Virtual Power Plants Are Having Their Moment

The German utility company RWE implemented first known virtual power plant (VPP) in 2008, uniting nine small hydroelectric power station power plants with a total capacity of 8.6 megawatts. In general, VPP combines many small components such as solar panel on the roofhouse batteriesand smart thermostats – into a single coordinated system energy system. The system responds to network needs on demand, whether by providing stored energy or reducing energy consumption by smart devices during peak hours.

runway there was a moment in the mid-2010s, but the market conditions and technology weren't quite right for them to take off. Electricity demand wasn't tall enoughand existing sources are coal, natural gasnuclear power and renewable energy sources—meeted demand and kept prices stable. Moreover, despite the costs of equipment such as solar panels and the batteries were running low, the software to communicate and manage those resources was lagging, and there was little financial incentive to catch up.

But times have changed, and less than a decade later, the stars have aligned in VPP's favor. They are reaching an inflection point in deployment and could play a significant role in meeting energy demand over the next 5 to 10 years in a faster, cheaper and greener way than other solutions.

Electricity demand in the US is growing

Electricity demand in United States it is expected that grow by 25 percent by 2030 through the construction of data centers, electric carsproduction and electrificationAccording to technology consultant ICF International.

At the same time, many bottlenecks make network expansion difficult. Eat lag at least three to five years on the new one gas turbines. Hundreds gigawatts of renewable energy are languishing in queues for internet connections, with delays of up to five years. On the delivery side there is transformer shortage solving this problem could take up to five years, and there is also a shortage power lines. All of this adds up to a long, slow process of increasing generation and delivery capacity, and it's not going to get any faster anytime soon.

“Electric vehicle refueling, electric heating and data centers using only traditional approaches will increase rates that are already too high,” says Brad Havencompany executive director California Solar Energy and Storage Association.

Enter the vast network of resources that are already active and online, and the perfect storm of factors that make now the time to scale them up. Adel Nasiriprofessor electrical engineering at the University of South Carolina, say load variability from data centers and electric vehicles has increased, as has the adoption of grid-tied batteries and storage. There are more distributed energy resources than there used to be, and advances have been made in managing networks using autonomous control over the last decade.

However, at the heart of it all is the technology that stores and distributes electricity on demand: batteries.

Advances in battery technology

Over the past 10 years, battery prices fell sharply: average lithium ion battery price fell from US$715 per kilowatt-hour in 2014 to US$115 per kWh in 2024. energy density simultaneously increased due to a combination of advanced materials, optimized battery cell design and improved packaging of battery systems, says Oliver Grosssenior researcher energy storage and electrification of automaker Stellantis.

The biggest improvements have been in the batteries. cathodes And electrolytesMoreover, nickel-based cathodes began to be used about ten years ago. “In many ways, the cathode limits the capacity of a battery, so by opening up the possibility of higher capacity cathode materials, we were able to take advantage of the inherent higher capacity of anode materials,” says Greg LessDirector of the Battery Laboratory at the University of Michigan.

Increase in percentage nickel in the cathode (relative to other metals) increases energy density because nickel can contain more lithium per gram than materials such as cobalt or manganese, exchanging more electrons and more fully participate in the redox reactions that move lithium in and out of the battery. The same applies to silicon, which is increasingly being used in anodes. However, there is a trade-off: these materials cause greater structural instability during battery cycling.

The anode and cathode are surrounded by a liquid electrolyte. The electrolyte must be electrically and chemically stable when exposed to the anode and cathode to avoid safety hazards such as thermal escape or fires and rapid degradation. “The real revolution was the breakthrough in chemistry that made the electrolyte stable with respect to more active cathode materials and increased energy density,” says Gross. Chemical additives, many of which are based on sulfur and boron chemistry – since the electrolyte helps create stable layers between it and the anode and cathode materials. “They form these protective layers very early in the manufacturing process to ensure the cell remains stable throughout its life.”

These achievements were primarily achieved electric car batteries that differ from mesh type batteries in that electric cars often parked or idle while grid batteries are constantly connected and must be ready to transmit power. However, says Gross, “the same approaches that have improved energy density in electric vehicles can also be applied to optimize Network storage. The materials may be slightly different, but the methodologies are the same.” The most popular cathode material for grid batteries right now is lithium iron phosphate, or LFP.

These technological advances and cost reductions have set off a domino effect: the more batteries are used, the cheaper they become, driving wider adoption and creating positive feedback loops.

Regions that have experienced frequent power outages, such as some parts Texas, CaliforniaAnd Puerto Rico– are the main market for home batteries. Texas Base powerwhich raised $1 billion in Series C funding in October, is installing batteries in customers' homes and becoming their retail an electricity supplier that charges batteries when excess wind or solar power drives prices down, and then sells that energy back to the grid when demand surges.

However, there is still room for improvement. For wider adoption, Nasiri says, “the installed battery cost should be less than $100 per kWh for large VPP deployments.”

Improvements to VPP software

Software infrastructure that once limited VPP pilot projects has evolved into a reliable digital backbone, making VPP possible at network scale. Advances in artificial intelligence are key: many VPPs now use machine learning algorithms to predict load flexibility, solar and battery capacity, customer behavior, and grid stress events. This improves the reliability of wind power, which has historically been a major challenge for grid operators.

While solar panels are advancing, VPP development has until recently been hampered by a lack of similar progress in the required software.Sanran

Cybersecurity Interoperability standards are still evolving. Interconnection processes and data transparency are not consistent in many areas, making it difficult to effectively monitor and coordinate distributed resources. In short, while the technology and economics of VPP are well established, there is still work to be done to harmonize regulation, infrastructure and market structure.

In addition to technical and financial constraints, VPPs have long been constrained by regulations that prevent them from participating in energy markets like traditional generators. SolarEdge recently announced including more than 500 megawatt-hours of residential battery storage in its VPP programs. Tamara SinenskayaThe company's senior manager of network services, says the biggest obstacle to reaching this milestone was not technical, but developing a regulatory program.

California Demand Grid Support (DSGSThe program, launched in mid-2022, pays homes, businesses and wind farms to reduce or reset their electricity use during grid emergencies. “We have seen significant growth in VPP enrollment, primarily due to the DSGS program,” says Sinensky. Similarly, in July, Sunrun's wind farm in Northern California supplied 535 megawatts of electricity to the grid from home batteries. 400 percent increase in participation in VPP since last year.

FERC Order 2222The law, issued in 2020, requires regional grid operators to allow wind farms to sell electricity, shed loads or provide network services directly to wholesale market operators and receive the same market price as traditional ones. power plant for these services. However, many states and regions do not yet have a process to comply with FERC's order. And since utilities profit from network expansion rather than from implementing VPP, they have no incentive to integrate VPP into their operations. Utilities “look at customers' batteries as competitors,” Heavner says.

According to Nasiri, wind farms will have a significant impact on the power grid if they reach a penetration level of 2 percent of the market's peak power. “Higher penetration—up to 5 percent for up to 4 hours—is needed to have a significant impact on throughput in network planning and operation,” he says.

In other words, VPP operators have a lot of work to do to further unlock flexible power in homes, businesses and electric vehicles. Additional technical and policy advances could transform VPP from a niche reliability tool into a key energy source and grid stabilizer in the coming energy crisis.

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