Virtual Power Plant: Expert Insights

author: FutureCar Staff    

U.S. electricity demand is on the rise after years of stagnation, driven by factors such as the increasing number of electric cars, data centers, and air conditioners, as well as the effects of a warming climate. However, the retirement of traditional power plants that generate electricity from coal, natural gas, or nuclear energy is outpacing the construction of new ones. As a result, wind and solar farms are becoming the primary sources of new supply, despite their output being dependent on weather conditions.

In response to this challenge, power companies are exploring alternative ways to balance supply and demand, and one option gaining popularity is virtual power plants. Unlike conventional power plants, virtual power plants are not large facilities located in a single site. Instead, they are aggregations of electricity producers, consumers, and storers, collectively known as distributed energy resources, that can be called upon by grid managers as needed.

These virtual power sources can include batteries that deliver stored electric power or large electricity consumers, such as factories, that agree to reduce their power use during periods of high demand. Compared to building new power plants, virtual power plants are quicker and cheaper to construct, operate, and are often cleaner.

Virtual power plants are not a new concept, with the U.S. Department of Energy estimating that there are already 30 to 60 gigawatts of them in operation today. While most of these virtual power plants consist of industrial customers that reduce their demand during tight conditions, the increasing adoption of rooftop solar panels, batteries, and electric cars by homes and small businesses means that these energy customers can also become suppliers of power to the grid.

For example, homeowners can charge their batteries with rooftop solar power during sunny periods and then discharge the power back to the grid during high-demand periods in the evening when prices may spike. With the increasing participation of customers through technologies such as smart thermostats, water heaters, rooftop solar panels, and batteries, the Department of Energy predicts that virtual power plants could triple in scale by 2030. This growth could potentially cover half of the new capacity needed to meet growing demand and replace retiring power plants, helping to limit the cost of building new wind, solar, and gas plants.

In addition to their economic advantages, virtual power plants also offer benefits to the aging transmission systems by being located where electricity is consumed. This reduces the strain on the transmission infrastructure, which has struggled to add new lines to accommodate increasing demand.

Virtual power plants disrupt the traditional roles of electricity producers and consumers. Unlike conventional power plants that generate electricity at central locations and transmit it to consumers, virtual power plants acknowledge that consumers can control their electricity demand. Industrial consumers have long had the ability to limit their demand during tight supply conditions in exchange for incentives or discounted rates.

Now, with technologies such as thermostats and water heaters that communicate with the grid, households can also modulate their demand. For example, smart electric water heaters can heat water when power is abundant and cheap, reducing demand during periods of scarcity. Utilities in various regions are already implementing programs that allow customers to install batteries and contribute power back to the grid when needed, turning homes into virtual power sources.

While virtual power plants offer promising solutions, there are challenges that need to be addressed. Some customers may be hesitant to give up control of their thermostats or experience delays when charging their electric cars. Concerns about the security and privacy of smart meters also exist. The success of these emerging programs will depend on customer participation and the effectiveness of operators in managing supply and demand.

Managing millions of consumers in virtual power plants presents a greater challenge compared to managing a few power plants. However, operators can overcome this challenge by incentivizing customers to allow coordinated flexing of supply and demand. As electricity demand continues to rise and renewable resources become more prevalent, virtual power plants can play a crucial role in creating a more flexible, efficient, and responsive electric power industry that can balance the variable output of wind and solar generation.

FutureCar Staff