A virtual power plant (VPP) is an emerging technology designed to save residential solar customers money. Individual homeowners are able to virtually (but not physically) connect their solar batteries in order to sell energy and grid services to their electric utility.
Utilities must not only always have sufficient electricity supply to perfectly meet customers’ demand; they also have to make sure that the electricity flowing through their wires flows at a steady rate of power and frequency.
When supply and demand are mismatched or when power surges or drops, the frequency is thrown off and can damage electrical systems. In conventional grid systems, turning fossil fuel-based power plants on and off to balance supply and demand is expensive and slow, while keeping them running as reserves wastes money.
In April 2021, 95% of California’s electricity came from renewable resources.As more and more variable renewable energy supplies electricity to the grid, too much wind or solar can lead to utilities shutting off available clean, low-cost renewable energy. Otherwise, they risk a blackout.
In virtual power plants, batteries are able to absorb excess electricity that might otherwise be curtailed and nearly instantaneously supply extra electricity when it’s needed. That means utilities can cut the cost of keeping a natural gas plant running and pass some of those savings on to the members of the VPP.
VPPs sound like a thing of the future, but they already exist, spurred by Order 2222 from the Federal Energy Regulatory Commission allowing retail customers to participate in energy markets. Outside of Salt Lake City, Utah, a solar+storage residential community runs a VPP in connection with the local utility. Owners of Tesla Powerwalls who are customers of National Grid or Eversource utility companies in the Northeast can join the Connected Solutions program and earn up to $1,000 a year. Tesla also operates VPPs in the United Kingdom and Australia, while leading solar installer Sunrun has VPP programs for solar+storage customers in Hawaii and California. As more and more VPPs emerge, the cost savings of solar+storage increase.
Should You Purchase a Solar-Plus-Storage Package?
Resilience might mean something different for homeowners than for a business, organization, or public service running critical infrastructure. From a traditional cost-benefit analysis, the ability for homeowners to generate and use their own power is currently uneconomical. Like car insurance or life insurance, most people are fortunate when they do not get a return on their investment.
Yet when factoring in the potential cost of damages incurred without it, a solar+storage system can be a worthwhile investment. When power went out in Texas during its 2021 record cold temperatures, monetary losses were in the hundreds of billions of dollars—and nearly 200 people died. Especially in areas prone to power outages from extreme weather or other natural disasters, the decision to invest in solar+storage has more weight than ever before.
