20-35GWofnameplategenerationcapacityfromdistributedsolarandfuel-basedgenerators;xlii,xliiiand7-24GWhofnameplatestoragecapacityfromstationarybatteries.xliv15Mostmarketstudiesestimatedemandresponsecapacityineitherwholesalemarkets(FERC2021:32GW)orretailmarkets(EIA2021:29GW),whichcannotbesummedduetopotentialdouble-counting.Estimatesofflexiblecapacityundermanagementbythetop10VPPcompaniesis28GW(accordingtoWoodMackenzieGridEdgeServices,2023).16IncreaseddensityofDERshastheadditionalbenefitofenablingmorelocalizedloadmanagementtomeettheneeds,orovercomeconstraints,ofdistributionsystems.DiffuseDERaggregationstypicallytargetbulkpower/transmissionsystemneeds.17ConversionofDERnameplatecapacitytoDERcontributiontoVPPintermsofflexibledemand,generation,andstoragecapacityvariesbyDERtype(e.g.,EVbattery&EVchargercontributionsdependonVPPparticipationrates,stateofcharge,drivingpatterns,andloadmanagementapproach).Estimatesofcapacityfromsmartthermostats,waterheaters,andnon-residential.demandreflectflexiblecapacity.14PathwaystoCommercialLiftoff:VirtualPowerPlantsAnnualDERcapacityadditions:Generation,Flexibledemand,Storage(2020-2030E)Note:ConversionofDERnameplatecapacity(generation,demand,orstorage)toDERcontributiontoVPPcapacityvariesbyDERtype.Seeappendixforclarificationofkeyconceptsandterms.Source:WMrefersto“WoodMackenziePower&Renewables”;Solar:NRELdGen(capacitygrowth),WM(capacity);“Mid-case,nonascenttechs,currentpolicies”scenariousedforsolarcapacitygrowthprojections;Fuel-basedgeneration:OP-NEMS(capacitygrowth),WM(capacity);Non-resi.flexibledemand:WM(capacity);Resi.STflexibledemand:WM(capacity);Resi.WHflexibledemand:WM(capacity);BTMbatterystorage:BNEF(capacity).CapacityfromEVs(includingbothchargingdemandandstoragepotential)isgrowingfastest,increasingtheoverallflexibilityofdemandastotalconsumptionincreases.Chargersdemandelectricityintermittently;toconvertnameplateEVchargercapacity(showninthechart)toanestimateofflexibleEVchargingdemandcapacitythataVPPcouldmanage,onemustconsiderthechargingpatternsofEVdrivers,includingwhentheEVispluggedinandwhetherthechargetimingisflexiblevs.inflexible.18Thiswillvarybychargertype,location(e.g.,workplace,home),andmarketsegment(e.g.,commercialfleets,personalvehicles).xlvOvernightchargingathomeordaytimechargingatworkplacesareexamplesofdemandthatcanmoreeasilyshifthoursvs.fast-chargingatroadsidestationsthatislessflexible.SimilarfactorsapplytothenameplatecapacityofEVbatteriesanditsrelationshiptopotentialVPPcapacity.Forexample,anEVbattery’sabilitytoabsorbenergyatastrategictime(e.g.,whenautilityhasexcesscleanelectricity),willdependonitscurrentstateofchargeandwhetheritispluggedintoacharger.AnEVbattery’sabilitytodispatchstoredenergy(eithertoabuildingorbacktothegrid)willdependonwhetheritispluggedintoachargerwithbidirectionalcapabilities.19ThereareadditionalconsiderationsforbidirectionalEVchargers;forexample,theelectricalinfrastructuresupportingthechargermustsupportinjectionfromtheEVbacktothegrid.Otherwisetheenergymuststaybehindthemeter.2018PredictabilityofchargingpatternsisimportanttohelpinformhowEVscancreatevalueaspartofVPPs,andEVcharging-relateddatasetsaregrowingtoprovideinsightintodriverbehavioranddutycycles.ModelingtoolsarealsoimprovingtohelpincorporateEVchargerandbatterycapacityintogridplanningandtobetterunderstandthecostsandbenefitsassociatedwithbidirectionalcharging(whichrequiresmoreexpensiveinfrastructurethanunidirectionalcharging).19EstimatesofthepresentorfutureabilityofnationalEVcharginginfrastructuretodispatchenergyfromanEVbattery(V2X)isnotincludedinthisreportandisanimportantareaforfutureanalysis.BidirectionalchargersaretypicallyfoundinL2orhighercapacitychargingsystems,whichtendtohavethenecessaryhardwareandcommunicationprotocolstoenablebidirectionalpowerflow.BasedonpreliminaryanalysisatDOE,theredonotappeartobeL1chargersonthemarketthatprovideV2Xenergydispatch.20In2021,theCaliforniaJointAgenciesVehicle-GridIntegrationWorkingGroupdevelopedaUseCaseAssessmentDatabasethatidentifiesandranksusecasesforlight-dutyvehiclesandmedium-to-heavy-dutyvehicleV2XapplicationsinCalifornia.15PathwaystoCommercialLiftoff:VirtualPowerPlantsAnnualEVchargerandEVbatterycapacityadditions:Demand,Storage(2020-2030E)Source:WMrefersto“WoodMackenziePower&Renewables”;EVchargers:NREL(Numberofports);DOEAFDC(Capacityperport);EVs:EERE/NREL/ORNL(non-resi.EVcapacity/DER);EIA(2019LDVEVs);EV-Database(resi.EVcapacity/DER);KelleyBlueBook(resi.EVprice);OP-NEMS(EVstock);VTO(non-resi.EVprice).ExpectedDERadoptionrepresentsinvestmentof$290-505billionperyearinEVs,xlviand$50-105billionperyear(2025-2030)inotherDERsxlvii,xlviii,xlixacrossresidentialandnon-residentialsettings.SpendingbyconsumersandbusinessesonDERs–e.g.,waterheaters,HVACsystems,vehicles–ismostoftenforequipmentreplacementsorupgrades,notanincrementalpurchase.ChoosingtheefficientelectricDER(e.g.,heatpumps,heatpumpwaterheaters,EVs)inplaceofthelower-efficiencyorfossilfuel-poweredequivalentscanreducerecurringenergybillsandreduceairpollutants,increasinglong-termvaluetotheconsumer.WhenDERsareVPP-enabledandenrolled,compensationforprovidinggridservicescanfurtheroffsettheDERcostandincreasestheconsumer’sreturnoninvestment.21,lAnnualprojectedinvestmentinDERs,$B(2020-2030E)Note:Non-residentialflexibledemandnotincludedininvestmentprojectionsduetothecomplexityofestimation;Medianpricesusedforsolar&batterystorage;“Mid-case,nonascenttechs,currentpolicies”scenariousedforsolarcapacitygrowthprojections;Non-residemandflex.investmentnotincludedduetoinabilitytopreciselycalculate;EVinvestmentbasedon2022prices,whicharekeptconstant;BTMbatterystorageinvestmentcalculatedbytakingaverageofdifferentsources’CAPEXestimates;EVchargerestimates21Forexample,ShiftedEnergy,aVPPoperatorwithaperformance-basedcapacitycontractinHawaii,workedwithcommunityorganizationsandelectricitycustomerstoreplaceold,low-efficiencywaterheatersinlow-andmoderate-incomehouseholdswithhigh-efficiencyheatpumpwaterheaters,savingparticipantshundredsofdollarspermonthonelectricitybills.ByenablingcontrolsandenrollingtheseappliancesintotheirVPPduringinstallation,participantswereabletoincreasetheirsavingsandmitigatetherisksoffuturechangestotheirelectricitybills.Thepaybackperiodforthenewwaterheaterwasasshortasoneyearforparticipants.16PathwaystoCommercialLiftoff:VirtualPowerPlantsbasedonNRELprojectionsfor2025and2030chargingportcount,NRELestimatesofequipmentandinstallationcosts,andDOEAFDCcapacityestimates.Source:WMrefersto“WoodMackenziePower&Renewables”;Solar:LBNL($/W,pricechanges),NRELdGen(capacitygrowth),WM(capacity);“Mid-case,nonascenttechs,currentpolicies”scenariousedforsolarcapacitygrowthprojections;Fuel-basedgeneration:OP-NEMS(capacitygrowth),WM(capacity,CAPEX);Non-resi.flexibledemand:WM(capacity);Resi.STflexibledemand:WM(capacity,CAPEX);Resi.WHflexibledemand:WM(capacity,CAPEX);BTMbatterystorage:BNEF(capacity),LBNL($/W,pricechanges),NREL($/KW),PNNL($/kWh),WM(CAPEX);EVs:EERE/NREL/ORNL(non-resiEVcapacity/DER);EIA(2019LDVEVs);EV-Database(resiEVcapacity/DER);KelleyBlueBook(resiEVprice);OP-NEMS(EVstock);VTO(non-resiEVprice);EVchargers:NREL(Numberofports,CapExperport);DOEAFDC(Capacityperport).Everypurchaseisanopportunitytoenroll(orpre-enroll)aDERownerinaVPP.If—afteraperiodofexpandedconsumereducation—VPPenrollmentforthesubsetofDERscapturedabovewerestreamlinedsuchthathalfofDERspurchased2025-2030joinedaVPP,thiswouldimplyenrollingroughly85GWofnameplategeneration,15GWofflexibledemand,135GWofnameplatedemandfromEVchargers,42GWhofBTMstoragecapacity,and1445GWhofnameplatestoragefromEVbatteries.CustomerswhodonotyethaveVPPparticipationopportunitiesintheirserviceareacouldpre-enrollinpotentialfutureprograms.NewenrollmentofexistingDERcapacityinstalledpre-2025wouldfurtherexpandVPPcapacity.Forexample,flexibleC&Iloadshavebeenestimatedtobeashighas300GWtoday,lithoughthecost-effectivenessofshiftingorsheddingsuchdemandwillvarybyindustryandbasedonlocalgridconditionsandconstraints.2.ii.VPPoperationsInnovativeanddiverseVPPmodelshaveemergedamongVPPcompanies,utilities,DERmanufacturers,andsoftwareplatforms,asmarketactorsrecognizethevaluecreationopportunity.ElementscommonacrossVPPsinclude:anaggregationofDERsenrolledbyparticipants,amechanismfororchestratingelectricaldemand,generation,and/orstoragefromDERsusingacommonarchitecture,andoneormoremeasurablegridservicesprovidedbytheDERaggregationthatcanbesold,traded,recognized,orotherwiseusedbytransmissionand/ordistributiongridoperatorstosupportgridmanagement.DERaggregationVPPscanbemadeupofasingletypeofDER(e.g.,EVchargers)oraportfolioofdifferentDERtypes(e.g.,microgridswithdistributedgenerationandstorage).DERownersagreetoenrollandparticipateinaVPPundervariousprogram-specificterms.ThemostcommontypesofDERsenrolledinVPPshistoricallyhavebeenresidentialsmartthermostatsandC&Iequipment,liithoughincreasinglydiversearraysofDERsarepartofactiveVPPstoday.SeeappendixforasummaryofVPPevolution.CompaniesacrosstheenergysectorareplayingaroleinDERaggregation;threeprimarymodelshaveemerged.Underthefirstmodel,theentityresponsibleforenrollingDER-owningcustomersisautilitythatservestheirelectricalload.Inthisscenario,theutilitywillreachouttocustomersandoffertoenrolltheirexistingDERsand/orofferDERpurchasesubsidiesasenrollmentincentives.ExamplesofutilitiesoperatingVPPsincludeGreenMountainPower’sbatteryVPPandDukeEnergy’smanagedEVchargingVPP.UtilitieswhoaggregateDERsoftheirowncustomersmayoperatetheVPPin-houseorpartnerwithathird-partyserviceprovidertooperatetheVPP.ConnectedSolutionsisaNewEnglandVPPoperatedbymultipleutilitieswithsupportfromVPPplatformcompanyEnergyHub,inwhichresidentialandnon-residentialcustomerscanenrollavarietyofDERs.liiiInthesecondmodel,themanufacturerorretaileroftheDERwhosoldittothecustomertakesresponsibilityforenrollmentandmanagementofcustomers.DERcompaniesthathavelaunchedVPPplatformsincludeEVmakersTesla,Ford,andGM,anddistributedsolarandstoragecompaniesSunrunandSunnova.Underthethirdmodel,aVPPplatformcompanyenrollsDERs,whichmayincludemultipledifferenttypesandbrandsaggregatedintoasingleportfolio.Voltus,AutoGrid,andLeap,forexample,recruitparticipants,directlyorviapartnerships,withavarietyofDERsinresidentialandnon-residentialsettings.Insomeinstances,theDERaggregatorcontractswithaseparate‘marketinterface’providertofacilitateparticipationinwholesalemarkets,wheretherulesandrequirementsvarybyregion.17PathwaystoCommercialLiftoff:VirtualPowerPlantsDERinstallersandservicerscanplayasupportingroleinenrollingcustomersineachofthesethreemodels,evenifnotinvolvedinVPPoperationsonanongoingbasis.Forexample,VPPplatformcompanySwellcollaborateswithbatteryinstallersaswellasmanufacturersandutilitiestomarketopportunitiesforVPPparticipation.Inthismutuallybeneficialarrangement,theprospectofrewardspaidbySwellhelpsdeploymoresolarandbatteriesthatdriveinstallationandservicebusiness.livDERorchestrationThewaysinwhichDERsareorchestratedtoprovidegridserviceshasbeenamajorsourceofinnovationinrecentyears,largelyenabledbyincreasingWi-Fi,Bluetooth,andcellulardataconnectivityofDERs.Decadesago,utilitiesmadephonecallstolargeindustrialcustomersfordemandmanagementrequestsordirectlycontrolledairconditioningunitsandwaterheatersofparticipatingcustomersusinghard-wiredswitchesextendingfromthedistributiongridintohomes.Forexample,NewHampshireElectricCo-opbeganofferinganinterruptiblewaterheatingprogramin1979thatcontinuestoreduceresidentialelectricitybills.lvToday,DERsareincreasinglyapp-enabledandcanbecontrolledremotelywithsoftwaresolutions.VPPoperatorsorchestrateDERbehaviorusinganinformationtechnology(IT)platformthatcanconnecttoDERsatdifferentpointsintheelectricalchain.Forexample,EVchargingdemandcanbecontrolledusingsoftwareinterfacesofthevehicle,thecharger,orthesmartelectricalpanelinthehostbuildingorchargingstation.22CommunicationbetweentheVPPoperatorandDERcantakeseveralforms.SomeVPPoperatorssignaldirectlytotheDER—e.g.,aspartofitsVPPplatform,GoogleNestcanscheduleadjustmentstoheatingandcoolingdemandthroughitsconnectedsmartthermostatsoftware.OtherssendsignalstotheDERownertomakemanualadjustments—e.g.,VPPplatformcompanyOhmConnectmessagesitsparticipantsandreliesonbehaviorchangeinsomeofitsVPPs.Thesesignalsmaytakeplaceinfrequently—i.e.,onlyduringcriticaldemandpeaks—oronadailybasistosupportgridoperations.Communication,control,andmeasurementofDERbehaviorisenabledbyacombinationoftechnologiesprovidedbybothDERserviceprovidersandutilities.ActivemanagementofDERsrequiressystems(oftencalledDERmanagementsystems,orDERMS)thatbalancethedemandandsupplyofelectricityinrealtime,provideancillaryservices,providevisibilityanddataexchangebetweenthegridoperatorsandVPPoperators,andprovideneededprotectiontoutilityandcustomerequipment.TheintegrationofDERsintoutilityITsystemscanenhanceautility’ssituationalawarenessofthestateofthedistributiongrid.Seeappendixforalistofenablinghardwareandsoftware.22ThefragmentationofcontroloveraDER’sdemandcanposechallengestomanaginggridserviceswhileprotectingtheEVowner’sinterests,forexample,ifthesignalssenttoanEVbatteryareinconflictwithsignalssenttoanEVcharger.TheissueoffragmentedcontrolcanapplytootherDERsandunderscorestheneedforcoordinationamongpartiesoperatingonthedistributiongrid,discussedinChapter4.18PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPoperationalmodelData/ITPlatformofVPPOperatorMarketinterfaceDERplatformsExamples(notexhaustive)VPPservicesThegridservicesaVPPcanprovidevarybasedonitscompositionofDERsandorchestrationcapabilities.Themostcommongridservices(sometimescalled‘products’)VPPssellare:ĥEnergy,measuredperMWhdeliveredintheformofelectricitydemandreductionorelectricitysupply;ĥCapacity,measuredperMWofaforwardenergyoption;andĥAncillaryservicesthatsupportpowerquality,whicharemeasuredinservice-specificways.19PathwaystoCommercialLiftoff:VirtualPowerPlantsThemostcommonwaythatVPPsprovideenergytodayistoreducedemandduringsupply-constrainedhours–calleddemandresponse.Assimpleasitseemstodialdownorturnoffelectricity-consumingequipment,thecriticalrolethatdemandresponseplaysinensuringgridreliabilitycannotbeoverstated.23DuringCalifornia’s2022heatwave,forexample,VPPshelpedavoidrollingblackoutsbydeliveringhundredsofmegawattsofdemandreductionwhensupplyresourceswerescarce.lviInadditiontodecreasingdemandduringsupply-constrainedhours,VPPscanalsoincreasedemandduringtimesofexcesssupply—e.g.,bychargingbatteriesorturningonEVchargers.Oftencalledcapacitybuilding,thisserviceisparticularlyvaluableinlocationswherecertainhoursofthedayexperienceanexcessofsupplyfromrenewableresourcesthatarevariableornuclearresourcesthatarehardtoturndown.VPPserviceproviderspredicttheavailablecapacityfromtheDERaggregationforanygivenhour,day,oreventbasedonhistoricalandforecastedDERandelectricityusagebytheowner.VPPperformancemodelinguseslargehistoricalelectricitydatasetspairedwithprobabilisticmodelsoffutureelectricityconsumption.ThisabilitytopredictDERusage,includingresponsestosignalsfromVPPoperators,iscriticaltothereliabledispatchofVPPs.Algorithmsforco-optimizingDERvaluetothegridandvaluetotheDERownerareimprovingasexperienceanddataaccumulate.2.iii.VPPparticipationinelectricitymarketsTherangeofwaysinwhichVPPsmonetizegridservicesisafunctionofseveralcharacteristicsofU.S.electricitymarketsandregionalvariations.Verticallyintegratedvs.restructuredmarketsTheU.S.isgeographicallydividedintoverticallyintegratedmarketsandrestructuredmarkets.VPPscurrentlyoperateinbothindifferentways.ĥVerticallyintegratedmarkets:Utilitiescanownandoperategeneration,transmission,anddistributionassets.ĥRestructuredmarkets(alsoreferredtoas‘deregulatedmarkets’):Retailelectricitysuppliers(whichincludeinvestor-ownedutilities,municipalutilities,co-ops,andcommunitychoiceaggregatorsandarereferredtoas‘utilities’inthisreportforsimplicity)purchasepowerthroughwholesalemarketsorcontractualarrangementsratherthangeneratepowerwiththeirownassets.MostutilitiesinrestructuredmarketsandsomeutilitiesinintegratedmarketsbelongtoanonprofitcorporationcalledanIndependentSystemOperator(ISO)orRegionalTransmissionOperator(RTO)thatoperatesaregionalbulkpowersystemthatbalancesdemandwithsupplythroughawholesalepowermarketplace.ĥStatesvoluntarilyallowtheirutilitiestojoinISOs/RTOsthatareregulatedbytheFederalElectricityReliabilityCorporation(FERC),whilethestatePublicUtilityCommissionsorPublicServiceCommissions(PUCs/PSCs)regulatethedistributionsystems.23Outsideofpeakperiods,VPPscanalsocontributetobaseloaddemandreduction.Forexample,aVPPdeploymentthatspursincrementalenergy-efficientDERadoptioncanreducetotalelectricityconsumption(forexample,byinducingconsumerstoreplaceresistiveheatingwithaVPP-enabledheatpumpthankstoVPPincentivepayments).20PathwaystoCommercialLiftoff:VirtualPowerPlantsU.S.ElectricitymarketoverviewWholesalemarketparticipationvs.retailmarketparticipationInrestructuredmarkets,VPPscanparticipateinwholesalemarkets,retailmarkets,orboth:ĥWholesale:EachISO/RTOoperatesitswholesalemarketwithitsownstructures(e.g.,energyauctions)andrules,subjecttoregulatoryframeworksestablishedbyFERC.24,lviiISOs/RTOsareresponsibleforensuringadequateresources(e.g.,generation,transmission)fortheirregion.InSeptember2020,FERCapprovedOrder2222,whichrequiredthesixFERC-jurisdictionalISOs/RTOstoallowparticipationofVPPs(referredtointheOrderas“DERAggregations”25)inwholesalemarkets.26Implementationisongoingacrossregions.AsofAugust2023,twooutofsixFERC-jurisdictionalISOs/RTOsallowedparticipationfromVPPsthatinjectelectricityforatleastasubsetofgridservices,andTexasalsobeganopeningwholesalemarketERCOTtoVPPs.AllISOs/RTOsallowparticipationfromVPPsthatmanagedemandwithoutinjection.VPPsthatbidintowholesalemarketsarereferredtoas‘marketparticipant’VPPs.lviiiĥRetail:Asanalternativetobiddingintowholesalemarkets,VPPcompaniescancontractwithutilitiesinbilateralarrangements,ortheVPPmaybeoperatedbytheutilityitself.UtilitiesuseVPPs(eitherathirdpartyorin-house)forabroadrangeofuse-cases,includingasanalternativetoprocuringenergyorcapacityfromwholesalemarkets,toalleviateoverloadeddistributionsystems,tobuildresiliencefortheircustomers,toavoidrenewablescurtailment,andmore.27Inallstates,PUCsorPSCsregulatemostutilityplanning,operations,andretailcompensationasrelatestoVPPdeployment.Municipalutilities,co-ops,andcommunitychoiceaggregators(CCAs)areregulatedbyseparateentities.VPPsoperatedattheretaillevelareoftenreferredtoas‘retailVPPs.’lix24Forreference:Participationofdemandresponseresources–themostcommonformofVPP–inRTOs/ISOsin2021was6.6%ofpeakdemandonaverageacrossRTOs/ISOs;MISOhadhighestparticipationwith10.2%ofpeakdemandservedbyDR;SPPwaslowestwith0.3%.25SeeappendixforFERCdefinitionofDERandDERAggregator.26Order2222requiresthatallISOs/RTOswillneedtoestablishDERsasacategoryofmarketparticipantinwholesalemarkets,includingenergy,capacity,andancillaryservicemarkets.FERCdoesnothavegoverningauthorityoverTexas-basedERCOT(ElectricReliabilityCouncilofTexas),whichdoesnotregularlyconductinterstatewholesaleelectricitysales—norovertheISOsoperatinginCanada.However,theseISOsgenerallyutilizethestandardsandpracticesofotherISOs/RTOs.27Insomeinstances,utilitiesmaysellgridservicesfromtheirownVPPsintowholesalemarketplaces.21PathwaystoCommercialLiftoff:VirtualPowerPlantsInearly2023,approximately60%ofVPPcompanyrevenuecamefrominvestor-ownedutilities,15%fromwholesalemarkets,andtheremaining25%frommunicipalutilities,co-ops,andcommunitychoiceaggregators.lxVPPmarketparticipationmodels2.iv.VPPdeploymentbystateThird-partyVPPsareconcentratedinstateswithfavorablepolicyandregulatorymechanismsthatenableVPPstoselltoutilitiesinretailmarketsand/orparticipateinwholesalemarkets.Somemechanismsacttode-riskrevenuestreamsforVPPservices,forexamplebyestablishingmarketplacestobuyandsellflexibledemandservices,orbyaccountingforthevalueofdistributioninvestmentdeferralinutilityplanningproposalsandcost-benefitassessments.28OthermechanismsincreasethescalepotentialofVPPs,forexamplebysubsidizingormandatingDERadoption.Thevariousmechanismsreflectstate-ormunicipality-specificprioritiesandregulatoryframeworks.28Seesection4.iv.fordetailonintegratingVPPsintoutilityregulatoryframeworks.22PathwaystoCommercialLiftoff:VirtualPowerPlantsNumberofthirdpartyVPPsprocuredbyutilitiesineachstate(2022)Note:OneVPPoperatingacrossstatesiscountedmultipletimes(onceforeachstate)Source:WoodMackenzieGridEdgeServicesExamplesofpolicyandregulatorymechanismsfavorabletoVPPsinCalifornia,NewYork,TexasCalifornia/CAISOlxiĥĥĥĥĥDemandResponseAuctionMechanism:AmarketplaceforVPPstoselldemandresponsetoutilities.EmergencyLoadReductionProgram:Customerprogramthatpayselectricityconsumersforreducingconsumptionduringperiodsofelectricalgridemergencies.Self-GenerationIncentiveProgram:Rebatesforinstallingenergystoragesystems.Distributioninvestmentdeferralframework:Mechanismtoidentify,reviewandselectopportunitiesforexistingornewBTMsystemstoalleviatefuturegridstress.CaliforniaIndependentSystemOperator(CAISO)allowsfullparticipationbyVPPsinwholesalemarkets.23PathwaystoCommercialLiftoff:VirtualPowerPlantsTexas/ERCOTlxiiNewYork/NYISOlxiiiĥERCOT’sEmergencyResponseServiceprogramprocurescapacityfromdistributedresourcesandloads.ĥAggregatedLoadResourceprovisionsofERCOT’sprotocolsareexpandingtoincludeanewassetclassofAggregatedDistributedEnergyResources(i.e.,VPPs).ĥCommercialLoadManagementprograms,runbyTexasutilities,compensateaggregationsorindividualloadsforprovidingdemandresponse.ĥERCOTsettlesenergycostsatthemeter,whichmeansretailutilitiespayERCOTforconsumedpowerasmeasuredbysmartmeters,thepriceofwhichvariesevery15minutesbasedonsupplyanddemand.Thiscreatesafinancialincentiveforretailenergyproviderstoreducepeak-timeconsumptionoftheircustomers.2.v.VPPbusinessmodeleconomicsĥUtility(retail-level)demandresponseprogramsallowdualparticipationwithNYISO(wholesale-level)demandresponseprograms;e.g.,ÎCommercialSystemReliefProgramÎDistributionLoadReliefProgramĥNewYorkISOhasmultipleloadreductionprogramsthatincorporatequalifiedbehind-the-meterDERaggregations;e.g.,ÎSpecialCaseResourcesprogramÎDemand-SideAncillaryServicesProgramĥValueofDistributedEnergyResourcesisaretailelectricitypricingscheme(calledatariff)thatpaysforelectricityinjectionfromDERsandaccountsformultiplesourcesofvalue,includingenvironmentalbenefitsandavoideddistributionsystemcosts.ĥNon-wiresalternativesrequirementsmandateutilitiesmustsolicitbidsfromeligibleDERsolutionsforallloadgrowth-drivengridupgrades.29VPPsareeconomicallyviabletodayinstatesandregionswhereVPPscanselltoutilitiesorparticipateinwholesalemarketsandearnmarketprices.ThescaleofthegridservicesaVPPcanprovide(e.g.,energy,capacity,andancillaryservices)isafunctionofthevolumeofDERsenrolled,theflexibleordispatchablecapacitythateachDERprovides,andhowoftentheVPPcanreliablycallontheDERs.Forexample,onesmartthermostattypicallyrepresentsapproximatelyonekilowattofflexibleelectricheatingorcoolingdemandthataVPPcanreduceonacoldorhotdayforabouttwohours(or~2kWhtotal),typicallyafterpre-cooling/heatingahouseduringoff-peakhoursorbystaggeringshortertimeincrementreductionstomaintainparticipantcomfort.29InNewYork,non-wiresalternatives(NWA)solicitationsoutlinethelocation,hours,andquantityofloadreliefrequired.Utilitiesearnaportion(typically20-30%)ofthenetbenefitsoftheNWAifanawardismade.24PathwaystoCommercialLiftoff:VirtualPowerPlants2.v.a.VPPoperatoreconomicsWhilethespecificeconomicsofaVPPoperatorwillvarybasedonitsDERcomposition,operationalmodel,marketparticipationmodel,andtheneedsandvaluecreationopportunitiesofthelocalgrid,VPPshavethefollowingcommoncostandrevenuedrivers:ĥCost:ÎProjectimplementationandadministrationcosts:DERmanagementsystem(DERMS)andassociatedITandpersonnelcosts;ongoingadministrativecosts.ÎParticipantacquisitioncosts:Marketing,consumereducation,recruitment;potentialDERsubsidies;potentialDERsoftwareintegrationfeespaidtoDERmanufacturers.ÎParticipantincentives:One-time,periodic,orper-kWhpaymentstoparticipants.ĥRevenue:ÎEnergy:PaymentperMWhdelivered(e.g.,avoided,shifted,exported),measuredusingcontractuallyagreed-uponmeasurementandverificationprotocolsthatvarybyDERtype.ÎCapacity:PaymentperMWofenergyoptionprocured.(Capacityproductspecificationsvarybymarketand/oroff-taker.30)ÎAncillaryservices:31lxivPaymentforservicessuchasfrequencyregulation,ramping,etc.ÎAvoidedcosts:Paymentproportionaltoavoidedcostssuchasdeferredinfrastructureupgrades(Compensationvariesbymarket.32)ÎAdditionalbenefits:VPPstodayarerarelycompensatedforadditionalbenefitstheymayoffer,suchasgridresilienceorreducedemissions.AcrossVPPsgenerally,theprimaryoperationalcostsareparticipantincentives;inotherwords,mostofthemoneyspentonVPPsflowstoelectricityconsumers(householdsandbusinesses).Theprimaryrevenuestreamsareenergyorcapacitypayments,whichvarybymarket.ArangeofpricesfortheseservicesisshownintheexamplesbelowtoreflectrealisticvariationsacrossgeographiesandtimeperiodsthatdeterminetheoverallfinancialviabilityoftheVPPbusinessmodel.Thefollowingthreeexamples,allbasedonrealVPPdeploymentsintheU.S.today,helpillustratefundamentalcostandrevenuedriversfromtheperspectiveofVPPoperators:331.SmartthermostatdemandresponseVPP;2.Utility-integratedBTMbatteryVPP;and3.EmergencyBTMbatterydemandresponseVPP.2.v.b.Example:SmartthermostatdemandresponseVPPThisexampleVPPcanbecharacterizedasaretailVPPmadeupof100,000residentialsmartthermostatsthatcollectivelyrepresent100MWofflexibledemandcapacityavailableduringseasonalpeaks.TheVPPoperatorsellsthecapacitytoautility,forexampleasanalternativetotheutilityprocuringpeakerplantgenerationcapacityfromawholesalemarketplace.30Forexample,capacitycanbeprocuredintheformofenergyefficiencyprogramsthatdecreasedemandonanongoingbasisorcanbeprocuredintheformofdemandresponseprogramsthatarecalledduringspecificevents.Eachprogramtypehasitsownperformancerequirementsthatvarybyjurisdiction.31Historically,themarketvalueofancillaryserviceshasbeen<5%oftotalwholesaleelectricitymarketvalue.32Insomemarkets,utilitiesareencouragedtouse(andcompensatedforusing)strategiesthathelpdeferoreliminatetheneedtoupgradeatransmissionordistributionsystemwhilesatisfyinggoalsofmanagingcosts,ensuringreliability,orotherpolicyobjectives.Suchstrategiesinclude,butarenotlimitedto,theuseofVPPs.33PotentialcostsincurredbytheutilitytoenableprocurementofservicesfromaVPParenotincludedintheexampleVPPs’costs.25PathwaystoCommercialLiftoff:VirtualPowerPlantsIllustrativeoperationsSmartthermostatdemandresponseVPPCosts:Inthisexample,theVPPoperatorsubsidizesthecostofthesmartthermostatandinstallationforparticipants,paysannualITintegrationfeestoconnecttheVPP’sDERMSplatformtothesmartthermostatsoftware,andofferscustomers$1.50perkWhforturningdowntheirelectricACorheatingforapproximatelytwohours(maybestaggeredinshortertimeincrementsoveralongerwindow)duringpeakevents(20peryear34lxv)averaging$60perparticipantperyear.Revenue:VPPrevenueisgeneratedprimarilybysellingits100MWofflexiblecapacityat$80-100perkW-yrasafutureenergyoptiontoutilitiestocallduringpeakdemandevents.ThisVPPearnsasmallamountofadditionalrevenuefromtheutilityforactualenergydelivered.MarginforVPPoperator:Inthismodel,theVPPeconomicsareroughlybreak-evenafterfiveyears.Seeappendixfordetailedcostandrevenueinputsandcalculations.34Forreference,insummer2022,CAISOissued11‘FlexAlerts’callingforenergyconservationduringcriticalpeakhourswhendemandforpowerwasatriskofexceedingsupply.26PathwaystoCommercialLiftoff:VirtualPowerPlantsAnnualcostandrevenueofillustrativesmartthermostatdemandresponseVPPof100MW,$MNote:Implementation,marketingcost,andone-timesmartthermostatsubsidyareannualizedover5years.Source:IndustryinterviewsParticipantperspective:InthisVPP,participantsgetsmartthermostatsforfreeorforahighlysubsidizedprice.Forparticipatinginatwo-hourevent,theparticipantreceives$3-6ofincentivepayments,typicallypaidoutquarterly.ParticipationwillnotresultinsignificantchangestoindoortemperaturesifheatingandcoolingdemandreductionsareappropriatelystaggeredbytheVPPacrossthelargenumberofhomesandbuildings,andifthosehomesandbuildingsareproperlyinsulated(whichisachallengeinsomecommunities,asdiscussedinsubsequentchapters).2.v.c.Example:Utility-integratedbatteryVPPThisexampleVPPcanbecharacterizedasaretailVPPmadeupof7500BTMbatteriesthatcollectivelyrepresent20MWofcapacityusedforbothdemandshapingandexport.TheutilitypaystheVPPforthreeservices:capacityreductionduringpeakdemand(i.e.,theoptiontoexportenergyfromthebatteryforlocalusebetween7-9pm);capacitybuildduringpeaksolarsupply(i.e.,theoptiontochargebatteriesbetween10am-2pm);andfastfrequencyresponse(anancillaryservice).TheVPPisoperatedbyaVPPplatformcompanyinpartnershipwitharetailutility.27PathwaystoCommercialLiftoff:VirtualPowerPlantsIllustrativeoperationsUtility-integratedbatteryVPPCosts:TheVPPcompanybearstheadministrativeandITcostsofimplementation;ITcostsincludebothfixedstart-upcostsandamonthlysoftwareintegrationfeepaidtothebatterymanufacturers.TheVPPoperatorlargelyavoidslocalmarketingcostsbypartneringwithlocalbatteryinstallerswhoadvertiseparticipationopportunities;inreturn,installersbenefitfromincreasedbatterysalesandinstallationrevenue.Therearethreeincentivespaidtoparticipants:Up-frontpaymentof$1000perkWofbatterycapacityforcustomersbuyingnewsystems,monthlyflatpaymentsofapproximately$16forparticipationbasedoncapacityenrolled,anda$0.20creditperkWhexported.Revenue:TheutilitypaystheVPPcapacitypaymentsforeachservice:capacityreduction,capacitybuild,andfastfrequencyresponse(FFR).Pricesforthiscapacityrangefrom$80-375perkW-yr.MarginforVPPoperator:ThisVPP’smarginishighlydependentonthenegotiatedpricesforthethreeservices,whichvarybymarket,byutility,andbycontract.Incombination,theytypicallyoffsetVPPcostswithamodestmargin.28PathwaystoCommercialLiftoff:VirtualPowerPlantsAnnualcostandrevenueofillustrativeUtility-integratedBTMbatteryVPPof20MW,$MNote:One-timeimplementationcostsandenrollmentincentivesfornewbatteriesareannualizedoverfiveyears.Source:Industryinterviews.Participantperspective:InthisVPP,theprospectofone-timeandongoingpaymentssignificantlyinfluencesaconsumer’sdecisiontopurchaseanewbattery.The$9,000-12,000up-frontcostofonebattery(5-20kWhofnameplatestoragecapacityeach)withinstallationispartiallyoffsetbya$4,000newsystempayment(forasystemwith4kWofflexiblecapacity)and$200ormoreannually.TheVPPoperatorpreservesenoughchargeinthebatterytoalwaysprovidebackuppowertotheparticipantinthecaseofagridoutage.2.v.d.Example:EmergencyBTMbatterydemandresponseVPPThisexampleVPPcanbecharacterizedasamarketparticipantVPPmadeupof10,000BTMbatteriesthatcollectivelyrepresent35MWofcapacity(orabout100MWhofstoredenergy)thatisusedfordemandreductionduringcriticalpeakevents.Manybatteriesmaybepairedwithdistributedsolararrays,butitisnotrequiredforparticipation.TheVPPoperatoristhebatterymanufacturer/sellerthat,aftersellingthebattery,askscustomerstooptintopaidbatterydispatchonlywhenpricesinwholesalemarketsarehigh.TheVPPnotifiesopted-inbatteryownersinadvanceofearningopportunities,andbatteryownerscanparticipateonanevent-by-eventbasis.Whendispatchedfromthebatteries,theenergyservesthehome’s/building’sconsumptionneedsandisnotinjectedbacktothegrid.Coordinateddispatchofbatteriestoserveon-sitedemandduringpeakhasthedesiredeffectofreducingthedemandonthebulkpowersystem.Keepingtheenergybehindthemeterinthiswaymayberequiredbythelocalutilityuponbatteryinstallationandinterconnection(aconditionthatisthenprogrammedintothebatterysettings)ormaybeaperformancerequirementofthespecificwholesalemarketprograminwhichtheVPPparticipates.29PathwaystoCommercialLiftoff:VirtualPowerPlantsIllustrativeoperationsEmergencyBTMbatterydemandresponseVPPCosts:ImplementationandparticipantacquisitioncostsarelowgiventheVPPoperator’s(i.e.,thebatterymanufacturer’s)existingaccesstothebatterysoftware,customerrelationship,andongoinginteractionsviasmartphoneapp.TheVPPoperatordoesnotofferanybatteryrebateorsign-upbonus.Itdoesoffer$1.50perkWhtoparticipantstodispatchstoredenergyduringhigh-demandperiods.Revenue:TheVPPonlycallsaneventwhenwholesaleenergypricesrisesufficientlyhighinshort-termenergymarkets.TheVPPbidsatapricethatclearsitscosttoaggregateandcompensateparticipants;theVPPdoesnotsellitscapacityinforwardmarkets(i.e.,doesnotcommitinadvancetodispatch).MarginforVPPoperator:InthisexampleVPP,theeconomicsarehighlydependentonthefrequencyofpeakevents(estimatedat15eventsperyear)andmarket-clearingenergypricesduringthosepeaks.Bybiddingintoenergymarketswithpricesabove$1500perMWh($1.50perkWh)duringpeakevents,35lxvitheVPPwillearnamarginwhenpayingcustomers$1.50perkWhgivenverylowfixedcosts.35Forreference,electricitypricesinERCOTroseto$9000perMWhduringstormUriwhenmanyconventionalpowerplantsfailedduetoextremeweather,resultinginsupplyshortages;ERCOTsubsequentlycappedpricesat$5000perMWh.30PathwaystoCommercialLiftoff:VirtualPowerPlantsAnnualcostandrevenueofillustrativeemergencyBTMbatterydemandresponseVPPof35MW,$MNote:ThisVPPdoesnotearnrevenuefromcapacitysales,ancillaryservices,orotherbenefitssuchasgridreliabilityandemissionsreduction.Implementationandparticipationcostsareannualizedoverfiveyears.Source:Industryinterviews.Participantperspective:Participantshavepurchasedthebatterysystemsfortheirpersonalbackuppoweratacostofroughly$9,000-12,000,includinginstallation.TheVPPpreservesenoughchargeincustomerbatteriestoprovidebackuppowertotheparticipantifneeded,accordingtothresholdscustomizedbytheparticipant(often20%chargeorhigher).Participantincentivesof~$20perevent(~$2perkWhfor10kWh)aresmallincomparisontotheDERinvestmentandarenotasignificantdriverofbatteryadoptionfortheseparticipantswhoviewVPPparticipationasanaddedbenefitofownership.2.v.e.AdditionalVPPexamples:Solar-plus-storage,Waterheaters,ManagedEVcharging,V2X,C&ILoadsVPPsthataggregateandorchestrateothertypesofDERssharethefundamentalcostandrevenuedriversofbatteryVPPs(storagewithorwithoutgeneration)andsmartthermostatVPPs(flexibledemand).Solar-plus-storageVPPsoperatesimilarlytobattery-onlyVPPs,withtheadvantageofchargingthebatteriesfromon-site,no-marginal-cost,renewableenergyratherthanfromthegrid.Forexample,VPPplatformSunrunbidintoNewEnglandwholesalemarketsin2019with20MWofcapacityfromhomesolarandbatterysystemsanddelivered1.8GWhinthesummerof2022.lxviiWaterheaterVPPsoperatesimilarlytosmartthermostatVPPs,butwithlessseasonality.AstudyconductedbygridoperatorsandutilitiesintheNorthwestU.S.showedthatswitchingfromuncontrolledelectricresistancewaterheaterstomanagedheatpumpwaterheaterscanreduce90%ofeveningpeakload.lxviiiManagedchargingforEVsshiftslargeandflexiblechargingdemand,takingintoaccountparticipantdrivingandchargingpatternswhenmodelingavailablecapacityandmanagingenergyuse(i.e.,accountingforthetimingofwhenthecarispluggedinandamountofchargeneeded).Forexample,retailelectricityproviderOctopusEnergyoffersTexascustomersadiscountontheirelectricityrate(priceperkWh)inreturnformanagingtheirovernightEVchargetiming(withoverrideavailable);lxixthiskeepsparticipationsimplefortheconsumerwhileoptimizingEVchargingforthegrid.31PathwaystoCommercialLiftoff:VirtualPowerPlantsUse-casesforVPPsthatdispatchenergyfromEVbatteriesbacktoabuildingorbacktothegrid(V2X)areconcentratedincommercialfleetstoday.Somecommercialfleets–forexample,schoolbusesthatareparkedformuchoftheday—havepredictabledrivingandchargingpatternsthatincreasecertaintyoverwhenandhowvehiclescanprovidegridservices.Revenuefromgridservicescanhelpoffsettheincrementalcostoffleetelectrificationandbidirectionalchargers,whichcanbeuptoseveralthousanddollarsmoreperchargerthanunidirectionalchargersofsimilarcapacity.InanexampleofasmallcommercialV2Xdeployment,FirstLightPower,FermataEnergy,andSkyviewVenturesinstalledtwoFermata15kWbidirectionalchargingstationsfortheFirstLightoperationsteamEVs(NissanLEAFs)inMassachusetts.lxxIntheresidentialsetting,Ford’sHomeIntegrationpackagefortheFordF150Lightningenablesvehicle-to-homedispatchasabackuppowersource.Whilethephysicaltechnologyforvehicle-to-griddispatchisavailableforresidentialuse,theoperationsandcustomerexperiencearestillbeingtestedatpilotscaleintheU.S.–forexample,inDukeEnergy’scollaborationwithFordinNorthCarolina.lxxiTheeconomicsofC&Idemandflexibilityvarybytypeofloadandtheopportunitycostofreducingelectricityconsumption.WhileflexibledemandcapacityfromC&IloadsisnotgrowingasfastasresidentialDERcapacity,itmaymakeupnearlyhalfofcost-effectivedemandflexibilityavailableby2030.362.vi.AninflectionpointforVPPsAconfluenceofmarketfactorsputVPPgrowthatapotentialinflectionpoint.UtilitiesmustreliablyandaffordablyserverisingelectricitydemandthatisinpartdrivenbyunprecedentedgrowthinDERadoption.Atthesametime,theflexibilityofthisdemand–theabilitytobettertime-matchdemandtosupply–isincreasingthankstoDERs’flexibledemand,generation,andstoragecapacity.TherapidpaceofDERadoptionexpandsthepotentialscaleofanygivenVPPinvestment.DevicesareincreasinglyconnectedviaBluetooth,Wi-Fi,andcellularnetworks.VPPplatformsareinnovatingtoimproveparticipantexperienceswithsoftwarethatdigestsconsumerenergydataandoptimizesDERcontrolsaroundtheirpreferences.DERtechnologyadvancementsareexpandingtherangeofgridservicesperformed.DistributiongridsaregraduallydigitizinginwaysthatcanbetterintegrateDERsandtheirpotentialgridservices.RatherthanviewingthemassiveadoptionofEVsandotherDERsjustasloadtoserve,utilitiesandregionalgridoperatorscanviewthisasanopportunitytoincreasetheflexibilityofthegridandmoreefficientlyuseexistingresourcesandinfrastructure.Thefollowingchapterdiscussesthevalueatstake.36Seeappendixfordetailon2030costeffectiveflexibledemandcapacityandsavingspotentialasestimatedbyTheBrattleGroup(2023).32PathwaystoCommercialLiftoff:VirtualPowerPlantsChapterThree:PathwaytoVPPLiftoffKeytakeawaysĥDeploying80-160GWofVPPs—triplingcurrentscale—by2030canexpandtheU.S.grid’scapacitytoreliablysupportrapidelectrificationwhileredirectinggridspendingfrompeakerplantstoparticipantsandreducingoverallgridcosts.Atthisscale,VPPswouldaddress10-20%ofpeakdemand.ĥLiftoffwillinvolveprogressonfiveimperatives:1.ExpandDERadoptionwithequitablebenefits2.SimplifyVPPenrollment3.IncreasestandardizationinVPPoperations(thiswillaccelerateimperative4&5)4.Integrateintoutilityplanningandincentives5.IntegrateintowholesalemarketsĥAsaparallelpathtothescaling-upofVPPsinthemarkettoday,investmentshouldcontinueinnext-generationVPPhardware,software,andbusinessmodelinnovation.ĥProperlydesigned,implemented,andregulated,VPPscanadvanceenergyandenvironmentaljusticebyretainingandcreatinggoodenergyjobs,increasingaffordabilityandreliabilityofelectricityforunderservedcommunities,andreducingairpollutioncreatedbytraditionalpeakerplants.3.i.VPPpotentialin2030WithexpectedpatternsofDERadoption,thenationalcapacityofpeak-coincidentflexibledemandthatcanbecost-effectivelymanagedwillgrowto180GWby2030(22.5%ofpeak),accordingtonewanalysisfromTheBrattleGroup.Managingallavailableflexibledemandrepresentspotentialsavingsofnearly$13Bperyear.ThesebenefitscomefrommanagingflexibledemandDERsthroughmechanismssuchassmartthermostatdemandresponse,commercialdemandresponse,andtime-varyingratesthatreshapeloadcurves.Estimatedsavingsfromlowerpeakswouldaccruefromdeferredcapitalexpenditureforgeneration($8.8B),transmission($1.3B)anddistribution($1.4B)infrastructure,inadditiontoavoidedenergycosts($0.9B)andancillaryservicescosts($0.4B).37AdditionalcapacityandassociatedsavingsfromexpectedstorageandgenerationDERsisnotincludedintheseestimates.Withoptimal(ratherthanexpected)deploymentandsitingofdemand,generation,andstorageDERs,potentialsavingscouldgrowto$22Bperyearin2030,accordingtoscenariosmodeledbyClacketal.lxxiiOptimaldeploymentinthisscenarioimpliesacumulative315GWofpeak-coincidentDERcapacitybutshouldbeconsideredtheoreticalgiventheimportantroleofconsumerchoiceinDERadoptionandlocation(i.e.,utilitiescansupport,butdonotcontrol,DERadoption).37SeeappendixXfordetailon2030costeffectiveflexibledemandcapacityandsavingspotentialasestimatedbyTheBrattleGroup(2023).33PathwaystoCommercialLiftoff:VirtualPowerPlantsEstimatesofpeak-coincidentDERcapacityandassociated2030systemsavingsNote:AdditionalstudiesthatmodelDERcapacitypotentialbasedonpre-IRADERadoptionexpectationsarenotshownbecausetheyunderestimategrowthvs.currentexpectations;thisincludesprojectionsof62GWofpeak-coincidentcapacityin2030publishedbyRMI(2023)and200GWofpeak-coincidentcapacityin2050publishedbyNREL(ElectrificationFuturesStudy,2021).Source:TheBrattleGroupanalysis2023;Clacketal.2021,APlanforEconomy-WideDecarbonizationoftheUnitedStates.3.ii.PathwaytoVPPliftoffDeploying80-160GWofVPPs—triplingcurrentscale—by2030couldexpandtheU.S.grid’scapacitytoreliablysupportrapidelectrificationwhileredirectinggridspendingfrompeakerplantstoparticipantsandreducingoverallgridcosts.38Inthelastdecade,theU.S.invested$100Bofcapitaltobuild94GWofgasassets,over20%ofwhichwasfrompeakerplants.lxxiiiBy2030,theU.S.gridwillneedtoaddresourcesthatcanserveapproximately200GWofdemandduringpeaks.Atthesametime,hundredsofgigawattsofflexibleDERcapacitywillbeavailableforVPPstoaggregateandorchestrateintodispatchableresourcesthatredirectmostspendingbacktoparticipants.Harnessing80-160GWofcapacity(10-20%of2030peak)withlow-costVPPmodelscanavoidover$10BperyearingridspendingthattranslatestoenergysavingsforallAmericans,whetherornotparticipatinginaVPP.39Beyondfinancialimpacts,VPPshavethepotentialtoreducetheriskofoutagescausedbycapacityshortfalls,increasetheefficiencyofexistingandnewgridinfrastructure,supportrapiddecarbonization,deliverhealthbenefitsfromimprovedairquality,andempowercommunities.IntentionaldesignanddeploymentofVPPswillbecriticaltoensurethesebenefitstargetthecommunitiesthatneedthemmost.LiftoffforVPPswillbeachievedwhenutilities,regionalgridoperators,andtheirregulatorsaccountforthepotentialvalueofVPPsandintegrateVPPsintocoregridplanningandoperations.4038Capacitypotentialof80-160GWisbasedon10-20%ofestimatedpeakloadin2030,takingintoaccountestimatedcurrentcapacity,estimatedavailablecost-effectivedemand(180GW),projectedincreasesingenerationandstorageDERcapacity,andthechallengesandpotentialsolutionsforVPPliftoffdiscussedinChapter4.39Potentialsavingsassociatedwithfor80GW($6B)to160GW($11B)ofVPPcapacityareestimatesbasedonthesavings-per-GWratiosofTheBrattleGroup(2023)andClacketal.(2021)analysisofpeak-coincidentDERcapacity(est.$0.07BperGWinbothstudies),recognizingsavingsmaynotaccruelinearly.ThefunctionalityofVPPsforthegridgoesbeyondreducingpeaks.DERsthatofferenergyefficiencycanreducebaseloadenergydemand,andflexibledemandDERscanfollowsupplytoenhancetheutilizationoftraditionalcleanenergyassetsastheycomeonline.PotentialVPPfunctionalityandvaluewillvarybasedonDERavailability,mixofrenewableenergysupply,andinfrastructureconstraints.40VPPsareacriticaltoolinassetportfoliosthatwilllikelyincludelong-durationenergystoragetohelpbalancesupplyanddemandwithahighmixofrenewables,andclean,firmresourcessuchasnuclearandgeothermaltoincreasebaseloadsupply.34PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPliftoffNotes:PeakdemandintheU.S.isexpectedtogrowapproximately8%intheU.S.by2030–from743GWto802GW,or59GW(estimatedbyTheBrattleGroupbasedontotalelectricityconsumptionprojectionsfromOfficeofPolicyNationalEnergyModelingSystemmid-caseelectrificationscenario).Itisestimated162GWto183GWofgenerationwillberetiredbetween2023-2030.Ifretiringassetswereoperatingatfullcapacity,thiswouldimplyasupplygapof221to242GW.However,themajorityofrecentandexpectedretirementsareagingcoalplants,withsomeoilandnaturalgasplantsretiringaswell;retiringassetswilllikelybeoperatingbelowfullcapacity.Forthisreason,thesupplyneedisestimatedconservativelytobe~200GW(~60GWnewpeakdemand+~140GWpeakdemandnolongerservedbyassetsretired).2023VPPcapacitybasedonmarketestimatesfromWoodMackenzie(2023)andFERC(2021).2030VPPcapacitypotentialandsavingspotentialbasedonindustryinterviewsandanalysisbyTheBrattleGroup(2023)andClacketal.(2021).ThepathwaytoliftoffforVPPswillinvolveprogressonfiveimperatives.ImperativesforVPPLiftoffExpandDERadoptionwithequitablebenefits:ScalingVPPsrapidlyreliesonacceleratingDERadoption,andscalingVPPsequitablyreliesonprioritizingbenefitsfordisadvantagedcommunities.TheaffordabilityandaccessibilityofDERsiscriticaltocreateequitableaccesstoVPPparticipation;byprioritizingsupportforthosefacingthehighestenergyburdens,energycostsavingscanbetargetedatcommunitiesmostinneed.Beyondmonetarysavings,intentionalVPPdeploymentcanofferdisadvantagedcommunitiesincreasedgridreliabilityandresilience,goodjobopportunities,andbetterairquality.35PathwaystoCommercialLiftoff:VirtualPowerPlants6.SimplifyVPPenrollment:EnrollingnewDERstobuildthecapacityofVPPswillinvolvegreaterawarenessandstreamlinedenrollmentamongDERownersandpurchasers.Clearingenrollmenthurdleswithmeasuressuchasautomaticenrollmentwithopt-outandinteroperabilityofDERsoftwarewillhelpscaleVPPsasrecordvolumesofnewDERscomeonline.7.IncreasestandardizationinVPPoperations:InordertoreplicatesuccessfulVPPdeploymentsacrossjurisdictionsquickly,theindustrywillneedprogressfrombespokeVPPapproachestoanarrowersetofstandardsthataretrustedbyutilitiesandregionalgridoperators.Alignmentisparticularlyimportantinareassuchasperformanceforecasting,measurementandverification,andservicecontracts.StandardsfortheoperationsofdistributionsystemswritlargecaninformandguidethedevelopmentofVPPstandardsinareassuchassystemreliabilityrequirements,DERinterconnection,energydatasharing,productcertification,andcybersecurity.Increasedstandardization(Imperative3)willaccelerateVPPintegrationintoretailandwholesalemarkets(Imperatives4&5).8.Integrateintoutilityplanningandincentives:Retailutilityandverticallyintegratedutilityregulation–specificallytheplanningrequirementsandcompensationstructuresthatgovernutilities–inmanystateswillneedtoberevisedtobetteralignutilities’incentivestosystem-optimalVPPdeployment.9.Integrateintowholesalemarkets:Inrestructuredmarkets,theapprovalofFERCOrder2222inSeptember2020instructedRTOs/ISOstoallowparticipationofDERaggregationsinwholesalepowermarkets(discussedinChapter2).Betweennowand2030,whenandhowRTOs/ISOsintegrateVPPsintotheplanningandoperationsofbulkpowersystemswillinfluencethegrowthofVPPplatformsregionally.Asaparallelpathtothescaling-upofVPPsinthemarkettoday,investmentshouldcontinueinnext-generationVPPandDERhardware,software,andbusinessmodelinnovation.Whilethefocusofthisliftoffreportisonthe2030opportunityforVPPs,achievingthefullvalueofVPPslonger-termwillinvolvenewDERtechnologies(e.g.,innovativemicrogrids41,lxxiv),newwaysofintegratingDERsasgridresources(e.g.,contributing>25%ofpeak),anexpandedsetofgridservicesfromVPPs,andotherimportantadvancements.3.iii.BroaderimplicationsCapitalformationAmericansareprojectedtoinvestapproximately$290-505billionperyearinEVs,and$50-105billiononotherDERsperyear,2025to2030.TheseinvestmentsarelargelyexpectedtobemadewithoutregardfortheDERs’potentialgridservicesvalue.However,thevalueoftheDERtoconsumersincreaseswiththeopportunitytoenrollinaVPP.InvestorscansupportDERadoptionandVPPvaluecreationthroughavarietyofDERfinancingmechanisms.Examplesincludeasset-backedsecuritiesinresidentialsolarprojects,publiclytradedequitiesinelectricalequipmentandEVmanufacturingcompanies,venturecapitalandgrowthequityinvestmentsinEVcharginginfrastructuredevelopers,manufacturinginvestmentsingrid-connectedHVACandwater-heatingequipment,andmore.SupportinginvestmentsinDERsamongdisadvantagedcommunitiesisatime-sensitiveissueformultiplereasons.First,manyhouseholdsandbusinessesbuyreplacementappliancessuchasheatingsystemsandwaterheatersevery10-20yearsonanemergencybasiswhentheappliancebreaks.Low-creditscoreorlow-incomeconsumersmayfacehighborrowingcosts(e.g.,creditcardfinancing)whenpurchasingthereplacement.Offeringlow-costfinancingforDERscaninducebuyerstochoosetheVPP-enabled41Forexample,IdahoNationalLaboratoryhascollaboratedwithprivateindustryandgovernmentcustomerstodevelopself-containedmicrogridsystems‘in-a-box’thatuseenergysourcessuchassolarpanels,windturbines,andevensmallnuclearreactorstoensureenergysupplyduringemergencysituationsorinremotelocations.36PathwaystoCommercialLiftoff:VirtualPowerPlantsoptionfornecessary(notincremental)purchases—anopportunitythatmaynotariseagainfordecades.Additionally,thehighestdemandpeaksonthegridwillbethemostlucrativeforVPPstoaddress,andasVPPscalegrowstomanagedownpeaks,theincrementalparticipant’scapacitymayhavediminishingreturns.Earlyenrolleeswillbepositionedtoreapthegreatestpotentialrewards.BeyondinvestmentsinDERs,investmentinVPPplatformscanbeattractivetocorporationsandinvestorsasalow-capex,IT-drivensolutionwithalargeandrapidlygrowingaddressablemarket.FinancingsupportcanacceleratedeploymentinmanywayssuchasbybuildingoutandimprovingITcapabilities,acquiringcustomers,andpostingcapitalreservesrequiredtobidintowholesalemarkets.WorkforceimplicationsTheavailabilityofqualifiedelectricians,electricalcontractors,andotherskilledtradestalentisaprerequisitetoinstallingandmaintainingtheDERsthatpowerVPPs.AgridmanagedwithhighernumbersofDERsispredictedtorequiresignificantlymorefull-timejobsintheenergysectorthanagridthatreliesonutility-scaleassetsalone.42,lxxvOnanimmediatebasis,utilities’partnershipswiththeInternationalBrotherhoodofElectricalWorkers(IBEW)andtheNationalElectricalContractorsAssociation(NECA)intheirareacouldfacilitateDERadoption,suchasbypre-qualifyingcontractorstoinstallDERstoensurethequalityofworkandthatonlynecessaryelectricalsystemupgradesarecompleted.Theseorganizationshavetheadvantageofwell-developedtrainingprogramsthatintegratecertificationsfornewtechnologiesandhelpalocalworkforceadapttochangesinmarketdemand.lxxviInthelongrun,intentionaleffortsareneededtoinvestinandgrowtheseprofessions.Specialattentionshouldbegiventorecruitandretainpeoplefromunderrepresenteddemographicgroups.Forinstance,inthecaseofelectricians,womenonlycomprised2%ofthetotalworkforceasof2021.lxxviiTraining,pre-apprenticeship,andworker-servingcommunity-basedorganizationscanbeimportantpartnerstoimproveaccesstogoodjobsinDERsandVPPs,prepareandconnectpeopletoapprenticeshipprograms,andidentifyandaddressbarrierspeoplefacetocompletingapprenticeshipprogramssuchaschildcarecostsandtransportationaccess.Thefederalgovernmentisalreadytakingmeasurestostrengthentheelectricianworkforce,suchasbytyingstatefundingforEVchargingtoelectriciantrainingandcertification.Energy&environmentaljusticeProperlydesigned,implemented,andregulated,VPPscanadvanceenergyandenvironmentaljusticebyincreasingaffordabilityandreliabilityofelectricityfordisadvantagedcommunitiesandreducingpollutioncreatedbytraditionalpeakerplants.Two-thirdsofpeakerpowerplantsintheU.S.arelocatednearcommunitieswithahigherpercentageoflow-incomehouseholdsthannationalaverage,andnitrogenoxideemissionsratesarehigherforpeakerslocatednearthesecommunities.DeploymentofVPPscanhelptoreduceemissionsfromtheseplantsandthereforeimproveairqualityinthesecommunities.lxxviiiDependingondispatchscenarios,optimizingDERdispatchcanalsoalleviatehostingcapacityconstraints.Researchhasfoundevidencethathostingcapacitydisparitiescanalignwithsocioeconomicfactorssuchasraceandethnicity.lxxixGridinfrastructurelimitationsmustbeconsideredintheearlystagesofprojectdevelopmenttoavoidskewingdeploymentawayfromunderservedcommunities.Additionalconsiderations,systemupgrades,financialassistance,andcommunityoutreachmayberequiredtosupportdisadvantagedcommunityparticipationinVPPandrelatedprograms.Forexample,homesindisadvantagedcommunitiestendtobeolderandlessenergyefficient,whichheightenstheneedforefficiencyandweatherizationprogramsalongsideprogramspromotingVPPs.Theelectrificationofhouseholdenergyserviceshasthepotentialtoimproveindoorairqualitybutmayrequireupgradestolocaldistributionsystems,whichcouldincreasetheaverageimplementationcostoftheprogram.42ModelingbyClacketal(2021)comparestwonationaldecarbonizationscenarios(netzeroby2050):ascenariowithonlyutility-scaleassetsvs.ascenariowithoptimally-sitedDERs.TheoptimalDERscenarioisassociatedwithanestimated304,000additionalfull-timeenergysectorjobsby2030.37PathwaystoCommercialLiftoff:VirtualPowerPlantsVPPoperatorscanbalancecostandemissionsconsiderationstoadvancedecarbonization,energyandenvironmentaljustice,andfinancialgoals.Inthenear-term,assomeregionalgridscontinuetorelyoncoalandotherfossilfuels,VPPsthatshiftDERselectricitydemandtolow-costhourswithoutconsideringemissionsandclimateimpactmayriskincreasingemissionsifthecheaperhoursarepoweredbyhigh-carbonfuelssuchascoal.lxxxLifecycleemissionsofDERsmanufacturingandinstallationshouldalsobetakenintoaccount.lxxxiThewayinwhichfinancialsavingsandcostsfromVPPdeploymentareallocatedacrossutilitycustomersmustbecarefullyconsideredinthecontextofdistributivejusticegoals.CustomerswithhighenergyburdenscanbenefitfromVPPsthroughdirectparticipationincentives—forexample,inwaterheatingdemandresponseprograms—thatloweroroffsettheirenergybills.EnergysavingsachievedwithVPPsthataccruetoautilitymaybedistributedtocustomersinseveraladditionalways,suchasthroughlowerelectricityratesforallcustomersorthroughafirst-lossfundingpooltosubsidizefinancingfornewDERs.ReturninggridsavingsonlytoparticipatingDERsownerswillnotadvanceenergyjusticeifDERsadoptionisnotequitable.Forsomeutilities,gridupgradecostswillbeincurredtodeployVPPs,includingsensing,communication,computing,distributedintelligence,andcontrolinfrastructure.Investmentsinthesmartgridsystemthatarebornebyallelectricityconsumersshould,inturn,benefitallconsumers.InthedevelopmentandpromotionofnewVPPs,thecommunitiesaffectedby,andbenefitingfrom,theseprogramsmusthaveavoiceintheirdesignandexecution.Proceduraljusticeisoneofthefoundingtenetsofenergyjustice;itconcernswhoispartofthedecision-makingprocess,andwhethereveryone’svoiceisheardinafair,transparentprocess.Thedevelopment,promotion,andexecutionofaVPPmustcarefullyconsiderthisaspectofenergyjustice.38PathwaystoCommercialLiftoff:VirtualPowerPlantsChapterFour:ChallengestoLiftoffandPotentialSolutionsVPPliftoffwillrequirecollaborationacrossadiversesetofstakeholderstoexamineawiderangeofsolutionsandtakeappropriateactions.Thefollowingsummaryofchallengestothefiveimperatives,potentialsolutions,andassociatedactionsforconsiderationbypublicandprivatestakeholdersismeanttoinitiateadialogue;itisnotacomprehensiveinventory.PrioritypotentialsolutionsforVPPliftoff4.i.ExpandDERadoptionwithequitablebenefitsKeytakeawaysĥPenetrationofDERsislownationally(e.g.,<4%householdshaverooftopsolar,<20%havesmartthermostats).LowpenetrationofDERswilllimittheopportunitiesacommunityhastodeploy,andbenefitfrom,VPPsatscale.ĥBoththeup-frontcostandfinancingcostsofDERscanbeprohibitivelyexpensive,andDERsfaceinstallationhurdlesinsomeserviceareas.ĥTomakeDERsmoreaffordableforallAmericans,publicandprivatefinancialinstitutions,utilities,andotherorganizationscouldprovidelow-costfinancingforDERsandhelpconsumersaccessavailablerebatesandtaxincentives.ĥInstallationhurdlesmaybeaddressedthroughworkforcedevelopmentthatprioritizesgoodjobsand(forapplicableDERs)throughpermittingpractices.ĥThepotentialbenefitsofDERsandVPPsextendbeyondDERownersandVPPparticipants,andincludelowerelectricitybills,improvedgridreliabilityandresilience,jobopportunities,andimprovedairqualityforthebroadercommunity.EquitablebenefitsarecriticalforVPPliftoff.39PathwaystoCommercialLiftoff:VirtualPowerPlantsChallengesChallenge:PenetrationofDERsislownationallyandboththeup-frontcostandfinancingcostsofDERscanbeprohibitivelyexpensive.Forexample,heatpumpwaterheaterscurrentlyaccountfor2%ofthenearly7millionwaterheatersreplacedintheU.S.annually;lxxxiionly3.7%ofsingle-familyhouseholdsgeneratedelectricityfromdistributedsolararraysasof2020;lxxxiiifewerthan20%ofsingle-familyhomeshavesmartthermostats.lxxxivAdoptionratesareevenloweramonglow-tomoderate-incomeandlow-creditscorehouseholdsandrenters.43Whileexpectedtogrowonaveragenationally,adoptionofDERtechnologiesisuneven,andhouseholdsandsmallbusinessesoftenfacedifficultypayingtheupfrontpriceofeventhemostcost-effectiveDERs,whichcanbemoreexpensivethannon-electric(andthereforenot-VPP-eligible)equivalents.Low-credit-scoreconsumerslackaffordablefinancingtopayovertime,andhigh-costloans(e.g.,creditcards)erodetheenergy-savingsvalueofthesepurchases.Thesechallengeshaveenergyjusticeimplications:ifcommunitieshavelowDERadoption,theymaybeexcludedfromthebenefitsofVPPs.Challenge:DERsfaceinstallationhurdlesinsomeserviceareas.Insomeareas,consumerspurchasingDERs,suchaslevel2EVchargersandsolarandstoragesystems,faceinstallationdelayscausedbylowelectricianavailability,unpredictableorlengthybuildingpermittingprocesses,overloadedorsaturatedfeederspreventinginterconnection,44andotherfactors.PotentialsolutionsPotentialsolution:FinancialassistanceforDERadoption,includinglow-costfinancing,rebates,andtaxincentives,particularlyforlow-incomeAmericans.Actionsmayinclude:ĥPrivateandpublicfinancialinstitutions(e.g.,communitydevelopmentfinancialinstitutionsandgreenbanks)couldhelpfinanceDERsandVPPprojectsonastateandlocallevel.ÎIndustrygroupsandconsumeradvocatesmaysupporttheseinstitutionswitheducationonthebenefitsofDERsandVPPstoinformfinancialassistancestrategies.ĥStateandlocalorganizationscouldfurtherpromoteanddeployDERrebatesandtaxcredits,includingthosemadeavailablebytheInflationReductionAct.45ÎConsumereducationandsupportisoftenneededtoaccessthesebenefits.Communityorganizations,DERmanufacturers,andotherorganizationscanplaycatalyticroles.ÎStategovernmentsinparticularmaydesignDERadoptionprogramsthatincorporateVPPenablementand/orenrollmenttoadvancepolicygoals.ĥUtilitiescouldlayerpublicincentiveswiththeirownDERadoptionprogramstogrowactiveorlatentDERcapacityforVPPs;exampleprogramsalreadyinuseinclude:ÎFinancingprogramswithon-billpaymentmechanismsofferinglowerinterestratesthanalternativeconsumerloans.46,lxxxv,lxxxvi,lxxxviiÎRebatesforqualifyingtechnologies.ÎLeasingforsolar-plus-storagesystems.ÎConsumereducationandtechnicalassistanceforDERchoiceandinstallation.ÎPartnershipswithDERassociations,businesses,andprofessionalgroupssuchasHVACspecialists,architects,engineers,renewableenergytradeassociations,andenergyefficiencytradeassociations.43Accordingto2018Censusdata,approximatelytwothirdsofhouseholdsareinmulti-unitdwellings.Tenantstypicallydonothavetheright-northeincentive–tomodifybuildingsandequipment,suchasbyinstallingrooftopsolarorEVchargers,deterringDERadoptionamongalargepopulationofindividualsandorganizations.44VPPsareasolutiontoreducingfeedersaturationbystaggeringflexibledemandtoshavepeaks.DERadoptionwithoutVPPenrollmentmaybemorelikelytofacedelays.45Fordetailonavailablerebates,taxcredits,andothersupport,seeMakingOurHomesMoreEfficient:CleanEnergyTaxCreditsforConsumersDepartmentofEnergy;EnergySavingsHubDepartmentofEnergy;HomeEnergyRebateProgramsDepartmentofEnergy46Studiesofutility-financedDERandenergyefficiencyprogramshavefoundstrongrepaymentratesacrosslow-andmoderate-incomeconsumersand,insomeanalyses,noobviousassociationbetweenaprogram’sunderwritingcriteria(includingincomeandcreditscore)andparticipantdefaultrates.40PathwaystoCommercialLiftoff:VirtualPowerPlantsĥTosupportVPPsthatmanageflexibleheating/coolingloads:Federal,state,andlocalgovernments,amongotherorganizations,couldsupportimprovedbuildingweatherizationandinsulation,particularlyinhomesofdisadvantagedcommunitieswheretheneedcanbeacute.ThiswillminimizeimpactsonthecomfortandsafetyofVPPparticipantsandimprovethehome’svaluetotheVPPasathermalbatterywhenHVACtime-shiftstoreducestrainonthegrid.ĥConsumeradvocateandConsumerFinancialProtectionBureauengagementcanhelpalignpracticeswithconsumerinterests,particularlyinDERfinance/loanagreements.Potentialsolution:WorkforcedevelopmentandgoodjobsforDERinstallationandmaintenance.Actionsmayinclude:ĥUtilities,DERmanufacturers,VPPplatformsandotherscansupportworkforcedevelopmentintradesthatarecriticalfortheinstallationandmaintenanceofDERs.TheseorganizationscanconsiderpartneringwithunionsandtradeorganizationssuchastheInternationalBrotherhoodofElectricalWorkersandNationalElectricalContractorsAssociation,forexamplebyproactivelypairingutilitycustomersthathaveinstallationandmaintenanceneedswithskilledelectricians.SuchpartnershipscanbenefitutilitiesbyincreasingvisibilityintoDERadoptionpatterns.AdditionaldetailonworkforceimplicationsofVPPliftoffareoutlinedinSection3.iii,BroaderImplications.ĥStateandlocalgovernmentscanconsideradoptingorrevisingbuildingcodestopromoteadoptionofVPP-enabledDERadoption,47,lxxxviiiandaugmentpersonnelcapacityofpermittingagenciesasneeded.ĥStateenergyoffices,regionalenergyefficiencyorganizations,DERandVPPindustrygroupscansupportpermittingagenciessuchasbuildingcodeofficialsandfiredepartmentswitheducationtobuildunderstandingofthesafetyandpotentialbenefitsofDERtechnologies.Potentialsolution:EquitableallocationofbenefitsfromVPPs–includingandbeyonddirectbenefitstoDERadopters–thatprioritizesbenefitsfordisadvantagedcommunities.Actionsmayinclude:ĥUtilities,regulators,andstatepolicymakerscanensureequitabledistributionofpotentialVPPbenefits,includinggridcostsavings,goodjobs,resilienceandreliabilitybenefits,andairqualityimprovements.ĥSeeSection3.iii,BroaderImplicationsfordetailonpotentialsolutionsandactions.47Forexample,NYSERDApublishesavoluntaryStretchCodefornewbuildings,whichspecifiesthat,“buildingcontrolsshallbedesignedwithautomateddemand-responseinfrastructurecapableofreceivingdemand-responserequestsfromtheutility,electricalsystemoperator,orthird-partydemandresponseprogramprovider,andofautomaticallyimplementingloadadjustmentstotheHVACandlightingsystems.”41PathwaystoCommercialLiftoff:VirtualPowerPlantsExampleactionsfromtheDepartmentofEnergy:ĥLoansandLoanGuaranteestosupportVPPprojectswithafocusonlow-tomoderate-incomecommunities,includingloweringthecostoffinancingforVPP-eligibleDER;ĥHomeEnergyRebatestoreducethecostofefficiencyretrofitsandelectrificationmeasuresinhomesandotherbuildings;ĥWeatherizationAssistanceProgramforenergyefficientandelectrictechnologiesinlow-incomehouseholds,includingimprovedinsulation;ĥTechnicalAssistanceforNewandStretchCodeAdoptionforadoptionandenforcementofnewandstretchbuildingcodes;ĥEnergyEfficiencyGrantsforlocalgovernments,schools,andnon-profits,includingfordeploymentofDERs;ĥEnergyEfficiencyLoanFundCapitalizationGrantstosupportenergyefficiencyprojects,includingdistributedsolar;ĥResidentialandCommercialWorkforceTrainingProgramsthatincludetrainingonsmarttechandgridnetworksystems;ĥNationalCommunitySolarPartnershiptoexpandaccesstoaffordablecommunitysolartoeveryAmericanhouseholdandenablecommunitiestorealizeotherbenefits,suchasincreasedresilienceandworkforcedevelopment.4.ii.SimplifyVPPenrollmentKeytakeawaysĥParticipantacquisitioncostsarecanbehighforVPPsduetolowconsumerawarenessandcostsofintegratingDERsoftwareintothirdpartyVPPITplatforms.ĥAutomaticenrollmentofDERs(withopt-out)couldbeacost-effectivesolutionforincreasingVPPparticipation.Expandedconsumereducationwillbecritical.ĥVPP-enablementcouldincreasinglybebuiltintoDERswithfeaturessuchasnetworkconnectivityandopen-sourceapplicationprogramminginterfaces.ChallengesChallenge:ConsumerawarenessislowandparticipantacquisitioncostscanbehighforVPPs.AlackofawarenessandunderstandingofVPPsamongelectricityconsumersdrivesupthecostofVPPmarketing,consumereducation,andenrollment.VPPplatformcompaniestypicallybearhighcostsoffinding,recruiting,andenrollingDERownersrelativetoDERmanufacturersandretailerswhointeractdirectlywithDERbuyersorutilitieswithongoingcustomerrelationships.EnrollmentcostsincreasefurtherwhenOEMsimposefeesonthird-partyVPPstointegratewiththeirDERsoftware.PotentialsolutionsPotentialsolution:Consumereducation.Actionsmayinclude:ĥEnvironmentalgroups,socialjusticegroups,consumeradvocates,VPPcompanies,utilitiesandotherelectricityretailers,regionalgridoperators,DERmanufacturers,DERinstallationandmaintenanceprofessionals,andgovernmentleadersallhavearoletoplayineducating42PathwaystoCommercialLiftoff:VirtualPowerPlantselectricityconsumersaboutVPPsandopportunitiesforparticipation.Inparticular,communityorganization-ledVPPeducationeffortscanincreasetrustandensurecommunitymembers’interestsareprioritized.ĥOff-takerssuchasutilitiesandISOs/RTOscanconsiderlonger-termVPPcontracts(fiveyearsormore)tode-riskaVPPplatform’sinvestmentinconsumereducationandmarketing.Potentialsolution:AutomaticenrollmentatpointofDERpurchasewithopt-out.Actionsmayinclude:ĥDERmanufacturers,retailers,andinstallerscanconsiderenrollingconsumersinVPPsatthepointofpurchase,whentheyarethinkingmostcriticallyaboutthevalueandfunctionalityoftheirDER.ThismaymeaneitherenrollingtheconsumerinanexistingVPPtoincreaselocalVPPcapacityorrecordingtheirinterestinpotentialfutureVPPopportunitiesonceavailable.48,lxxxixLaunchingaVPPissometimesreferredtoasa‘chickenandegg’problem:ADERaggregatororutilitymayinvestinaVPPplatformonlyifasufficientpopulationofDERswillenroll;meanwhile,forsomeconsumers,collectingVPPrewardsaswaytooffsetthecostoftheDERmaymakeorbreakthepurchasedecision.ProactivelyidentifyingandaggregatingavailableDERcapacitythroughautomaticenrollmenthasthepotentialtocatalyzeVPPdeployment.49,xcĥConsumeradvocatescouldshapeenrollmentandopt-outmechanismstoensureconsumersatisfactionandprotection,andtohelpnavigateVPPoptions.AsVPPsbecomemainstream,customerswillhavedifferentoptionstoselectfrom.TrustedresourcesthatexplainVPPparticipationrequirementsandcompensationrateswillbeincreasinglyneeded.ĥInparallel,VPPcompaniesandutilitiescouldworktocreatepositiveparticipantexperiencesanddeliverexcellentcustomerservicetopreventchurn.VPPsmustrespectparticipantcomfortandconveniencewiththeunderstandingthataDER’sroleinprovidinggridservicesissecondarytoitsfunctionstotheconsumerasavehicle,heatingsystem,backuppower,orotherwise.Potentialsolution:VPP-enablementstandardsorrequirementsforDERmanufacturers.Actionsmayinclude:ĥPolicymakerscanconsiderexpandingusageofcriteriaforDERhardwarethatenablegridservices.Forexample,theEPAcurrentlymaintainsconnectedcriteriaforcertainENERGYSTARproductcategorieswherenetworkconnectivityenablesadditionalopportunitiesforenergysavingsandgridbenefits,50,xciandtheConsortiumforEnergyEfficiencymaintainssimilarcriteriaforcertainproducts.xciiWhenweighinghowtoapplythesecriteria,policymakerscouldtakeintoaccountboththeincrementalmanufacturingcostspassedontotheconsumerandtheexpectedbenefitsfortheconsumer.Criteriamaybeassimpleasdelayedstartbuttonsonappliances,ortheymayberelativelymorecomplex,suchasbuilt-inenergymetering.ĥPolicymakerscanconsidermandatingthatmanufacturersofDERsuseopensourceAPIsthatstreamlineDERintegrationintothird-partyITsystems.ThiscanreduceaggregationcostsandITimplementationcomplexityfortheVPPprovider.48Opt-outstructuresamongCommunityChoiceAggregators(CCAs)maybeaninstructiveanalogforVPPenrollment.AccordingtointerviewswithCCAs,typicalopt-outratesareontheorderof5%–15%,meaningabout85%–95%ofeligiblecustomersremaininCCAs.Incontrast,top-performingvoluntary(opt-in)utilitygreenpricingprogramsachieveprogramparticipationratesontheorderof5%–20%(NREL2018)49Inatestoftheeffectsofstreamliningenrollment,Uplightintegrateddemandresponseprogrampre-enrollmentintotheonlinepurchaseprocessforsmartthermostatsandfoundfourtimesmoreenrollmentsthanwithtypicalprocesseswherecustomersmustvisitaseparatewebsitetosignup.50Fordetail,seeConnectedCriteriaforPartners,EPA.43PathwaystoCommercialLiftoff:VirtualPowerPlantsExampleactionsfromtheDepartmentofEnergy:ĥRoadmapfordeploymentofGrid-interactiveEfficientBuildingspublication;ĥConnectedCommunities,ascaleddemonstrationofthetechnologiesandapproachestoVPPdeployment;ĥSmartGridGrantstoincreasetheflexibility,efficiency,andreliabilityoftheelectricpowersystem;ĥNationalEVInfrastructureStandardsthatensurefederally-fundedchargingequipmentiscapableofsmartcharging;ĥV2XMOUpartnershipandbusinesscasedemonstrationprojectsthatidentifyinterconnectionstandards,marketaccessneeds,andinteroperabilityapproachesforcharginganddischargingwithpublicandprivatesectorengagement;ĥComputationaltoolsdevelopedandappliedbyNationalLaboratoriestohelpregulatorsandutilitiesdeterminehowtoapplyDER,includingmicrogrids,tobetterserveequityandresilienceneeds.4.iii.IncreasestandardizationinVPPoperationsKeytakeawaysĥSomeutilitiesperceiveVPPsaslesspredictablethantraditionalassetsbecauseforecastingandperformancemeasurementmethodsvarywidelyamongVPPserviceproviders.LimitedpubliclyavailabledataonhistoricalVPPperformancemakesitchallengingtounderwriteperformanceguarantees.ĥPartofthedifficultyinscalingupprovenVPPsacrossgeographiesstemsfrominconsistenciesinkeyareasofdistributionsystemoperations,includinggridparticipantgovernance,electricitydatameasurementandcommunication,DERinterconnectionandproductcertification,andcybersecurity.WhentheseoperatingparametersallmustbenegotiatedinsettingupaVPP,transactioncostsarehigh,andtimelinesarelong.ĥStandardizingVPPoperationalapproaches—andmanagementofdistributionsystemsmorebroadly—couldaccelerateVPPintegrationinretailandwholesalemarkets(Imperatives4&5).StandardsmustbedesignedandmanagedtoevolveovertimeĥTodate,suchstandardizationhasprogressedorganically;improvedcoordinationandresourcingisneededtodevelopcoherentindustry-andregulator-alignedstandardsontimelinesthatmeetelectrificationgoals.ChallengesChallenge:VPPsareperceivedbysomeutilitiesaslesspredictablethantraditionalassetsbecauseforecastingandperformancemeasurementmethodsvarywidelyamongserviceproviders,andbecauseofalackofpublicly-availablehistoricalperformancedata.SomebelievethatforVPPstoperformpredictably,DERsmustindividuallybepredictable.However,theaggregateperformanceofaVPPcanbepredictablewithappropriatehistoricaldataandforecastingmodels—similartootherportfolioapproachestomanaginguncertainty.Today,modelingapproachesforVPPsdifferacrossserviceprovidersandarenotalwaystransparent.Differencesproliferateinareassuch44PathwaystoCommercialLiftoff:VirtualPowerPlantsas:forecastingVPPperformanceforfutureplanningpurposes,controllingVPPperformanceinongoingoperations,andmeasuringandverifyingVPPimpactsaftergridserviceshavebeendelivered.VariationsinserviceagreementsandcodesofconductacrossdifferenttypesofDERs,off-takers,andstatesslowthescale-upofprovenVPPs.51ServiceagreementsspecifydiscreteservicesandrelatedperformanceexpectationsfromDERserviceproviders,includingrequirementsforvisibilityintoindividualDERs,operationalcoordinationprotocols,compensationforservices,performanceevaluationmethods,andcustomerconsentrequirements(e.g.,electronicopt-invs.wetsignature).Insomecases,variationisdrivenbyunderlying(incompatible)ITandoperationalsystems;inothers,itisdrivenbyinternalorganizationpolicies.Challenge:Insomecases,thereisalackofconsistentstandardsfortheunderlyingtechnologiesofVPPs,includingcollectionandcommunicationofelectricitydata,productcertifications,andDERinterconnection.Electricitydatacontentandformat(e.g.,datafields,timeresolution)usedbygridactorsvarieswidely.Barrierstodatasharingobstructsaccurateneedsassessments,forecasting,andperformancemeasurementandverification,allofwhichsignificantlyincreasestransactioncost.Datasharingacrossorganizationsislimitedbyacombinationoffactors,includingprivacyconcerns,thedesiretomaintainacompetitiveadvantageinthemarketplace,incompatibleITsystems,andinsomecasesalackofdatacollectionhardwareandsoftwareondistributionsysteminfrastructure.Standarddataformatsthatcouldbesharedacrossorganizationalplatformsandbetweensystemsareneeded.OnlyapplicabletoDERsrequiringinterconnection(e.g.,batteries,distributedsolar):AproliferationofdifferentinterconnectionstandardsleadstocomplexityforsomeDERtechnologieswhilethereisalackofstandardsforothers.UnderlyingreasonsincludedivergentutilitypreferencesandITsystems,stateinterconnectionstandards,andOEMpolicies.Thisissueistechnology-specific;forexample,itisnotanissueformostflexibledemandDERs,butisachallengefordistributedsolarandsomeEVchargers.Challenge:Cybersecuritybestpracticeshavenotyetbeenuniformlyadopted,whichcreatesbothrealandperceivedrisksforVPPdeployments.IntegrationofahighervolumeofDERsintothegridmaycreateagreaterattacksurfaceformaliciousintrudersifattackerscompromiseaDERvendor,VPPoperator,orotherparty.Best-practicesinmitigatingriskofgridoperationsdisruptionshavebeenidentifiedbutnotwidelyadopted.Thecybersecuritypracticesfordistribution-levelVPPswillneedtobespecifiedatthestatelevelorbytheinterconnectingutility,whichcouldcreateahodgepodgeofstandardsandrequirements.Alackofcommonlyacceptedmeasuresaddsfrictionandcosttoserviceagreementnegotiations,andfailuretoimplementappropriateriskmitigationapproachesmayintroducesystemrisks.PotentialSolutionsPotentialsolution:Common,opensourceDERandVPPmodelingtoolstohelpengineerspredictandmanageperformance,includingdatasets,predictivemodels,andmeasurementmethods.Actionsmayinclude:ĥPrivatecompaniesandresearchorganizations,suchasnationallabs,couldpromoteadoptionof,andcontinuetodevelop,opensourcedatabasesforkeyinputsintoVPPmodels.Examplesmayincludehigh-resolutionbuildingandhousehold-levelelectricityconsumptiondataandEVchargingdataingranulartimeincrements,includingmeasuredresponsestogridsignalsandincentivesunderanarrayofconditions(i.e.,complianceratesforarangeofpaidincentives).ĥThesestakeholderscouldalsoreleaseandcurateopensource,trustedprobabilisticmodelstoforecastVPPperformance(e.g.,demandshifting,energydispatch,ancillaryservices)thatcanbeappliedacrossgeographiestoexpeditelocation-specificpilotsanddatacollection.Establishing51Forexample,aVPPplatformcompanyleaderreportedthatacross20VPPoperations,16weresouniquethatstaffcouldnotbesharedacrossthem.45PathwaystoCommercialLiftoff:VirtualPowerPlantsstandard,transparentapproachesforguaranteeingVPPperformanceandassuringthedeliveryofDERservices—includingunderwritingknownriskand/oradjustingcapacityfactors—couldaccelerateintegrationofVPPsinbothutilityapplicationsandwholesalemarkets.SeeappendixforexamplesofmodelingtoolsavailablefromselectDOE-partneredNationalLaboratories.ĥStandardizedmethodologiesformeasuringandverifyingtheperformanceanddeliveredbenefitsofVPPsforsettlementarealsoneeded–e.g.,toestimatebaselineelectricityusagevs.theVPP-drivenoutcome.52,xciiiPotentialsolution:Industry-widestandardVPPserviceagreement(s)thatincludeperformanceguarantees.Actionsmayinclude:ĥRegulators,utilities,regionalgridoperators,andotherVPPleaderscouldcodifyasetofacceptedmeasurestominimizeVPPperformanceriskwithinacceptedandunderstoodbounds;forexample,asetofstandardover-enrollment‘buffer’factorsthataccountforpotentialparticipant(DERowner)eventopt-out.ĥVPPcompaniesandoff-takers,suchasutilities,couldestablishandadoptstandardlanguagethatoutlinestermsandconditionsbetweenanaggregatorandautilityand/orbetweenanaggregatorandparticipantstoacceleratenewVPPdesignandcounterpartynegotiations.53Thetemplatescouldincludeaseriesofstandardadd-onannexesforcommonDERtypesthatoutlinesDER-specifictelemetryrequirements(whererelevant),operationallimits,andsettlementprocesses(includingmeasurementandverification).Thefollowingpotentialsolutionsareproposedareasforstandardizationofoveralldistributionsystemoperations(notspecifictoVPPs)thatwouldenablemoreconsistencyandrepeatabilityacrossVPPdeployments,includingthemodels,data,measurementtools,andserviceagreementsdescribedabove.Potentialsolution:Industry-andregulator-aligneddistributionsystemreliabilitystandardsandaholisticsetofgridcodestogoverngridparticipantsandtheiroperations.Actionsmayinclude:ĥResearchorganizations,regulators,utilities,andregionalgridoperatorscouldaccelerateresearch,development,andadoptionofdistributionsystemreliabilitystandardsandrequirements.Thiscouldinvolveextendingexistingrequirementsfromtransmissionsystems(regulatedbyNERC)todistributionsystems(regulatedbystates)withappropriateadaptations.54Thesestandardscouldbestructuredtoreflectthechangingnatureofgridoperations,andDERsandVPPscouldbetreatedascriticalinfrastructureastheyscaleuptobecomecriticalresourcesforagrowingnumberofutilities.ĥDOE,inpartnershipwithresearchorganizations,utilities,regionalgridoperators,andotherVPPindustryleaderscouldhelpestablishgridcodes–operationalcoordinationframeworksthatgoverntherelationshipsofallparticipants(DERaggregators,distributionsystemoperators,andbulk-level-systemoperators)intheprovisionandmanagementofelectricgridservices,includingfromVPPs.StandardizationbecomesespeciallyimportantastheuseandsophisticationofDERaggregationservicesbecomesincreasinglycommonandautomatedinaddressingsystemdynamics.52Inanexampleofajurisdictionbuildingalignment,CAISOpubliclysupportedanopen-sourcemethodologyformeasuringdemandresponse(FLEXmeter)aftertestingitacross24,000residentialandcommercialcustomersparticipatingduringCalifornia’s2022heatwave.53Asananalogy,considermasteragreementscommonincommoditiesfuturetrading:InternationalSwaps&DerivativesAssociationforms.Theycanincludeitemssuchascontractterm,communicationprocesses,compensation,paymentmechanisms,confidentiality,creditrequirements,disputeresolution,andmore.54Standardsshouldbedevelopedinatransparentmannerandphasedinovertimetoavoidover-burdeninglegacysystems.46PathwaystoCommercialLiftoff:VirtualPowerPlantsPotentialsolution:AnarrowedsetofDERinterconnectionstandards&technologyanddatastandards.Actionsmayinclude:ĥDOE,researchorganizations,gridoperators,andVPPindustryleaders,couldmapwherealackofstandardsor,conversely,aproliferationofstandardscreatesfrictioningridoperationsanddevelopapathforward.55,xcivCreatingseamlessdataflowbetweenaggregators,consumers,VPPplatforms,andutilitieshasthepotentialtosubstantiallylowertransactioncostsforVPPdeployments.Keyareasforalignmentinclude:ÎDataanddeviceinteroperability(communicationsinterfacesbetweenDERs,DERMS,legacysystems,andothergridactorsystems).56ÎDataprivacystandards.Potentialsolution:Disseminationandadoptionofnationallyrecognizedbaselinecybersecuritymeasuresfordistributionsystemparticipants.Actionsmayinclude:ĥRegulators,utilities,andVPPscompaniescouldincorporateand/orrequirecommonbaselinecybersecuritymeasuresandresponsibilitiesthatensuresystemsaresecurebydesignandoperatedforresilience.57,xcvMeasuresmayinclude,forexample,multifactorauthentication,endpointdetectionandresponse,andencryption.xcviResponsibilitiesmayincludemethodologiesforassessingrisk,planningrisk-mitigationmeasures,andfundingandimplementingcost-effectivemeasuresinwaysthatareconsistentacrossgeographies.58,xcviiĥTofurthermitigatecyberrisk,allgridactors–particularlythoseusingcloud-basedITarchitecture–cancontributetocollectivedefensebysharinginformationonthreats.NationalinformationsharingmechanismsincludetheElectricityInformationSharingandAnalysisCenterandpartneringwithDOE’sEnergyThreatAnalysisCenterPiloteffortsinthefuture.xcviii55ThiseffortcanbuildontheNationalInstituteforStandardsandTechnology(NIST)FrameworkandRoadmapforSmartGridInteroperabilityStandardsAccess.Fordetail,seerelease4.0.56WorkisongoingacrossindustrygroupstocreatecommonstandardsforintegratingDERsintogridmanagement.ExamplesforEVinfrastructureincludetheAmericanNationalStandardsInstitute’sElectricVehiclesStandardsPanelRoadmapandtheOpenVehicleGridInterfaceProtocol(OVGIP);OVGIPisacommoncommunicationlanguageforEVsandthegriddevelopedbyautoindustryandenergyindustrygroups.AnexampleforsmarthomedevicesisMatter,aninteroperabilitystandarddevelopedbyTheConnectivityStandardsAlliancewithsupportfromAmazon,Google,Apple,andSamsung,andothers.AnotherexampleisOpenADR,whichstandardizesthemessageformatusedforAuto-DemandResponseandDERmanagementsothatdynamicpriceandreliabilitysignalscanbeexchangedinauniformandinteroperablefashionamongutilities,ISOs,andenergymanagementandcontrolsystems.57DOEiscollaboratingwithNARUC,industry,andotherpartnersondevelopingbaselinemeasuresfordistributionsystemcybersecuritythatcanprovidedirectionforindustrystandardsand/orrequirementsmandatedbystates.Formorerecommendedactionsonintegratingcyberresilienceintothedesign,implementation,operation,andmaintenanceofenergyinfrastructureandembeddedenergysystems,seetheDOE’s2022NationalCyber-InformedEngineeringStrategy.58Responsibilities,ratherthanstaticrequirements,arerecommendedtoavoidbare-minimumcomplianceorstiflinginnovation.Formoreinformation,seetheDepartmentofEnergy’sworkonCybersecurityforDistributionSystems,including,CybersecurityConsiderationsforDistributedEnergyResourcesontheU.S.ElectricGridandReportonCybersecurityofDistributionSystems.47PathwaystoCommercialLiftoff:VirtualPowerPlantsExampleactionsattheDepartmentofEnergy:ĥGridSolutionsprogram,acollaborationwithregulatorsandutilitiestodefinecoordinationandsystemrequirementstoenabletheutilizationofgridservicesfromDERsandVPPs:ÎDevelopinggridcodes,standardserviceagreements,andcodesofconductgoverningbusiness,market,andtechnicaloperationalrequirementsofallparticipantsintheprovisionandmanagementofservicesfromDERs;ÎDevelopingstandardreferencedesignsforthedistributiongridtoenableDERsutilizationandorchestration;ÎDevelopingguidelinesonthestageddeploymentoffoundationalandco-dependentgridassetstoenabletheutilizationandorchestrationofDERsandincorporatingthemintoplanningguidelinesforregulators;ĥDistributedEnergyResourcesCybersecurityRiskAssessmentandMitigationreportpublication;ĥDistributionsystemcybersecuritybaselinesdevelopmentaspartoftheNationalCybersecurityStrategy,ledbyNARUCthroughDOEfunding;ĥCyber-InformedEngineeringStrategydevelopmentforenergysystemarchitecture;ĥEnergyThreatAnalysisCenterlaunchforcybersecuritythreatcollaborationbetweenindustryandgovernmenttoenablecollectivedefense;ĥVPP-relatedresearch,development,anddeploymentprogramsfocusedonsystemsintegration(includingSHINES,ENERGISE,SolarForecasting,resilientcommunitymicrogrid):ÎDevelopmentofinverterandpowersystemmodels,optimalcontrolalgorithms,softwaretoolssuchDERMS,gridservicesfrominverter-basedresourcesandDERs,andsolargenerationandnetloadforecasting;ÎTestingattheNationalRenewableEnergyLaboratory’sAdvancedResearchonIntegratedEnergySystemsfacilitiesforsolar-plus-storage;ÎInterconnectionInnovationExchange(I2X)andotherprogramsforthedevelopmentofinterconnectionstandardsforinverter-basedresourceandDERstoensuresystemreliability;ÎCost-benefitanalysissupportforVPPsolutionsinvolvingdistributedsolarandenergystorage;ĥBuildingEnergyCodesProgramtosupportdevelopment,adoption,implementation,andenforcementofcodestoachieveenergyefficiency;ĥEVs@ScaleNationalLaboratoryConsortiumthatbringstogethernationallaboratoriesandkeystakeholderstoconductresearchanddevelopmenttoaddresschallengesandbarriersforhigh-powerEVcharginginfrastructuretoenablegreatersafety,gridoperationreliability,andconsumerconfidence.48PathwaystoCommercialLiftoff:VirtualPowerPlants4.iv.Integrateintoutilityplanningandincentives59KeytakeawaysĥFamiliaritywithVPPsremainslownationallyamongutilityregulators.ĥUtilityplanningrequirementsandcompensationstructuresareoftennotalignedwithsystem-optimalVPPdeployment.Revisingtheseframeworksischallengingforregulatorsanddifferentacrossjurisdictions.ĥTechnicalassistance(includingpersonnelincreases)forutilityregulatorscouldhelpexpandeffectivepracticessuchasintegrateddistributionsystemplanning,performance-basedratedesign,andall-sourceprocurementthatincreaseconsiderationofVPPsingridmanagementdecisions.ĥStatelegislatorscanconsiderintroducingorrevisingpoliciestopromoteVPPdeploymentinlinewithstategoals(e.g.,affordableelectricity,gridresilience,decarbonization).ĥUtilitiesthathavenotyetintegratedVPPsintogridoperationscanconsiderproactivemeasures–e.g.,distributionsystemmapping,loadforecasting,customerincentivedesign–tobegindeployingVPPsthatcangrowasDERadoptionaccelerates.ChallengesChallenge:FamiliaritywithVPPsremainslownationallyamongutilityregulators,includingPUCs/PSCs,theboardsofruralelectriccooperativesandpublicpowerutilities,andstatepolicymakers.WhileawarenessofDERsiscommon,manyregulatorsnotfamiliarwithapproachesforintegratingandutilizingDERsinVPPstoprovidevaluablegridservicesreliablyandcost-effectively.Thislackoffamiliaritywithpotentialuse-casesanddemonstratedsuccessfuldeploymentscanleadtoskepticismaboutVPPperformance.Challenge:ExistingmethodsforvaluingservicesfromVPPSandDERsarenotcomprehensive.ValuationofpotentialVPPbenefitsingridplanningandoperationsvariesbasedonstateandlocalprioritiesasdeterminedbylegislators,utilityregulators,60,xcixboardsofmunicipalutilitiesandruralelectriccooperatives,communitygroups,utilities,andregionalgridoperators.Inthiscontext,thelackofcomprehensivevaluationtoolshandicapsVPPsintwoways.First,whencost-benefitanalysesofaVPP(vs.analternativegridresource)underestimateorexcludeVPPbenefits,VPPsarelesslikelytobeintegratedintoutilityplans.Second,under-compensation(relativetosystemvaluecreated)limitsaVPP’sabilitytoreward–i.e.,recruitandretain–participants.Benefitsthatareoftenexcludedorunder-valuedinclude,butarenotlimitedto:resilience,greenhousegasemissionsreductionandclimatebenefits,improvedairquality,reducedT&Dcongestion,andsocioeconomicbenefitsforcommunities.Challenge:Aligningutilityplanningrequirementsandcompensationframeworksforsystem-optimalVPPdeploymentiscomplexandevolving.Withinstateutilityregulationframeworks,VPPsspanareasmanagedseparately,andregulatoryrequirementsandpracticesvarybystate.Eveninlightoftheirdiversity,existingplanningandcompensationframeworksfacecommonchallengeswhenitcomestoimprovedintegrationofVPPs.ĥAminorityofstates(about20)requireregulatedutilitiestofiledistributionplansthataddresstheintegrationandutilizationofDERs(amongotherissues).cRelatedly,regulatorsandutilitiesarechallengedwithdeterminingrational,stagedapproachesfordeployinggridtechnologytoenabletheintegration,utilization,andorchestrationofDER-basedassetsandtheservicestheyprovide.59StatepoliciesandthetreatmentofVPPsinutilityregulationsvarywidely;thefollowingchallengesdonotapplytoallstates/jurisdictions.60Fewstatecommissionsusesocietalcost-benefitcalculationstoday.Fordetail,seeLawrenceBerkeleyNationalLaboratory’sDatabaseofScreeningPractices.49PathwaystoCommercialLiftoff:VirtualPowerPlantsĥCommoncapex-drivencompensationschemescreateutilityfinancialdisincentivesforVPPdeployment.Approachesareneededforconsideringsharedinvestmentsbetweenutilitiesandthird-partyserviceproviders,orsharedsavingsbetweenutilitiesandcustomers.61ĥVPPsspantopicareasthathavetraditionallybeenhandledthroughseparateprocesses—forexample,planningprocesses,procurementprocedures,energyefficiencyprograms,demandresponseprograms,andratemaking.ĥMethodsforintegratingDERsviaVPPsareevolvingandrequirenewmethodstoevaluatetheircost-effectivenessgivenutilityoperationsandconstraints.Challenge:PUCs/PSCsmaylacktheresources,expertise,and/orcapacityneedednear-termtoa)reviseregulations,andb)scrutinizeutilitydistributionandresourceplansthatdonotconsiderVPPsand/orthefullrangeofVPPbenefits.Insomecases,ashortageofpersonnelbandwidthlimitsthespeedofprogress.Regulatorsoftenlackthefinancialresourcesandpersonneltoundertakeeffortstofullyunderstandandassessneededregulatorychanges,especiallyasthepotentialforgridservicesfromcustomersandthird-partiescontinuestoexpand.PotentialsolutionsPotentialsolution:ComprehensivevaluationofVPPbenefitstoimprovecost-benefitassessmentsindistributionsystemplanning,andtoinformstateandlocalpolicydecisions.Actionsmayinclude:ĥNationallaboratoriesandotherpublicandprivateleadersinenergyanalyticscancontinuetodevelopandhelpdeploymodelingtoolsthatmorecomprehensivelyvalueVPPs.62Thismayinvolvenewtoolsand/oradaptingtheuseofexistingtoolstomoreholisticallyvalueVPPbenefits.ĥInadditiontomodelingtoolsthatestimateVPPbenefits,decisiontoolsthatincorporatesuchbenefitsintopolicydecisionscouldhelpstateandlocalpolicymakersshapeutilityplanningobjectives.Forexample,statepolicymakersmaydecidetorequireutilitiestoconsideracomprehensivesetofsocietalcostsandbenefitsinplanningdecisions,ormaydecidetointroducemandatesforinvestmentsinresilience,decarbonization,orequity(viaVPPsorotherwise).Communitiesandutilitiesshouldbeengagedindecision-makingforsuchinvestments.Potentialsolution:Integrateddistributionsystemplanningrequirementsforutilities.Actionsmayinclude:ĥPublicandprivatesectorstakeholderscouldincreaseresourcesforneworexisting63technicalassistanceprogramsforutilityregulatorstosupportdistributionsystemplanningpractices.EnhancedplanningpracticescanhelptounderstandtheevolutionofconsumerDERandtheirinteractionwiththegrid,andtoformulatefoundationalgridinvestmentstrategiesalignedwithpoliciesandcustomerinterests.64,ciPlansshouldintegratewithregionaltransmissionplanning,andconsiderlong-term(morethanfiveyears)forecastsandscenariosforelectricitydemand,DERadoption,andclimateparameters.ÎAkeyenablerofsuchplanningisvisibilityintodistributionsystemconstraints–forexample,hostingcapacitymaps.Suchmapscanbepairedwithinformationonthelocationofexistingandanticipated61Wheretechnologicalupgrades,suchassystemsforenhancingthevisibilityandorchestrationofDERassets,arerequiredtoenableVPPs,decisionmakerswhoformulateandapprovegridinvestmentsmustdeterminethestagedstrategyfordeployingtheseupgradesandtheirassociatedcosts.62Deploymentsupportforregulatorsandutilitiesmayincludepublishingguides,hostingwebinars,postingvideos,anddirecttechnicalassistance.63ExistingprogramsareoperatedbyorganizationssuchasLawrenceBerkeleyNationalLaboratory,RegulatoryAssistanceProject(RAP),NARUC,RMI’sVirtualPowerPlantPartnership(VP3),andothers.Forexample,NARUCpublishesguidanceforPUCs/PSCs,hostsworkshops,andprovidesfinancialtools.Intheirinitialmemberconveninglastspring,VP3setgoalsofadvancingVPPresearchandcommunication,conveningutilitiesandregulators,anddevelopingpolicystrategiestosupportdeployment.64Forexample,theOrlandoUtilitiesCommissionusedadistributedenergygenerationforecastingtooldevelopedbytheNationalRenewableEnergyLaboratory(thedGenmodelingtool)tosupportthedevelopmentofalong-termCleanEnergyplan.Thebuilding-levelgranularityofthemodelgavetheCommissionvisibilityintothepotentialscaleandlikelylocationofdistributedsolargenerationresourcesthrough2050,andultimatelyledplannerstopullforwardthetargetretirementdateforcoalresources.50PathwaystoCommercialLiftoff:VirtualPowerPlantsgridassets,suchasEVchargingandstorage,todirectVPPdeployment(andanynecessarysupportinggridinvestments)tothehighest-valuelocations.65ĥStatelegislatorscanconsidermandatingintegrateddistributionsystemplanning.Wherenotalreadyinplace,statescanconsiderrequiringutilityplanningpracticesthataddressstategoals(includingondecarbonization,resilience,andequity).Potentialsolution:Alignmentofutilityincentivestructuresandratedesignforsystem-optimal(cost-effective,reliable,clean,equitable)resources.Actionsmayinclude:ĥPublicandprivatesectorstakeholderscouldincreaseresourcesfortechnicalassistancetosupportimplementationofmeasuressuchas:ÎPerformance-basedpaymentsorratedesign.Utilitycompensationcanbetiedtogoaloutcomessuchasenergyefficiency,66emissionsreduction,resilience,capexdeferral,orother.67,ciiÎPotentialmodificationofcostrecoverypractices.ModificationscouldallowutilitiestocapitalizethecostsofVPPs(e.g.,implementationofsoftwareplatforms,participantrecruitment)thatwouldotherwisebetreatedasoperationalexpenses.ÎAdvancedratedesignthatbetterreflectsthehourlycostand/oremissionsintensityofelectricity.Advancedrates,suchastime-varyingrates,havethepotentialtohelpbalancesupplyanddemandandcancreateenergyarbitrageopportunitiesforsometypesofVPPs.Utilitiesmayconsiderthatovertime,ahighnumberofDERsusedbyconsumersrespondingtothesamepeakvs.off-peakpricesmayresultinnewdemandpeaktimestomanage.TheactivemanagementofDERsbyaVPP(forexample,tostrategicallystaggerovernightEVcharging,ortoadaptinreal-timetoanunexpectedgenerationshortfall)mayofferhighervaluewhileplacinglessonusonconsumers’attentionandbehaviorchange.ÎUpdatedprocurementprocesses,including‘allsource’procurementopentoVPPs.ĥStatelegislatorsandregulatorscanconsiderdirectmeasures,suchasrequirementsthatutilitiesuseallsystem-optimalVPPsorthatVPPsmustbeincludedindistributionandintegratedresourceplanningpracticeswherecost-effectiveandotherwisealignedwithstateenergygoals.Indirectmeasuresmayincludecleanenergymandates(e.g.,renewableportfoliostandards)thatincentivizeintegrationofdistributedsolar,buildingelectrificationprogramsthatpromoteDERadoption,amongothers.Potentialsolution:Proactiveleadershipamongutilities–incollaborationwithregulators–inVPPplanningandinvestmentproposals.68,ciii,civActionsinclude:ĥUtilitiesandotherloadservingentitieswhohavenotyetintegratedVPPsintogridoperationscanconsidertakingthefollowinginitialstepscv:ÎConvertpolicies,consumerpreferences,andDERadoptionforecastsintoasetofobjectives–e.g.,increasingrenewablesmix,mitigatinggridimpactsofbuildingandtransportationelectrification,reducingemissionsofairpollutants.ÎConsiderpotentialcustomerincentivesandratestructuresthatoptimizeVPPbenefitsforboththegridandutilitycustomers.65Hostingcapacitymapsandloadservingcapacitymapscanbeusedbydeveloperstoidentifylocationswhereinterconnectionisviable(e.g.,forEVcharginginfrastructure,communitysolar,andotherprojects),whicheliminateswastedtimeprospectinginareaswithgridconstraints.Additionally,granularvisibilityintogridconditionshelpsutilitiesdeterminealocalavoidedcostvalueofanon-wiresalternativethatwouldbereflectedinVPPcompensation.This,inturn,candirecttargeted,location-specificVPPparticipantrecruitment.OnepotentialsolutiontoincreaseDERlocationvisibilityisavoluntary,cross-utilityDERregistry,suchasthatcoordinatedbynonprofitgroupCollaborativeUtilitySolutions.66EnergyefficiencyprogramsmusttakeintoaccountthehourofdemandreductiontocreateincentivesforVPPstomanagepeaks.67Fordetail,see‘DemandFlexibilitywithinaPerformance-BasedRegulatoryFramework,’NARUC2023.68ExamplesofutilitiesalreadyintegratingVPPsatscaleintooperationsandplanninginclude:OtterTailPowerCompanyhasanexistingdemandresponseportfoliothatrepresents15%ofsystempeak(winter);DakotaElectricAssociationhasover40%ofmembersparticipatinginademandresponseprogramandcanreduceapproximately25%ofpeakdemandwithmanagedloadassets;PortlandGeneralElectrichasagoalthatby2030,VPPswillenablecustomerchoicesforshiftingenergyusethatwilldelivera25%reductioninpeakload.51PathwaystoCommercialLiftoff:VirtualPowerPlantsÎUndertakegranularDERadoptionandloadforecastingaspartofintegrateddistributionplanningtounderstandinvestmentneeds.ÎEvaluatecostsandbenefitsassociatedwithaddressinglocationalandtemporalgridneeds.ExampleactionsfromtheDepartmentofEnergy:ĥGridInnovationProgramthatprovidesfinancialassistancetostates,Tribes,localgovernments,andpublicutilitycommissionstodeployprojectsthatuseinnovativeapproachestoT&Dandstorageinfrastructuretoenhancegridresilienceandreliability;ĥIntegratedDistributionSystemPlanningTrainingandGuidelinesdevelopmenttoassistregulatorsindevelopingrequirementsfor,andinassessing,integrateddistributionplansofutilitiesthatconsiderintegratingandutilizingDERservices,aswellasinunderstandingneededinvestments;ĥCleanEnergyInnovatorFellowshipfundsrecentgraduatesandenergyprofessionalstosupportpublicutilitycommissions,co-ops,PuertoRicanenergyassociations,tribalutilities,andothergridoperators;ĥStateEnergyProgramprovidesfundingandtechnicalassistancetoenhanceenergysecurity,advancestate-ledinitiatives,andincreaseenergyaffordability;ĥDERCompensationInitiativetoengageregulatorsviaacooperativeagreementwiththeNationalAssociationofRegulatoryUtilityCommissioners.4.v.IntegrateintowholesalemarketsKeytakeawaysĥFERCOrderNo.2222instructsISOs/RTOstoallowparticipationofVPPsdirectlyinwholesalemarkets.ĥImplementationtimelinesandVPPparticipationrequirementsvarybyregion,andmultipleISOs/RTOsarefacingsignificantchallenges,includingITlimitationsandpersonnelcapacityconstraints,thatmustbeaddressed.ChallengesChallenge:DuetoinstitutionalandtechnologicalhurdlesinimplementingFERCOrder2222,someISOs/RTOshaveproposedtimelinesaslongas2030orconservativeparticipationrequirements.HowandwhenISOs/RTOsimplementFERCOrder2222willdetermineaVPP’sabilitytoparticipateintheregion’swholesalemarkets.MultipleISOs/RTOsciteoperationalbarrierstotimelyandinclusiveintegrationofVPPs.Forexample,MidwestIndependentSystemOperator’s(MISO)proposedplanwouldpermitVPPstoparticipatein2030;reasonsincludeaprerequisite,multi-yearupdatetolegacysoftwaresystems.69,cviNewYorkIndependentSystemOperator(NYISO)proposesaminimumcapacityof10kWforeachindividualDERinanyaggregationinorderforaVPPtobeeligibleforparticipation(thiswouldexcludemanyresidentialDERtypes);reasonsincludealackofpersonnelcapacitytomanageenrollmentandauditingofahighvolumeofDER.70,cvii69InitsApril2022lettertoFERC,MISOwrote,‘benefitsoftheseaggregationsareunknownandrelativelylimitedbytheexistingretailregulatoryconstructinmanyofthestatesintheMISORegion…potentialquantityofdistributedenergyresourceaggregations,bothnumberofaggregationsandcapacityinmegawatts,isunknown.”70InaSeptember2022presentation,NYISOwrote,‘GiventheNYISO’scurrenttechnicalresourcesandcapabilitiesforinitialDERdeployment,allowingsmall(<10kW)DERwillrequireasubstantialamountofadditionalmanualworkinordertocompletetasksthatarecoretothetimelyparticipationofDER.”52PathwaystoCommercialLiftoff:VirtualPowerPlantsSpecifichurdlescitedacrossISOs/RTOsinclude:ĥGainingsufficientreal-timevisibilityofthestateofDERsandwhethertheycanbedispatchedatagiventimedependingupontheoperatingrequirementsofthedistributionsystem;71ĥHavingagreementsandsupportingprocessesinplacerelatingtoensuringparticipatingDERscomplywitheligibility,dispatchability,anddataflowrequirementstosupportgrid,marketandsettlementoperations;ĥHavingtheappropriatecontroltechnologiesinplacetoenabletheorchestrationofDERssotheycanprovideservicestothegridand/orcustomersinareliablemanneratlargescale.PotentialsolutionsPotentialsolution:TargetedsupportforISOs/RTOstoaccelerateITupgrades,augmentpersonnel,andresolveoperationalbarrierstointegratinghighvolumesofDERsintoplanningandmanagementofbulkpowersystems.Actionsinclude:ĥDOEcanconsiderplayingamoreactiveroleinconveningindustry–utilities,regulators,VPPplatformcompanies,individualDERowners–todeterminerequirements.Forexample,technicalassistanceprogramssupportedbyDOEandnationallabsmaybedirectedatprovidingnear-termITandpersonnelsupporttoaccelerateandexpandVPPparticipationinwholesalemarkets.ThismayincludeenhancedplanningprocessesforISO/RTOtocaptureopportunitytouseVPPsforcapacityandreliability.ĥLong-term,ISOs/RTOsmayconsiderintroducingnewproductsdefinedspecificallyforVPPs(e.g.,flexibledemand)withfit-for-purposeperformanceexpectations,eligibilitycriteria,andmetricsthatbalancecosttoimplementwithexpectedsystem-widebenefits.ExampleactionsfromtheDepartmentofEnergy:ĥOperationalCoordinationGuidelinesdevelopment,vetting,anddisseminationthataddresstherolesandresponsibilitiesofallparticipants(DERowners,VPPs,distributionsystemoperators,bulksystemoperators,andregulators)tosupportDERintegrationandscaleuseofDERservices;ĥTechnicalassistancefortheuseandapplicationsofDERstosupportdistributionandbulkpowersystemoperationsforISO/RTOs,regulators,states,andcommunities;ĥGridResilienceUtilityandIndustryGrantsthatfundcomprehensivetransformationaltransmissionanddistributiontechnology.71Examplesofoperationalcomplexitiesinclude:Protectionschemestoensurethatcustomerandgridsystemsareprotectedfromover-currentorover-voltagesituations,especiallyinthecaseofbi-directionalflowwithVPPs;Voltageandreactivepowermanagement;Outagemanagement,includingpotentialneedtoisolateaportionofthegridonshortnotice;Right-sizingoflines,transformers,andotherequipmenttohandlebi-directionalflow;andmore.53PathwaystoCommercialLiftoff:VirtualPowerPlantsChapterFive:MetricstoTrackProgressGiventheinfluenceofjurisdiction-specificutilityregulationandenergypolicyovertheviabilityofVPPdeployment,metricsshouldbetrackedattheregional,state,and/orutilitylevel.Communityand/ordemographicdetailshouldbecapturedtotrackbenefitsdistributionandalignmenttoJustice40Initiative.Threecategoriesofmetricsshouldbetracked:ĥOutcomestrackthevaluecreatedbyVPPsasrelatestobroadersocialandenvironmentalgoals.ĥLeadingindicatorssignalmarketreadinessforDERandVPPadoptionandgrowth.ĥLaggingindicatorstrackobservedprogresstowardVPPLiftoff.Thefollowingnon-exhaustivelistpresentspotentialcategoriesofmetrics.VPPLiftoffOutcomePotentialvalueĥAffordabilityofelectricityasaresultof,forexample:ofVPPsatscaleÎPeakdemandreductionsandassociatedinfrastructureinvestmentdeferral(transmission,distribution,and/orgeneration)ÎReducedelectricityconsumptionduetoenergy-efficientDERsÎIncreasedutilization(capacityfactor)ofT&DinfrastructureandcleangenerationassetsĥReliabilityandresiliencebenefitsasindicatedby,forexample:ÎAvoidedoutagesÎShortenedoutagesÎReducednumberofendusersimpactedbyoutagesĥGreenhousegasemissionsandairpollutionreductionasaresultof,forexample:ÎReducedprocurementfromfossil-fueledpeakerplants,netofpotentialemissionsfromincreaseduseofnon-peakinggenerationassetsÎReducedcurtailmentofutility-scalerenewablesassets(andpotentiallong-termimplicationsforincreasedrenewablesdeployment),aswellasincreasedutilizationofcleanfirmgenerationresourcesĥCommunitybenefitsincludingenergyjobcreationandretentionassociatedwithDERandVPPdeployment,andassociatedindicatorsofjobqualityandworkforceequity(e.g.wages,benefits,workforcedemographics)54PathwaystoCommercialLiftoff:VirtualPowerPlantsImperativeLeadingindicatorsLaggingindicatorsExpandDERadoptionwithequitablebenefitsĥCapitaldeployedforlow-costfinancingofDERsandassociatedDERadoptionsupport(e.g.,homeweatherization)ĥDERrebateandtaxincentiveuptakeĥBuildingcodesthatpromoteVPP-enabledDERadoptionĥWorkforcedevelopmentinitiativesrelatedtoDERandVPPdeploymentĥAvailableDERcapacity,bytype,thatindicatesthepotentialscaleofVPPgridservices:ÎDERnameplatecapacitybytype(MWflexibledemand;MWdistributedgeneration;MWandMWhdistributedstorage)»EVs,EVchargers(unidirectional,bidirectional)»Smartthermostats/electricHVAC,incl,heatpumps»Smartelectricwaterheaters»BTMbatteries»Distributedsolar»OthersÎFlexiblecapacityfactorsbytype,whererelevantĥDERcapacity/adoptionratesĥGoodjobscreatedand/orretainedSimplifyVPPenrollmentĥConsumerawarenessofVPPsĥAdoptionofenrollmentstreamliningmeasures;examplesinclude:ÎAutomaticenrollmentwithDERpurchaseamongDERmanufacturersandretailersÎOpen-sourceapplicationinterfacesforDERsoftwareĥEnrolledVPPparticipantsandenrolledDERsĥDERcapacityenrolledinVPPsÎEnergyÎCapacityÎAncillaryservicesÎPotentialnewproductsIncreasestandardizationinVPPoperationsĥPublicandprivatesectorcollaborationandresourcingforthedevelopmentofVPPoperationalstandardsĥPublicandprivatesectorcollaborationandresourcingforthedevelopmentofdistributionsystemstandardsĥBreadthofadoptionofopen-sourceforecasting,planning,operations,andmeasurementtools(datasets,modelingmethods)relatedtoDERandVPPdeploymentĥStandardizationofVPPserviceagreementsacrossjurisdictions;forexample:ÎReductioninnumberofdifferentinterconnectionstandardsacrossutilitiesforagivenDERÎCommondatastandardsanddatasharingpoliciesÎCybersecuritybaselines55PathwaystoCommercialLiftoff:VirtualPowerPlantsImperativeLeadingindicatorsLaggingindicatorsIntegrateintoutilityplanningandincentivesĥFavorableregulatoryframeworksforVPPtoparticipateinretailmarkets;examplesinclude:ÎLong-termintegrateddistributionsystemplanningrequirements(includingDERadoptionscenarios)ÎNon-wirealternativesrequirementsÎPerformance-basedratemakingÎInclusiveprocurementprocessesthatpermitparticipationfromVPPs(e.g.,‘allsourceprocurement’)ÎEnergyefficiencyresourcestandardsĥNumberofutilitiesandcommunitychoiceaggregatorsusingVPPstoaddress10-20%ormoreofforecastedpeakdemandĥTotalVPPcapacityprocured,(andutilized)inagivenyearÎEnergyÎCapacityÎAncillaryservicesÎPotentialnewenergyproductsIntegrateintoĥFavorableregulatoryframeworksĥTotalVPPcapacityprocured,(andwholesaleforVPPtoparticipateinwholesaleutilized)inagivenyearmarketsmarkets;examplesinclude:ÎFERC2222ImplementationtimingandapproachesÎEnergyÎCapacityÎAncillaryservices56PathwaystoCommercialLiftoff:VirtualPowerPlantsAppendixI.KeyconceptsandtermsinthisreportBehindthemeter(BTM)vs.Frontofthemeter(FTM)‘BTM’describesassetsthatarelocatedonthecustomer’ssideoftheelectricitymeter.‘FTM’describesassetsthataredirectlyconnectedtotheelectricitygrid,infrontofacustomer’smeter.FTMassetsdonotcontributetooroffsetacustomer’smeteredload,thoughtheymaybelocatedonthesamesiteasacustomer.VPPsmayincludeDERsthatarebothBTMandFTM.DemandresponseDemandresponseisthepracticeofcurtailingconsumptioninresponsetopeakdemandsignalsfromgridoperators.Responsesinclude,forexample,turningdownHVACsystems,orreschedulingindustrialproductionlineoperations.Energy&capacity(nameplatecapacity,flexiblecapacity)Energyistheamountofenergyproducedorconsumedovertime,measuredinkilowatthours(kWh).Capacityreferstothemaximumpoint-in-timeoutput(forgenerationorstorageassets)ormaximumdraw(fordemandassets)ofelectricalequipment,measuredinkilowatts(kW).Insomemarkets,utilitiesmayprocureelectricitycapacitytodrawonduringaspecifiedfuturewindowoftime—essentiallyaforwardenergyoption.Forexample,autilitymayprocure100MWofcapacityforafuturetwo-hourwindow,thenlaterdrawupto100MWforthosetwohours—i.e.,upto200MWhofenergy.Nameplatecapacityisthemaximumpowerdraworpoweroutputofanenergyassetasdefinedbythemanufacturer.Forexample,afastEVchargerhasahighernameplatedemandcapacitythanawaterheaterbecauseitdrawsmoreenergy.Alargearrayofsolarpanelshasalargernameplategenerationcapacitythanasmallarray.StorageDERhavebothpoint-in-timemaximumelectricityoutput(nameplatecapacitymeasuredinkW)andmaximumamountofenergystored(nameplatestoragecapacitymeasuredinkWh).Inthisreport,flexiblecapacityofaDERreferstotheactualcapacityavailableforaVPPtomanage.ConversionfromnameplatecapacitytoflexiblecapacityinvolvesvariablesthatdifferbyDERtype.Forexample,theflexiblecapacityofanEVchargeravailabletoaVPPinagivenwindowoftimedependsonwhenandforhowlongavehicleispluggedinandthechargingneedsoftheEV’sdriver.Theflexiblecapacityofabehind-the-meterbatterydependsontheowners’preferredminimumstateofchargetopreserveenergyforemergencies(outages).Electricitydemand,dispatch,generation,loadElectricitydemandreferstoenergyconsumption–i.e.,theflowofpowerto,andusedby,aDER.ElectricitydispatchreferstothecontrolledflowofpowerfromaDERthateitherstoresorgenerateselectricity.Electricitygenerationthatisnotcontrolled(e.g.,distributedsolarorwindwithoutstorage)isnotconsidereddispatchable.Thetermelectricalloadgenerallyreferstothedemandforelectricitynetofanylocallysuppliedelectricityfromdistributedgenerationorstoragethatreducetheamountofelectricitythegridneedstoprovidefromcentralizedassets.ResourceadequacyResourceadequacyreferstotheabilityoftheelectricgridtosatisfytheend-userpowerdemandatanytime;Itisanassessmentofwhetherthecurrentorprojectedresourcemixissufficienttomeetcapacityandenergyneedsforaparticulargrid.57PathwaystoCommercialLiftoff:VirtualPowerPlantsII.Illustrative24-hourelectricalloadcurvein2024,2030,2050Note:“Netload”isthegrossdemandminusexpectedsolarandwindgeneration.ProfilesrepresenthourlyaveragesforallsummerdaysforaregioninPJMundertheMid-CasescenarioinNREL’sCambiumdataset.PJMrepresentsafossildependentregionthathaveaverydifferentnetloadshapeinlateryearswithincreasedrenewabledeployment.III.FERCdefinitionofDERandDERAggregatorFERCdefinitionofDER:“Anyresourcelocatedonthedistributionsystem,anysubsystemthereoforbehindacustomermeter.Theseresourcesmayinclude,butarenotlimitedto,resourcesthatareinfrontofandbehindthecustomermeter,electricstorageresources,intermittentgeneration,distributedgeneration,demandresponse,energyefficiency,thermalstorage,andEVsandtheirsupplyequipment.”FERCdefinitionofDERAggregator:“Theentitythataggregatesoneormoredistributedenergyresourcesforpurposesofparticipationinthecapacity,energyand/orancillaryservicemarketsoftheregionaltransmissionorganizationsand/orindependentsystemoperators.”58PathwaystoCommercialLiftoff:VirtualPowerPlantsIV.VPPEvolutionSource:Industryinterviews,Companywebsites,NewportConsulting59PathwaystoCommercialLiftoff:VirtualPowerPlantsV.VariationacrossVPPs60PathwaystoCommercialLiftoff:VirtualPowerPlantsVI.EnablinggridsoftwareandhardwaretechnologiesforVPPsThetablebelowcontainsexamplesoftechnologiesthatenableVPPsandadescriptionofthetypicalroleofthetechnologyinVPPs.NotallVPPsrequirealltechnologieslisted.SOFTWARETechnologyDescriptionRolewithinaVPPAdvancedADMSdifferentiatefromtraditionalADMSaretypicallydeployedbytheentityresponsibleDistributiondistributionmanagementsystemsforthesafe,efficientandreliableoperationoftheManagementbyprovidingnext-generationdistributiongrid(typicallyanelectricitydistributionSystem(ADMS)controlcapabilities.Thisincludesutilityordistributionsystemoperator).ADMScanmanagementofhighpenetrationsensurethedeploymentandcontrolofDERs,eitherofDERs,closed-loopinteractionindividuallyoraggregatedasaVPP,doesnotstrainororcontrolwithconnectedDERsviolateoperatingrequirementsofdistributionsystems(includinggrid-interactivebuildings),anddoesnotcauselocalpowerqualityissues.ADMSandintegrationwithutilitymeterfacilitateVPPparticipationingridservicesthroughmanagementsystems,assetdata,programssuchasnon-wiresalternatives(NWA)andandbillingsystems.ADMScanbeacapitalinvestmentdeferral.ADMScanalsoenablelocalsoftwareplatformthatsupportsthecapacityandpowerqualitymanagement.fullsuiteofdistributionmanagementandoptimizationfunctions,includingautomationoffunctionslikeoutagerestoration.DistributedDERMSaresoftware-basedsolutionsInthecontextofVPPs,DERMSusedbyVPPoperatorsEnergyResourcetomonitor,forecast,andcontrolgrid-actastheinterfacebetweentheaggregationofDERsManagementconnectedDERsacrosscustomer,andtheutilityoroff-taker.DERMScanalsobeanSystem(DERMS)grid,and/ormarketconditionsinreal-time.Theseassetsmaybeutility,third-party,orcustomer-ownedanddirectlyorindirectly(suchasthroughanaggregator)controlledbyanoff-taker,suchasautility.applicationthatintegrateswithanADMS.DERMSplatformsforecastandoptimizeDERdispatchtomaximizethevalueoftheDERs.WhileADMSensuresreliableandaffordableelectricityfromallsources,DERMScontributetoelectricityreliabilityandaffordabilityfromDERassetsspecifically.VPPscanoperatewithoutADMS,butADMSisimportanttoenablelargescaleparticipationofVPPsintheoperationalmanagementofpowersystems.DemandResponseDRMSaresoftware-basedsolutionsDRMScanbeintegratedwithaDERMScontrollingandManagementthatincludetheadministrativecoordinatingVPPstofacilitateparticipationindemandSystem(DRMS)andbusinessfunctionsneededfordemandresponsemanagement.Theycoordinatekeysystemsinvolvedindemandresponse.responseprograms.MarketInterfacesMarketinterfacesareabroadcategoryofsoftwareplatformsthatfacilitatetheparticipationofassetsinwholesalemarketsorloadflexibilityplatforms.MarketinterfacesallowVPPstooffergridserviceswithouthavingtodevelophardwareandsoftwareintegrationsforeverywholesalemarketorloadflexibilityprogram.Theyenableenergy,capacity,demandresponse,andwholesalemarketparticipation.61PathwaystoCommercialLiftoff:VirtualPowerPlantsHARDWARETechnologyDescriptionRolewithinaVPPGatewaysGatewaysaredevicesthatfacilitatecommunicationandexchangeofdataandcontrolsignalsbetweentheloadservingentityandFTMorBTMassetssuchassolarandstorage.Gatewaysassistinintegration,communication,anddispatchofenergyassetstoprovideservicesbasedonmarketandgridsignals.Insomeapplications,gatewaysmaycontainsomeofthelogicusedtodispatchon-siteassetsbasedoneventsorcommandssentfromacentralizedDERMSplatform.GatewayscanalsofacilitateintegrationofassetswhereaDERequipmentmanufacturerorvendorhasnotprovidedtheirowncloudbasedplatform,API,orcompliancewithacommunicationprotocolthatfacilitatesgridservices.AdvancedMeteringAMI,or‘smartmeters,’areAMIcanbeusedtomeasureandcommunicatetheInfrastructure(AMI)usedtomeasureacustomer’senergyconsumptionduringsettimeintervals.AMIincludestechnologiestomeasureandcommunicateenergyuseandotherdataandnotificationsatintervalsthataregranularenoughtosupportgridandmarketoperations.Moreadvancedfunctionscanincludeadditionalgridsensingfunctions.performanceofindividualsitesparticipatinginaVPP.IntervalmeterdatafromAMIisusedinmanyVPPsasthebasisforcompensatingparticipants.MoreadvancedsmartmeterscanactasgridsensorstosupportmorecomplexusecasesforVPPs.AMImayalsoprovidereal-timevisibilityintosystemloadandcanfacilitategridoperatorsdispatchingVPPstosupportdistributionsystemoperation.AMIcanalsofacilitategridoperatorsprovidingadynamicortime-varyingratetocustomerstoincentivizeloadflexibility.DistributedsolarDistributedsolar,ordistributedphotovoltaics(PV),aresolarenergyresourcesthataredeployedincloseproximitytotheendusersofthepower.Thiscanincludesolarthatisbehindacustomermeter,butalsomayincludeothermodelsfordeployment,suchascommunitysolar.DistributedsolarcanbeaggregatedwithinaVPPtoprovidecapacity.WhenaggregatedwithotherflexibledemandDERssuchasbatteries,EVchargers,andconnecteddevices,distributedsolarcanprovideasourceofcarbonfreeenergy.Solarisincreasinglyinstalledwith“smart”or“gridsupport”invertersthatarecompliantwiththeIEEE1547technicalstandardforinterconnectingdistributedenergyresourceswithelectricpowersystems.Themostrecentrevision,IEEE1547-2018cviii,helpsfacilitatecommunicationbetweenutilitiesandaggregatorsandDERs,andhelpsenablethesecureexchangeanduseofinformation.IEEE1547-2018compliantinvertersalsohavefunctionsthatcansupportgridreliability,suchasreactivepowerabsorptionandproduction,thatcanbeaggregatedinaVPPasagridservicetoprovideadditionalrevenuestreamsforVPPownersandoperators.Gridservicesprovidedinclude:Energy,ReactivePowerandPowerQuality(withIEEE1547-2018compliantinverters),Resilience(whenpairedwithenergystorage).62PathwaystoCommercialLiftoff:VirtualPowerPlantsStationaryEnergyDevicesthatcancaptureenergyStationaryenergystoragesystemscanprovidebackupStorage(including,producedatonetimeforusepowerforsitesandassistinloadshiftingorgridservices.butnotlimitedto,atalatertime,generallyusedWithinVPPs,mostbatteriesarepairedwithonsitebatteries)toreduceimbalancesbetweenenergyproductionandenergydemand.Energystorageincludesmechanical,electro-chemical,andthermaltechnologies.Ingeneral,onlymechanicalandelectro-chemicaltechnologycandeliverelectricitybacktothegrid/load(energyexport)inDERapplications.generation(e.g.,distributedsolar),butmayalsobeinstalledinstandaloneconfigurations.Ineitherconfiguration,batteriescanhelpincreasesiteandgridresilienceandreliability.EnergystoragetechnologiesprovideahighlydispatchableresourceforbothcapacitybuildandcapacityreduceinaVPPandarewellsuitedtoprovideancillaryservicesandparticipateinnon-wiresalternativesprograms.StoragealsohelpsfirmintermittentrenewablesandallowsVPPstoshiftenergyproducedtobeusedatothertimesofday.Gridservicesprovidedinclude:Energy,Capacity,RegulatingReserves,ReactivePowerandPowerQuality(withIEEE1547-2018compliantinverters),FrequencyResponse,Resilience.OtherConnectedDERsOtherConnected(orgrid-enabled)DERsareanyindividualtechnologiesthatconnectatthecustomersiteandtypicallydownstreamofautilitymeter.Theseincludediscreteassetsorloadsthathaveenhancementstoenableconnectivityandcontrol,eitherlocallyorbyaremotethirdparty.Examplesofdevicesorappliancesnotdiscussedelsewhereinthistableincludecommercialandresidentialrefrigeration,advancedlightingcontrols,plugloadcontrols,plugloadcontrollers,clotheswashersanddryers,andresidentialorcommercialdishwashers.ConnectedDERsareaggregatedtobuildthetotalcapacitythatisavailabletobecontrolledaspartofaVPP.Dependingonthedevice,theconnectedDERcanprovideloadflexibilityatavarietyoftimescales.InVPPswithmultipleassettypes,theloadflexibilityofheterogenousassetscanbestackedtoparticipateingridservicesacrossdifferenttimescales.63PathwaystoCommercialLiftoff:VirtualPowerPlantsVII.PotentialgridservicesThetablebelowlistsservicesthatmaybeprovidedbyDERs,todayorinthefuture.ItwasprimarilydevelopedasasupportingreferencedocumentfortheDOE’sOperationalCoordinationandIntegratedDistributionSystemPlanningprogramstofacilitateappliedresearchandindustrydiscussions.Thislistincludesservicesasmaybeapplicableinthebulkpowersystem,distributionsystem,andwithintheedge(e.g.,customerandcommunity).Foradditionalinformation,includingservice-specificperformanceattributesandinformationsources,seeDOE’sBulkPower,Distribution&EdgeServicesDefinitions.BulkPowerSystemEnergyThegenerationoruseofelectricpowerbyadeviceoveraperiodoftime,expressedinkilowatt-hours(kWh),megawatt-hours(MWh),orgigawatt-hours(GWh)astransportedacrossatransmissionsystem.RegulatingreservesRegulationServiceprovidesforthemanagementoftheminute-to-minutedifferencesbetweenloadandresourcesandtocorrectforunintendedfluctuationsingeneratoroutputtocomplywithNERC’sReal-PowerBalancingControlPerformanceStandards(BAL-001-1,BAL-001-2)FrequencyresponseTheabilityofasystemorelementsofthesystemtoreactorrespondtoachangeinsystemfrequencyformaintainingscheduledInterconnectionfrequencyatsixtycyclespersecond(60Hz).InertialResponseInertialresponseinjectsstoredkineticorbatteryenergyintothesystem,slowingdownthedeclineinfrequencytoprovidetimeforotherreserveproducts(includingprimaryfrequencyresponse(PFR),whichisthenextstageofreservedeployment)todetectthosechangesandrespondaccordingly.PrimaryFrequencyResponse(PFR)Automaticandautonomousresponsetofrequencyvariationsthroughagenerator’sdroopparameterandgovernorresponseorenergyinjectionbygridfollowinginverters,orresponsebyload.FastFrequencyResponse(FFR)Fastfrequencyresponsecombinescharacteristicsofinertiaandprimaryfrequencyresponse.Itisessentiallyanenergyinjectionthatisprovidedalmostimmediatelyfollowingafrequencydeviation,thatprovidessupportbyreducingtherateofchangeoffrequencytherebyincreasingtheminimumfrequency,andreducingthesteady-statefrequencydeviationduetoamorecontinuousinjection.SecondaryFrequencyResponseTomaintaingridfrequency,andtohonorscheduledenergyflowsbetweendifferentBalancingAuthorities(BA).ItismeasuredthroughNERCControlPerformanceStandards(CPS1andCPS2–retired),andthenewBalancingAuthorityAreaControlErrorLimit(BAAL)scorerequirements.TertiaryFrequencyResponseMaintainscheduledenergyflowsbetweendifferentBAs,tomaintaintheBAgeneration-loadbalance(load-followingreserve),ormaintaingridreliabilityunderN-1contingencies(spinningandnon-spinningreserve).Tertiarybalancingserviceisprovidedbythespinningandnon-spinningreserveunits.OperatingReservesTheactivepowercapacityabovefirmsystemdemandrequiredtoprovideforregulation,loadforecastingerror,equipmentforcedandscheduledoutagesandlocalareaprotection.Itconsistsofspinningandnon-spinningreserve.OperatingReserves(Spinning)SpinningReserveisthecapabilityofresourcessynchronizedtothesystemandfullyavailabletoserveloadwithintheDisturbanceRecoveryPeriodfollowingthecontingencyevent;orLoadfullyremovablefromthesystemwithintheDisturbanceRecoveryPeriodfollowingthecontingencyevent.OperatingReserves(Non-Spinning)Non-spinningreservesareenergyproducingresourcesthatthatareoff-linebutthatcanrespondtodispatchinstructions.OperatingReserves(Tertiary)TertiaryorcontingencyreserveisusedafterSpinningandNon-spinningreservesareemployedinthecaseofacontingency.Itisprocuredtoreplacereservecapacitypriortoasecondcontingencyeventtoensureoperatingreservesarerestoredtotherequiredamountsoonafterthecontingency.ReactivePower&VoltageSupportTheabilitytocontrolleadingandlaggingreactivepoweronthesystemtomaintainappropriatevoltagelevelsandacceptablevoltagebandwidths,tomaximizeefficienttransferofrealpowertotheloadundernormalandcontingencyconditions,andprovideforoperationalflexibilityundernormalandabnormalconditions.64PathwaystoCommercialLiftoff:VirtualPowerPlantsRampingTheabilityofaresourcetorampactivepowerupwardordownwardinacertainamountoftime.ItistypicallymeasuredonaMW/minbasis.EnergyImbalanceEnergyImbalanceServiceisprovidedwhenadifferenceoccursbetweenthescheduledandtheactualdeliveryofenergytoaloadlocatedwithinaControlAreaoverasinglehour.BlackStartTheabilitytoenergizeabus,meetingtheTransmissionOperator’srestorationplanneedsforRealandReactivePowercapability,frequencyandvoltagecontrol,andthathasbeenincludedintheTransmissionOperator’srestorationplan.TransmissionCapacityAnon-transmissionalternative(NTA)supplyand/oraloadmodifyingservicethatprovidesasrequiredviareductionorincreaseofpowerorloadthatiscapableofreliablyandconsistentlyreducingnetloadingondesiredtransmissioninfrastructure.DistributionSystemDistributionVoltage-ReactivePowerTheabilitytocontrolleadingandlaggingreactivepoweronthesystemtomaintainappropriatevoltagelevelsandacceptablevoltagebandwidths(ANSIC84.1),tomaximizeefficienttransferofrealpowertotheloadundernormalandcontingencyconditions,andprovideforoperationalflexibilityundernormalandabnormalconditions.PowerQualityServicesthatsatisfypowerqualityrequirementsregardingflickerandharmonicsshouldbewithinacceptablelevels.ResilienceSupplybasedservicescapableofimprovinglocaldistributionresiliencyandreliabilitywithinamicrogrid.Thisservicemayalsoinvolvefastreconnectionandavailabilityofexcessreservestoreducedemandwhenrestoringcustomersabnormalconfigurations.EnergyTheproductionoruseofelectricpowerbyadeviceoveraperiodoftime,expressedinkilowatt-hours(kWh),ormegawatt-hours(MWh)astransportedwithinadistributionsystem.EdgeEnergyTheproductionoruseofelectriccurrentbyadeviceoveraperiodoftime,expressedinkilowatt-hours(kWh)ormegawatt-hours(MWh)astransportedbehindameteredgridconnectionpointorbehindamicrogridislandingpointwithinacommunitymicrogridboundary.DistributionVoltage-ReactivePowerTheabilitytodynamicallycontrolleadingandlaggingreactivepoweronthedistributionsystemtomaintainappropriatevoltagelevelsandacceptablevoltagebandwidths(ANSIC84.1),tomaximizeefficienttransferofrealpowertotheloadundernormalandcontingencyconditions.PowerQualityServicesthatsatisfyelectricservicepowerqualityrequirements,includingflickerandharmonicswithinacceptablelevels.ResilienceEnergybasedservicetosupplyconnectednetcustomerloadsasdeterminedbyatypicalloadprofilewithinthemicrogridboundaryduringislandmodewhendisconnectedfromthepowergridattheislandingpoint.65PathwaystoCommercialLiftoff:VirtualPowerPlantsVIII.OverviewofVPPBusinessmodelcostandrevenuedriversThefollowingschematicofVPPcostsandrevenuesissimplifiedforinstructivepurposes.Note:Over-enrollmentbufferfactor(>100%)accountsfortheexpectationthatsomeenrolledDERswillnotbedispatchedwhencalledupon.66PathwaystoCommercialLiftoff:VirtualPowerPlantsIX.CostandrevenuedetailforexamplesmartthermostatdemandresponseVPPVariableCategoryVariableDescriptionExample:smartthermostatVPPScaleofVPP#DERsNumberofdistributedenergyresources100KthermostatsFlexiblecapacityperDERAmountorpercentofDERcapacitythatisflexible/controllable/dispatchablebyVPPduringanevent(e.g.,duringpeakdemandhours)1KWperthermostatTotalflexiblecapacity#DERsDispatchablecapacityperDER100MWFrequencyofevents#ofeventsperyear20events;SummerTotaldeliveredenergy(kWh)Controllablecapacity%capacityactivatedinaneventEventduration#ofevents4000MWh(2hrdurationperevent)AncillaryservicesServicesdeliveredperDER#DERsactivatedperevent#ofeventsn/aCostsSystemcostsITsystemintegrationDER<>VPPintegrationvarybyDER;someOEMschargeintegrationfeestoVPPsVPP<>off-takerintegrationcostsmaybeincurredby3rd-partyVPPssellingtoutilitiesorISO/RTOs$500K(one-time;5-yrlifetime)HardwareEnablingnon-DERhardwarefordistributionsystemssometimesrequired(e.g.,sensors,advancedmeteringinfrastructure)$250K(one-time;5-yrlifetime)LaborInternalprojectmanagementandconsultingsupporttoestablishVPP$250K(one-time;5-yrlifetime)AnnualsoftwarecostsSoftwarecustomization,annuallicenses$650KperyearAnnualadministrativecostsProgrammanagement,customerservice,training,etc.$50KperyearTotalsystemcostsperyear--$900KperyearCustomercosts#Customers--100KOne-timecustomeracquisitioncostformarketingMarketingcostsandcustomereducation$50percustomer;One-timecustomeracquisitioncostforsmartthermostatsubsidyDERhardwaresubsidyand/orinstallation$75percustomer;(includes$50perthermostat)Totalcustomeracquisitioncosts(amortizedover5-yrcustomerlifetime)--$2.5MperyearAverageactivationincentiveVariesbasedonDERtype,businessmodel,eventtiming,andurgencyoflocalgridconditions;Insomecases,aflatrateispaidinsteadofavariablerate$3perevent($1.5perkWh)ActivationcostsperyearIncentive#customersactivatedperevent#events$6MperyearTotalcustomercostsperyear--$8.5MperyearTotalcostsperyr--$9.4MperyearValueAdditionalMonetizedvaluevalueEnergy(kWh)Energysoldto,orprocuredby,ISOs/RTOsorutilitiesatmarketprices(perkWh)$400K(~$100perMWhinsummermonths)Capacity(kW)Capacitysoldto,orprocuredby,ISOs/RTOsorutilitiesatmarketprices(perkW)$8M-$10M($80-100perkW-yr)AncillaryServicesE.g.,frequencyregulation,ramping,etc.n/aDeferredT&DinfrastructurecostsNotconsistentlycompensatedvariesAvoidedcostofcarbonNotconsistentlycompensatedvariesReliabilitybenefitsNotconsistentlycompensatedvariesTotalrevenueperyear--$8.4M-$10.4M67PathwaystoCommercialLiftoff:VirtualPowerPlantsX.2030flexibledemandcapacityandgridsavingspotentialdetailDatashownbelowistheresultofanalysiscompletedbyHledikandPetersofTheBrattleGroupin2023fortheVPPLiftoffreport.Itisarefreshof,TheNationalPotentialforLoadFlexibility(2019)cixwithup-to-datemarketassumptions(e.g.,DERadoption,mixofrenewablesinthebulkpowersystem,loadprofiles).Thenationalcost-effective,achievablepotentialforthedemandflexibilityoptionsconsideredinBrattle’sanalysisis180GW.ThisestimateisslightlylowerthanpotentialmeasuredinTheBrattleGroup’s2019study(198GW)because:ĥHigherassumedpenetrationofsolarshiftssystemnetpeakdemandlaterintheday.ThiseveningpeakislesscoincidentwithlargeC&Ipeakdemand,whichisasignificantsourceofdemandflexibilitypotential.ĥThehourlymarginalenergycostsusedintheupdatedanalysishavelessoverallpricevariation,dueinparttodifferencesingaspriceoutlook.Nationalpotentialforcost-effectiveflexibledemandcapacityin2030(GW)Loadcontrolstrategies:ĥSmartThermostat:Analternativetoconventionalairconditionerdirect-load-control,smartthermostatsallowthetemperaturesetpointtoberemotelycontrolledtoreduceairconditionerorheatingusageduringpeaktimes.ĥLargeCommercialandIndustrialManualDemandResponse:Participantsagreetoreducedemandtoapre-specifiedlevelandreceiveanincentivepaymentintheformofadiscountedrate.ĥTime-varyingPricing72:Time-of-useorcriticalpeakpricingratesareusedtoincentivizebehavioralpriceresponsethroughpeak/off-peakpricedifferentials.Portfoliopotentialestimatesaccountforandavoiddouble-countingpotentialwithEVtime-of-usemanagement.ĥAuto-DemandResponse:Auto-DemandResponsetechnologyautomatesthecontrolofvariouscommercialandindustrialend-uses.Featuresofthetechnologyallowfordeepcurtailmentduringpeakevents,moderatedemandshiftingonadailybasis,anddemandincreasesanddecreasestoprovideancillaryservices.Modeledend-usesincludeheating,lighting,andheating,ventilation,andairconditioning.ĥSmartWaterHeating:Smartcontroloffersimprovedflexibilityandfunctionalityinthecontroloftheheatingelementinthewaterheater.Thethermostatcanbemodulatedacrossarangeoftemperatures.Multipledemandcontrolstrategiesarepossible,suchaspeakshaving,energypricearbitragethroughday/nightthermalstorage,ortheprovisionofancillaryservicessuchasfrequency72Time-of-usepricingisnotaVPP,butisincludedinthisanalysistodemonstrateflexibledemandpotential.AlthoughthisloadcontrolstrategysharescharacteristicswithaVPP—i.e.,usingalargenumberofDERstoshapedemandprofiles—itlacksaunifyingarchitecturethatallowstheDERaggregationtointeractwithagridoperatorasoneutility-scaleresource.68PathwaystoCommercialLiftoff:VirtualPowerPlantsregulation.Wemodeledthecontrolofelectricresistancewaterheaters,astheserepresentthevastmajorityofelectricwaterheatersandarecurrentlythemostattractivecandidatesforarangeofadvanceddemandcontrolstrategies.ĥEVCharging:Time-of-useratesareaneffectivetoolforencouragingoff-peakchargingofEVsathome,withearlyevidenceindicatingthat70%ormoreofthepeakperiodchargingdemandofparticipantscouldbeshiftedtooff-peakhours.ÎIncludesonlyunidirectionalcharging;excludesvehicle-to-everything(V2X).ÎHomechargingonly;excludescommercialfleets.ÎDemandmanagementpotentialisassociatedwithadistributionsystemthatdoesnotyetfacecapacityconstraints;constraintswouldleadtogreateruseofdirectmanagementofEVcharging(vs.time-of-use).ĥAirConditionerDirect-Load-Control:Participant’scentralairconditionerisremotelycycledusingaswitchonthecompressor.ĥDemandBidding:Participantssubmithourlycurtailmentschedulesonadailybasisand,ifthebidsareaccepted,mustcurtailthebidamounttoreceivetheincentivepaymentormaybesubjecttoanon-compliancepenalty.Savingspotentialfrommanagingnationalcost-effectiveflexibledemandcapacityin2030,$BThegrossbenefits(avoidedresourcecosts)ofthedemandflexibilitypotentialarenearly$13billionperyearby2030.Thesebenefitsarenetofthecostsofobtainingthedemandflexibility,thoughallprogramsincludedintheresultsarecost-effective.AvoidedGenerationCapacity(est.$8.75B)ĥValuebasedonnetcostofnewentryinwholesalecapacitymarkets.ĥCapacityremainsthedominantsourceofdemandflexibilityvaluethroughatleast2030.ĥCapacityvaluewillvarysignificantlybyregion;demandflexibilitypoisedtoprovidemostcapacityvalueinregionswithpendingcapacityretirements,supplyneedsintransmission-constrainedlocations,orunexpectedsupplyshortages.AvoidedEnergyCosts(est.$0.94B)ĥValueaccountsforreducedresourcecostsassociatedwithshiftingdemandtohourswithlowercosttoserve;doesnotincludeconsumerbenefitsfromreductionsinwholesalepriceofelectricityĥEnergyvalueisbestcapturedthroughprogramsthatprovidedailyflexibilityyear-round,suchasAuto-DemandResponseforcommercialandindustrialcustomers,time-of-userates,EVchargingdemandcontrol,andsmartwaterheating.69PathwaystoCommercialLiftoff:VirtualPowerPlants-AvoidedTransmission&DistributionCapacity(est.$2.83B)ĥValuerepresentssystem-widebenefitsofpeakdemandreductionandisbasedonreviewavoidedcostsassumedinutilitystudiesinavarietyofU.S.jurisdictions.Thisvaluewillvarysignificantlybysystemandlocation.AncillaryServices(est.$0.35B)ĥValueaccountsonlyforfrequencyregulationandassumesaneedequalto0.5%ofsystempeakdemand;additionalvaluemayexistifconsideringotherancillaryservicesproducts.ĥFrequencyregulationprovidesveryhighvaluetoasmallamountofcapacity;inouranalysis,thefullneedforfrequencyregulationcanbeservedthrougharobustsmartwaterheatingprogram.XI.ModelingtoolsavailablefromselectDOE-partnerednationallaboratoriesThetablebelowcontainsexamplesofdataandmodelingresourcesdevelopedbyDOE-partnerednationallaboratoriesthatsupportVPPdeployment.ResourceUsecaseTargetuserDescriptiondsgrid:Demand-SideGridToolkit(NREL)CustomerloadpredictionUtilities,DERaggregatorsDsgridcreatescomprehensiveelectricityloaddatasetsathightemporal,geographic,sectoral,andend-useresolution.Thesedatasetsenabledetailedanalysesofcurrentpatternsandfutureprojectionsofend-useloads.dGen(NREL)CustomerDERadoptionpredictionUtilities,DERaggregatorsTheDistributedGenerationMarketDemandmodelsimulatescustomeradoptionofdistributedenergyresourcesforresidential,commercial,andindustrialentitiesthrough2050.DER-CAM(Berkeley)DERinvestmentplanningIndustrial-scaleconsumersTheDistributedEnergyResourcesCustomerAdoptionModel(DER-CAM)isadecisionsupporttoolthatfindstheoptimalDERinvestmentinthecontextofbuildingsormulti-energymicrogrids.Itcanbeusedtofindtheoptimalportfolio,sizing,placement,anddispatchofawiderangeofDER,whileco-optimizingmultiplestackedvaluestreamsthatincludeloadshifting,peakshaving,powerexportagreements,orparticipationinancillaryservicemarkets.Cambium(NREL)GridoperationsandmaintenanceplanningUtilitiesCambiumdatasetscontainmodeledhourlyemission,cost,andoperationaldataforarangeofpossiblefuturesoftheU.S.electricitysectorthrough2050,withmetricsdesignedtobeusefulforforward-lookinganalysisanddecisionsupport.70PathwaystoCommercialLiftoff:VirtualPowerPlantsIntegratedGridoperationsUtilities,TheIntegratedModelingToolprovidesModelingToolandmaintenanceregulatorsquantitativeinformationtoutilitiesandregulators(Berkeley)planningtohelpthemmanagechanginggridhostingcapacitycostsasconsumersadoptDERs.DistributedReal-timeDERDERaggregatorsTheDOPERisanopen-sourcemodelpredictiveOptimalandmanagement&controllerfordistributedenergyresources.ItPredictiveoptimizationoptimallycoordinatesDERs,suchasdistributedEnergysolarwithsmartinverters,batterystorage,ResourcesandEVs,aswellasbuildingcomponentssuch(Berkeley)aslighting,HVAC,andcontrollableloads.Theobjectiveistominimizethetotalenergycost,peakdemand,and/orgreenhousegasemissionsforasingle/multiplesitesorwholedistributiongridlevels.DOPERalsoincludesancillaryservicemarketmodels,suchasfrequencyregulationanddemandbiddingprograms,toprovideadditionalservicestothegridwhilereducingenergycosts.GRIDMeterReal-timeDERUtilities,DERGRIDmeterisacombinationofmethodsand(Berkeley)management&optimizationaggregatorsopen-sourcecodingthatenableaccuratemeasurementofbehind-the-meterDERimpactsforcommercialandresidentialbuildingsbyidentifyingcomparisongroupsviastratifiedsamplingonkeyusageparameterstoenableahighlevelofaccuracyandconfidenceinbehind-the-meterresources.TimeSensitiveValueCalculator(Berkeley)Real-timeDERmanagement&optimizationUtilities,DERaggregatorsTheTimeSensitiveValueCalculatorisanExcel-basedtoolthatestimatesthevalueofenergyefficiencyandDERmeasuresusinghourlyestimatesofelectricitysystemcosts.TheCalculatortakeshourlyprofilesofuptosixmeasuresatatimeandmonetizestheirvalueforsixvaluestreams,producingoutputsintabularandgraphicalformats.REopt:Real-timeDERDERaggregatorsTheREopt™modelprovidesconcurrent,multipleRenewablemanagement&technologyintegrationandoptimizationEnergyoptimizationcapabilitiestohelporganizationsmeettheircostIntegration&savingsandenergyperformancegoals.TheREoptOptimizationmodelrecommendsanoptimallysizedmixof(NREL)renewableenergy,conventionalgeneration,andenergystoragetechnologies;estimatesthenetpresentvalueofimplementingthosetechnologies;andprovidesadispatchstrategyforoperatingthetechnologymixatmaximumeconomicefficiency.71PathwaystoCommercialLiftoff:VirtualPowerPlantsOptGridReal-timeDERDERaggregatorsOptGridsolvesreal-timeoptimalpowerflowControlsmanagement&problemsatthegridedge,whereitisinstalledon(NREL)optimizationcommondeviceslikesmartmetersandinverters.OptGridcoordinatestheoptimizeddevicessothatcollectively,DERsareusedtobalancesupplyanddemand,supportgridreliability,andreducetheimpactofoutageevents.LODGEDERinvestmentplanning;UtilitiesTheLeast-costOptimalDistributionGridExpansion(LODGE)modelisadeterministiccapacity[Tobereleaseddistributionexpansionandplanningmodelfordistributioninlate2023]gridcapacitygrids.BasedontheREPAIRmodel,LODGEallows(Berkeley)expansionforautomatedupgradeanalysisofhundredsorpotentiallythousandsofdistributioncircuitsorfeeders.Themodelfindstheleast-costportfoliooftraditionaldistributionsystemupgradestointegratecommunity-scalesolargenerationincombinationwithalternativesolutions,suchasutility-ownedstorageXII.RecommendationsforfurtheranalysisValuableextensionsofthisfirstVPPliftoffreportwouldincludedeeperanalysisofspecifictypesofVPPs:ĥAdoptionreadinesslevel(ARL)andtechnologyreadinesslevel(TRL)assessments,forexampleinresidentialvehicle-to-gridVPPsthathasseenlimiteddeploymentintheU.S..ĥDER-specificvaluechainanalysis,includingadeeperfocusonworkforceimplications.ĥComparativeanalysisofdifferentVPPbusinessmodelsandtheirimpactonconsumersandgridintegrity,andpotentialpolicyimplicationsforhowflexibleelectricitydemandismanagedandcontrolledacrossstakeholders(i.e.,utilities,VPPplatforms,DERmanufacturers,etc.)ĥDetailedanalysisofchallengesandpotentialsolutionsthatarespecifictotheVPPtypeand/ortheunderlyingDERs.Inaddition,marketreadinessanalysisbasedoncriteriaoutlinedinchapter5,‘leadingindicators’caninformroadmapsforVPPdeployment.72PathwaystoCommercialLiftoff:VirtualPowerPlantsReferencesi.OfficeofPolicy–NationalEnergyModelingSystem.2023.AdvancedBIL-IRAScenarioxxi.Nadel,F.,Amann,J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