The New Green Grid: Utilities Deploy ‘Virtual Power Plants’ RSS Feed

The New Green Grid: Utilities Deploy ‘Virtual Power Plants’

By linking together networks of energy-efficient buildings, solar installations, and batteries, a growing number of companies in the U.S. and Europe are helping utilities reduce energy demand at peak hours and supply targeted areas with renewably generated electricity.

The tens of thousands of tons of natural gas that surged into the Southern California sky late last year were supposed to have fueled the region’s power plants and heated its homes. Instead, the massive leak at the Aliso Canyon storage site left California electricity providers racing to replace the lost supplies to avoid blackouts and recurring outages in the coming months.

But Los Angeles area utilities aren’t solely seeking more fossil fuels to fill the gap in natural gas. They are also turning to “virtual power plants”: sprawling networks of independent batteries, solar panels, and energy-efficient buildings that are tied together and remotely controlled by software and data systems. The goal of these virtual power plants is to collectively reduce customers’ energy demand at peak hours and provide renewable energy supplies in targeted areas. This would allow utilities to offset some of the needs for power from conventional sources and avoid disruption on the grid.

Energy experts say that the ongoing response to California’s natural gas shortfall may serve as a high-profile test case for virtual power plants, an emerging field of clean energy that is projected to more than quintuple in size in the United States within a decade, rising from about 4,800 megawatts in capacity in 2014 to nearly 28,000 megawatts by 2023, according to Navigant Research, a consulting and market research firm. Power providers in the U.S. and Europe are increasingly experimenting with these systems to help manage and harness the value of thousands of distributed energy systems – the various energy storage, efficiency, and renewable energy installations scattered across the grid.

“There’s been a significant uptick in interest from utilities and other power-sector shareholders to deploy these solutions for their different needs,” Omar Saadeh, a senior analyst at GTM Research, said by phone from San Francisco.

Propelling this demand overall is the nation’s ongoing shift away from a centralized electricity market — where hulking, fossil fuel-fired power plants send electrons across state borders via transmission lines — toward a network of localized and lower-carbon supplies, Saadeh said. “The whole notion that utilities are transitioning into a decentralized system is where this interest in virtual power plants and other technologies has really emerged,” he added.

In California, a natural gas shortfall from a major leak is speeding the adoption of these technologies. GTM Research projects that just the software component of virtual power plants – known as “distributed energy resource management systems” – will soon double in market value, from roughly $50 million in 2014 to $110 million in 2018. Add in the renewable energy technology, batteries, and other components, and the virtual power plant market could grow from $1.5 billion in annual revenue in 2016 to a $5.3 billion market by 2023, with the U.S. taking $3.7 billion of that year’s total and Europe snagging $1.3 billion, Navigant projected in 2014. Peter Asmus, principal research analyst for Navigant in San Francisco, said the market may actually be worth much more, given the recent growth in residential and commercial battery systems from companies such as LG Chem and Panasonic.

In California, the gas shortfall resulting from the Aliso Canyon leak is speeding the adoption of these emerging energy technologies. The California Public Utilities Commission in late May ordered Southern California Edison (SCE), the region’s main power provider, to “expedite its purchase of energy storage” this summer to help “alleviate the electric reliability risks to the Los Angeles Basin,” a process that’s still ongoing. Utility commissioners also asked SCE to hasten the rate at which privately owned batteries, solar, and other distributed systems are connected to the grid.

SCE obtains most of its natural gas supplies from Southern California Gas Company, which owns the underground Aliso Canyon facility that leaked more than 97,000 metric tons of methane from late October 2015 through mid-February this year. Only about 15 billion cubic feet, or less than one-fifth of the facility’s capacity, remains available for electricity and heating service in the region, California regulators estimated.

Stem Inc., an energy storage provider, says it expects to accelerate some of its existing virtual power plant projects in the Los Angeles area as a result of California’s response efforts.

The startup uses batteries and software to help major retail and hospitality companies, such as Whole Foods and Marriott, reduce their electricity bills. In the last seven years, Stem has installed battery systems (occasionally paired with rooftop solar) in hundreds of large buildings across California. Batteries are charged when electricity rates are low. Stem’s software systems then analyze a building’s energy use along with information on utility rates. When power prices are most expensive, the system automatically reduces the use of utility-provided electricity and instead draws from the battery.

In this way, the owners of individual buildings can lower the “peak demand” fees that utilities charge them each month. But collectively, the benefits are even greater, John Carrington, Stem’s chief executive officer, said in a phone interview. Through its software, Stem can coordinate the systems in its customers’ buildings to reduce area-wide energy demand when power is suddenly needed. Stem received a contract in 2014 to provide SCE with 85 megawatts of virtual power in densely populated areas where existing supplies are constrained.

Carrington said Stem is now working with “all the Los Angeles-area utilities on very fast-responding and quick installations of our product.” For virtual power, he added, the response to Aliso Canyon “could really serve as an inflection point for the industry.”

Read full article at Yale Environment 360