It’s pretty clear to everyone who hasn’t been living under a rock lately that renewable energy is going to continue to contribute greater and greater amounts of electricity. And while this does represent some challenges, leveraging them as well as other distributed energy resources to their full potential presents big opportunities for utilities.
Just as Uber relies on drivers with their own cars to taxi people around cities, utilities can leverage existing assets, and in most a lot of cases already paid for or paid for by someone else, to create virtual power plants (VPPs) so as to minimize future generation investments, protect against network disruptions and others.
Peter Asmus principal research analyst at Navigant Research noted during a webinar earlier this month that in a VPP construct any node on the grid represents a potential solution to both supply and reliability challenges. A VPP “can reduce capital costs, boost efficiency and harness advances in software to create a more flexible and resilient grid,” he added.
There are additional benefits utilities can derive from VPPs, Asmus added. “You don’t have the not in my backyard issues with siting new power plants. A lot of vpps are actually just basically making more out of what’s already there on the grid, squeezing more value out. And it’s essentially a low capital cost but high value grid service.”
Asmus likened a VPP to Metcalfe’s Law. Robert Metcalfe, co-inventor of the ethernet, noted that the value of telecommunications network is proportional to the number of devices connected to the system, squared.
”What that really means is essentially network value correlates with network size. The more the better. So that’s sort of the idea of a VPP, the more diverse resources you can aggregate and optimize the greater the value you can squeeze out of those assets,” said Asmus.
This is a dramatically different way to view the electricity grid, and this trend of more renewables (or variable sources of energy) distributed through a utilities networks is only going to continue. That means that utilities have to figure out how to leverage those growing distributed energy resources (DERs) to ensure grid reliability but also to reduce network costs and minimize rate impacts.
Bud Vos, president and CEO at Enbala Power Networks, noted during the webinar optimization is key in this new paradigm.
“We’re leveraging underutilized assets and systems that have already been paid for and we’re using the flexibility in those assets to create entirely new market opportunities. That’s exactly what Uber did. Uber built a model leveraging fleets of (cars) and started created new business models with the flexibility of those resources and now that’s expanded into a global phenom really that I think nobody anticipated,” he said.
Distributed energy can be that underutilized asset for utilities.
“If we find ways to tap the flexibility of loads, (energy) storage, PV and other types of behind the meter assets, even generators and CHP (combined heat and power), we can create a valuable product that can be delivered to the grid like no one has ever done before,” argued Vos.
Adopting a VPP type of approach can also bring financial benefits to utilities. As with the Uber model, the cars are already paid for but are being used to generate additional revenue for the owner. In a utility environment, it will have a mix of assets such as energy storage, renewable energy and demand response on which it can build a VPP.
Vos described such an offering as being “largely much more competitive than traditional resources that you might be bringing onto the grid.”
In addition, these resources are at the edge of the network or very localized, meaning they can help solve problems other more centralized approaches can’t.
“Because we’re at the edge of the grid and we’re controlling assets that are actually at the very edge, we have the ability to solve problems that you can’t solve with your traditional fired or top of the system type of resource either,” stated Vos.