Q&A With Mark Dyson, Managing Director of RMI’s Carbon-Free Electricity Program, on Virtual Power Plants & Beyond
From grid resilience challenges to outages caused by extreme weather events, the effects of climate change are increasingly apparent. One silver lining? The distributed energy resource (DER), demand flexibility, and electric vehicle markets are growing rapidly indicating literal consumer buy-in, and offering a solution to grid instability and volatile rates. To meet evolving demand, the utility industry is challenged like never before with how to best optimize these resources. Fortunately, new strategies, like virtual power plants (VPPs), can enable DER aggregation and guide the decision-making process to improve grid resiliency, while lowering energy costs.
This is why we’re partnering with RMI and the new Virtual Power Plant Partnership (VP3). We believe in the power of collaboration and community in tackling these problems head-on. To better illustrate the nature of our work, I sat down with Mark Dyson, RMI’s Managing Director of RMI’s Carbon-Free Electricity Program to learn more about what VP3 is and how it aims to scale VPP technology for the greater good of the planet.
Can you tell us how the Virtual Power Plant Partnership (VP3) came to be?
RMI has been working on topics related to virtual power plants (VPPs) for more than a decade. In early 2022, with the growing reliability and resilience risks on display from Winter Storm Uri and other events, the accelerating momentum for the electrification of vehicles and buildings, and the continued pace of innovation from solution providers, we decided it was time to work alongside industry to help scale the market for VPPs.
Why is now the time to form this formal coalition?
For the first time, Congress (with the Inflation Reduction Act and the Infrastructure Investment and Jobs Act) and FERC (with Order 2222) have virtual power plant-friendly programs and regulations supporting the advancement of distributed energy resources (DERs). Meanwhile, grid reliability concerns and an increasing focus on affordability, public health, and climate change risks illustrate the pressing need to catalyze technologies that support affordable, reliable electric sector decarbonization. As a result, the next 12 to 24 months will be critical for policy and program development to seize the potential offered by virtual power plants.
Can you dive into the goals of VP3 and what you expect the outcomes to be?
With the guidance and support of its members, VP3 is working toward a future where businesses, households, and communities are empowered through VPPs to ensure cost-effective energy, emissions reductions, and a more resilient electricity grid. With these outcomes top of mind, VP3 has laid out near-term goals to:
- Catalog, research, and communicate virtual power plant (VPP) benefits
- Develop industry-wide best practices, standards, and roadmaps
- Inform and shape policy development
Tell us what RMI sees as the barriers to virtual power plant (VPP) technology and how this coalition will help.
Working with our members, RMI has mapped out three main barriers to virtual power plant (VPP) market growth:
- Wholesale electricity market rules must be clarified, updated, and modernized to enable competitive access for VPPs. FERC Order 2222 (2020) requires regional transmission organizations (RTOs) and independent system operators (ISOs) to provide VPPs access to bid into and compete in wholesale markets. Successful implementation of Order 2222 hinges on RTOs making rules that efficiently integrate and fairly compensate DER aggregation, and will affect whether VPPs can thrive in wholesale electricity markets.
- Retail utility programs and offerings must be improved and expanded to benefit more customers. Retail utility programs are an important channel for virtual power plants, but in many areas, retail programs are not available or do not provide compelling offerings. Many public utility commissions are still exploring how to effectively regulate utility VPP efforts. VPPs cut across several topic areas—energy efficiency, demand response, electric vehicles, etc.—making it unclear how to integrate them within existing dockets and proceedings.
- More industry leaders and policymakers must be made aware of the VPP opportunity. While virtual power plants are not new, awareness of VPPs remains relatively low among customers and policymakers. Without high levels of awareness and understanding, these policymakers may not be developing policies that capture the full benefits of VPPs.
To address these barriers with the guidance and support of its members, VP3 will:
- Develop technical resources for practitioners and advocates to enable VPPs to scale in key venues
- Provide direct support in key federal, state, and local venues to provide proof points of success
- Convene across the industry, utilities, and policymakers to generate alignment within a broad coalition interested in VPP market growth
- Communicate to targeted and mass-market audiences to raise awareness of the VPP opportunity and how to capture it
By advancing those four priorities, and working closely with the government, NGOs, and industry organizations, VP3 will help address key barriers and scale the VPP market.
Can you share your perspective on the role that utilities play in scaling distributed energy resources (DERs) and how they could affect virtual power plant (VPP) investments?
Utility involvement is critical in scaling virtual power plant programs and VPP-enabling structures (e.g. time-of-use rates, etc.). As mentioned above, the expansion of utility retail programs to provide compelling options for customer participation is essential to enable DER market access.
How will the founding members of VP3 spend their time and what opportunity will they have to influence the trajectory of virtual power plants?
VP3 members will have the opportunity to participate in activities designed to grow the VPP market for the benefit of all. This includes
- Semi-annual meetings and quarterly calls to share priorities and shape the VP3 agenda;
- Engagement with VP3 staff and the broader VP3 network to shape product development and priorities; and
- Engagement with VP3 staff and research relevant to specific market opportunities.
Anything else you’d like to share?
Virtual power plants offer tremendous potential to help regulators, utility planners or operators, and other grid stakeholders address some of the most critical challenges facing the grid today: reliability, affordability, decarbonization, electrification, and health and equity. After a decade of steady advances, VPPs are poised for explosive growth. RMI is committed to being at the forefront of its success, working together with our members towards an equitable, reliable, carbon-free electric future.
Final Thoughts: The Time to Act is Now
Between market indications, global decarbonization efforts, and the challenges of grid insecurity and high energy costs, the time to act for our planet is now. At Virtual Peaker we’re eager to come together with other industry experts to help problem solve and we wholeheartedly believe that being a founding member of VP3 will allow us to be part of the solution to virtual power plant market adoption, as one more tool in the fight against climate change.