In the electricity sector, balancing supply and demand is critical to maintaining a reliable electricity grid. VPPs present an innovative solution, enabling local grid operators to use energy flexibility to ensure a more stable electricity supply, improved energy efficiency and enhanced grid capacity.

The industry is focusing more on renewable forms of energy, distributed energy resources (DER) and electrification. For this reason, VPPs are attracting more attention. While they deliver value to customers, they also offer huge benefits to DER installers, grid operators and utilities companies.

Drawing on the capacities of a diverse range of energy sources, including wind turbines, solar panels or photovoltaics, EVs and battery storage, smart plugs and thermostats, the cost of implementing VPPs can be much lower when compared to more traditional power plants. Controlled by grid operators or third-party aggregators, these energy resources can be monitored, forecasted and optimised with bi-directional communications between components for a more efficient and resilient power grid.

As we look to a less carbon-intensive energy future, VPPs are set to be a key part of providing resource adequacy and other grid services at a negative net cost to the utility.

Virtual power plants can deliver value to customers and also offer huge benefits to distributed energy resource installers, grid operators and utilities companies.

The market potential for VPPs
The unique opportunities and robust growth in the VPP market are highlighted by market research firm Research and Markets in its Virtual Power Plant Global Market Report 2023. Figures show that the global market for VPPs is expected to grow from $1.92bn in 2022 to $2.36bn in 2023 at a compound annual growth rate (CAGR) of 22.5%. Despite sensitive geopolitical issues, rising commodity prices and supply chain disruptions, the VPP market is expected to reach $5.04bn by 2027, at a CAGR of 20.9%.

Major players in the VPP sector are focusing on the adoption of advanced technologies and open standards, which is helping to drive growth.

Partnerships will be key to this growth, as utilities and energy providers collaborate with technology companies and device manufacturers to turn homes, workplaces and communities into VPPs. Two such companies, Swell Energy and SunPower, are playing important roles in this transformative shift, having established VPPs that offer new value to utilities and their customers.

Swell Energy: making waves in Hawaii
California-based Swell Energy has made huge strides in the field with its large-scale VPP operations. Last year, the company raised $120mn to further its VPP programmes, including the development of 600 MWh of VPPs through the deployment and aggregation of 26,000 energy storage systems at homes and businesses in the US.

Swell creates VPPs by linking utilities, customers and third-party service providers together, and by aggregating and co-optimising DER through its software platform. The VPPs provide a variety of grid service capabilities through projects in Hawaii, California and New York, helping utilities to deliver cleaner energy to customers and reduce the grid’s dependence on fossil fuels.

Swell is working with Hawaiian Electric to co-optimise batteries in 6,000 different homes to create a decentralised power plant on three Hawaiian Islands. The programme will deliver 80 MWh of grid services using OpenADR based integration, including capacity reduction, capacity build and fast frequency response to the three island grids, while also reducing bills and providing financial incentives for participating customers.

This VPP tackles several challenges at once, driven by Hawaiian Electric’s need for energy storage and renewable generation through DER, along with capacity and ancillary services to ensure adequate supply and system reliability across its service territory.

It is also future proofing energy supply. Hawaii became the first US state to commit to generating 100% of its electricity from renewables by 2045. While Hawaii is a sun-drenched location where sunshine is plentiful, island grids quickly became saturated with solar production at midday, prompting the need for batteries to store the surplus and make it available for use after the sun goes down.

Swell Energy will supplement Hawaiian Electric’s energy supply by relieving the grids of excess renewable energy as production spikes and absorbing excess wind energy when needed, reducing peak demand and providing 24/7 fast frequency response to balance the grids. The renewable energy storage systems will collectively respond to grid needs dynamically.

The model is a win-win, providing homeowners with backup power and savings on their energy bills, while battery capacity is made available to the utility to deal with the challenges of transitioning to a much cleaner energy source. This requires balancing grid needs while ensuring that customers are backed up and compensated.

Successful VPP projects are not just being rolled out in Hawaii. Another example that’s also creating value for both utilities and customers is the work being done by global solar energy company SunPower.

SunPower VPP offers rewards for Californian customers
SunPower’s VPP platform interfaces with utility distributed energy resource management service (DERMS) platforms to ensure its customers’ SunVault storage systems are charging and discharging in line with the needs of the utility grid. The goal is to enrol customers in the programme, dispatch according to the utility’s schedule, handle customer opt-outs and report performance data to the utility.

As SunPower is a national installer, it must be able to communicate with dozens of utilities across the country.

Earlier this year, the company announced a partnership with OhmConnect to provide a new VPP offering for SunPower customers in California. Homeowners in selected locations with solar and SunVault battery storage can now connect with OhmConnect directly through the mySunPower app to earn rewards for managing their electricity use during times of peak demand. The aim is to make it as simple as possible for customers, and also put them in full control of their energy use.

VPP programmes like these can, and do, offer huge value. They demonstrate how to balance energy supply and demand on the network by adjusting or controlling the load during periods of peak demand, conduct fast frequency response supporting the overall health of the grid, absorb excess renewable energy for delayed consumption, and much more.

Companies are already showcasing the potential future direction and capabilities of an advanced, distributed and dispatchable energy future. But they are just a relatively small number of initiatives compared with global scale potential.

The timing has never been more important as we look ever more closely at an energy future that relies more on renewable energy resources. With growing demands on the grid, especially in densely populated cities and during increasingly extreme weather events, VPPs offer an attractive and affordable solution. 

For VPPs to be widely accepted and adopted, the industry and policy makers need to change. Utilities, energy providers and their partners need to work together and embrace change, while governments must help drive this change through regulation. Only then can we realise the full potential of this opportunity.