Understanding the Benefits of Virtual Power Plants

5/5/2023

Grid reliability is becoming increasingly crucial as extreme weather increases. The California heat wave in 2022 and the deep freeze in Texas in early 2021 both showed how vital having reliable power is — and the power grids during these two events fared wildly differently in terms of protecting people and property.  

One reason California was better able to respond is that it took advantage of Virtual Power Plants (VPPs) to keep the grid from becoming overtaxed, and therefore didn’t have to resort to rolling brownouts. VPPs are essentially an array of small-scale, networked energy assets that can support the power generated in the grid.  

But grid reliability is only part of the benefits story for VPPs. They also have a climate story, because when VPPs are deployed, they’re generating and distributing energy from non-fossil fuel sources. 

We recently spoke with Connor Usry, co-founder of the Virtual Power Plant Partnership (VP3) and a senior associate at RMI’s Carbon-Free Buildings Electricity team, about why VPPs will continue to flourish. 

FacilitiesNet: Can you explain the most basic definition of Virtual Power Plant?  

Usry: Virtual power plants are portfolios comprised of hundreds or thousands of households and businesses that offer the latent potential of their electric vehicles (EVs), smart thermostats, appliances, batteries, solar arrays, and additional energy assets to support the grid. When aggregated and coordinated with grid operations, VPPs can provide the same reliability value as traditional power plants by enabling rapid and flexible deployment, reducing demand, or feeding power into the grid during times of critical demand. While VPPs aren't new, they have a growing role to play in providing resiliency and reliability services in a world of increasingly extreme climate events.  

FacilitiesNet: How does VPP differ from islanding or micro-gridding? 

Usry: Islanding or micro-gridding are concepts that refer to a section of the power system (household, business or collection there-of) in a single location which has the ability to operate independently of the main grid. Microgrids contain a local power source (solar/storage/wind…etc.) which allow them to isolate or “island” from the larger electrical grid to ensure resiliency or provide cost savings. VPPs are designed to operate as part of the larger grid, whereas micro-gridding is designed to isolate from it. That said, in many cases, a microgrid can participate as part of a virtual power plant by reducing its load from the grid or injecting power when called upon to do so. 

FacilitiesNet: What are the biggest advantages of implementing VPP in commercial facilities? 

Usry: The biggest advantages to participating in a virtual power plant in a commercial facility are: 

• Lower Energy Costs: Virtual power plants can automatically adjust a building's energy consumption based on energy demand and utility price signals. This can reduce energy waste, improve energy efficiency, and avoid expensive demand charges. 
• Additional Revenue: Virtual power plants aggregate the electricity demand of all participating buildings, and then manage their energy consumption to offer services to the grid. VPPs work with grid operators to enroll each building in profitable programs and directly compensate participating businesses through bill savings, cash payments, or rewards programs. 
• Environmental Benefits: By reducing energy usage during peak times, building owners can help reduce utility’s reliance on fossil fuels to generate electricity. This can help lower greenhouse gas emissions and mitigate climate change. Optimization around emissions can have financial upsides as well in jurisdictions with carbon emissions taxes like NYC after implementing Local Law 97. 

FacilitiesNet: How does rising facility technology like IoT and other advances in building management systems affect VPP implementation? 

Usry: Advancements in facility technologies — like building management systems or general IOT — have a significant impact on VPP implementation. 

• Increased Participation and Capacity: Participation in a virtual power plant requires buildings to have basic data collection and control capabilities. The more buildings with facility technologies, and the more expansive the footprint under control of each building’s building management system (BMS), the larger a virtual power plant can become. 
• Greater Automation: Investment in facility technology can enable greater automation of load shifting and demand response, helping building operators effectively respond to grid signals without manual intervention. 
• Increased Efficacy: With more sophisticated monitoring and analytics in buildings, a virtual power plant operator can more effectively identify energy patterns and optimize building operations according to the needs of the electricity grid without impacting occupancy comfort. 

FacilitiesNet: What cost savings can be achieved by implementing VPP? 

Usry: VPPs directly compensate participating customers, while also driving down electricity costs for all consumers by reducing the total cost to operate the grid. VPPs can help the power sector avoid $17 billion in bulk system costs by 2030. (Source: RMI) 

Greg Zimmerman is senior contributor editor for the facility group, which including FacilitiesNet.com and Building Operating Management magazine. He has more than 19 years’ experience writing about facility issues.