Latest / Rural-E / Virtual Power Plants Explained — What They Mean for Rural America

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Virtual Power Plants Explained — What They Mean for Rural America · Rural-E

0:00
SPEAKER_01: What it is, is it's an aggregation of several small distributed energy resources.
0:06
SPEAKER_01: So think of residential solar panels or residential battery storage, smart thermostats, very small energy resources.
0:14
SPEAKER_01: And then you're taking special software that's virtually bringing all these resources together and act in unison.
0:20
SPEAKER_01: You can kind of think of it as the software is the conductor of an orchestra, and every single one of these little distributed energy resources is a is a different instrument.
0:30
SPEAKER_01: So they all have their different roles to play within the orchestra, and then that software is collectively managing them or um allowing them to act in unison to produce that wonderful song you're used to hearing, or in this case to providing a resource to the electrical grid.
0:49
SPEAKER_00: Hey, welcome.
0:50
SPEAKER_00: Welcome to Rule E Podcast, uh, where we talk about real stories from real people doing work in rural energy throughout the area.
0:58
SPEAKER_00: No politics, just what works and what doesn't.
1:00
SPEAKER_00: So, hey, uh this is kind of a gonna be a fun little conversation we're gonna have today.
1:05
SPEAKER_00: I got just Michael and I in studio today, and and uh we want to take a few minutes to talk about a project that Michael's been working on, and we'll we'll dive into it.
1:14
SPEAKER_00: And basically it's about VPP or virtual power plants.
1:18
SPEAKER_00: And I gotta say, when Michael first came to me and asked about virtual power plants, I said, Michael, I have no clue what virtual power plants are.
1:27
SPEAKER_00: And so hopefully by the end of today's episode, we'll have a general understanding of what virtual power plants are and uh and everything.
1:34
SPEAKER_00: So, anyways, welcome, Michael.
1:35
SPEAKER_00: You've been a co-host with me on the Ruley podcast here and on a few of our different episodes and and uh and stuff.
1:42
SPEAKER_00: And so I don't know, can we just dive into this?
1:44
SPEAKER_00: Maybe, maybe first of all, what is a virtual power plant?
1:48
SPEAKER_00: Yeah, can you give us just a very general, high-level understanding of what that is?
1:54
SPEAKER_01: Yeah, so a virtual power plant, I want to preface this with first of all, very new technology.
1:59
SPEAKER_01: First one was only in 2008, and the first one in the United States was in 2018.
2:03
SPEAKER_01: So this is pretty cutting edge still.
2:04
SPEAKER_01: And what it is, is it's an aggregation of several small distributed energy resources.
2:11
SPEAKER_01: So think of residential solar panels or residential battery storage, smart thermostats, very small energy resources, and then you're taking special software that's uh virtually bringing all these resources together and act in unison.
2:25
SPEAKER_01: You can kind of think of it as the software is the conductor of an orchestra, and every single one of these little distributed energy resources is a is an different instrument.
2:35
SPEAKER_01: So they all have their different roles to play within the orchestra, and then that software is collectively managing them or um allowing them to act in unison to produce that wonderful song you're used to hearing, or in this case to providing a resource to the electrical grid.
2:50
SPEAKER_00: Okay.
2:50
SPEAKER_00: So how how did you get involved?
2:52
SPEAKER_00: I mean, where did this even come from for you?
2:54
SPEAKER_00: Like you had obviously seen this technology someplace, but I don't know.
2:58
SPEAKER_00: Tell us like how you got involved with it and kind of where your your path with virtual power plants.
3:03
SPEAKER_01: Yeah.
3:04
SPEAKER_01: So uh essentially what this was, I was reading an article in the news about this new thing called a virtual power plant, and similar to you, it's like, what in the world is that?
3:12
SPEAKER_01: I've never heard of this concept before.
3:15
SPEAKER_01: And this was maybe in, let's see here, probably spring of 2022.
3:20
SPEAKER_01: So a couple years ago is when I first heard about it.
3:23
SPEAKER_01: And then I just recently graduated with my master's degree, and my thesis was on virtual power plants.
3:29
SPEAKER_01: So I knew I wanted to explore something involving rural resiliency for my thesis work.
3:34
SPEAKER_01: I just didn't quite know what.
3:36
SPEAKER_01: I was looking at everything from just normal distributed energy resources to resilience hubs to bidirectional charging, and I eventually settled on virtual power plants because I saw it as kind of a next generation cutting edge concept.
3:51
SPEAKER_01: And I was joking the other day with you.
3:53
SPEAKER_01: It's like I expected my thesis to be outdated within six months, and I think it's probably about six weeks now, yeah, with how fast this field's moving.
4:01
SPEAKER_01: So yeah, it's definitely a challenge.
4:04
SPEAKER_00: I know you you first came to me, you know, with this concept of virtual power plant, and I had no clue what it was.
4:10
SPEAKER_00: And it seems like, you know, fast forward 12 months, 18 months, I hear I hear it pretty regular now.
4:16
SPEAKER_00: And so, you know, we've we've been involved with the state's energy planning groups and some of those.
4:21
SPEAKER_00: And I know we talked about it and brought that up in those groups.
4:24
SPEAKER_00: And then now here we are, you know, six months.
4:27
SPEAKER_00: That was six months ago.
4:28
SPEAKER_00: And then today it's like we're hearing more broadly talking about this.
4:31
SPEAKER_00: And so how, you know, how can it benefit the grid?
4:35
SPEAKER_00: I don't know if you want to talk about that a little bit.
4:37
SPEAKER_00: Like you you talked about you know, smart thermostats, but then you talked about batteries.
4:40
SPEAKER_00: So is it energy efficiency or energy savings, or is it generation or storage or all the above?
4:46
SPEAKER_00: Or I don't know if you can dive into that just a little bit.
4:49
SPEAKER_01: Yeah, so it's really an all of the above approach.
4:51
SPEAKER_01: It's not only storage assets or generation assets, where you kind of have the generation side of things, but then you also have the demand response side.
5:00
SPEAKER_01: So that's where your smart thermostats are coming into play.
5:02
SPEAKER_01: So you're adding resources that are already there through storage or through new generation all behind the meter.
5:08
SPEAKER_01: Or in the case of smart thermostats, what you'd be doing is proactively managing uh your thermostat, your home, your small business.
5:16
SPEAKER_01: And say you know it's gonna be a super hot day in the afternoon.
5:18
SPEAKER_01: Let's set your thermostat early in the morning so that way instead of having this massive spike on the grid, what you're able to do is kind of level that out a little bit and get it taken care of in the morning versus seeing this spike later in the afternoon that's causing challenges for grid operators, utilities uh to be able to manage that massive influx of energy.
5:36
SPEAKER_01: I guess to step back a little bit, I do want to, I've got to print it out here, but Department of Energy's definition for virtual power plants because there's a wide variety of definitions out there.
5:47
SPEAKER_01: And honestly, that was half the challenge of understanding what a VPP is, is every utility has a different definition.
5:52
SPEAKER_01: Several different state legislation that's out there has a different definition.
5:56
SPEAKER_01: So it's really challenging to kind of understand how this could be applied in rural communities without operating from the same starting point.
6:04
SPEAKER_01: So the Department of Energy defines a VPP as aggregations of distributed energy resources or DERs, such as rooftop solar with behind-the-meter batteries, electric vehicles and chargers, electric water heaters, smart buildings in their controls, and flexible commercial and industrial loads that can balance electricity demand and supply while providing utility scale and utility grid services just like a traditional power plant.
6:28
SPEAKER_01: VPPs enroll owners, including residential, commercial, and industrial electricity customers, and a variety of participation models that offer rewards for contributing to grid operations.
6:38
SPEAKER_01: So it's really this all-encompassing definition that's looking at multiple technology types.
6:43
SPEAKER_01: But I think what's also important there is that participants are compensated for their benefits to the grid.
6:48
SPEAKER_01: So this is a system that's really flipping the traditional grid structure on its head.
6:53
SPEAKER_01: And instead of energy flowing one direction from generation to transmission to distribution to end users, now it's going bi-directionally.
7:00
SPEAKER_01: So end users, homeowners, business owners, farmers are actually now participating more actively in their energy system.
7:08
SPEAKER_00: Yeah, that's that's interesting.
7:09
SPEAKER_00: Cause I know initially, you know, I was thinking maybe it's more of a residential sector project or or technology, but residential, commercial, industrial, you know, and so it's it's basically any any in electrical energy source per se.
7:23
SPEAKER_00: And then uh the other interesting thing, a few years ago, I know that California, the state of California was in a high temperature situation, and and they had came out, the state power authority came out and said, Hey, don't charge your EV, you know, on this this day or whatever.
7:40
SPEAKER_00: Boy, people come out of the woodworks and and stuff about that.
7:43
SPEAKER_00: And they said we're we're short on power, maybe brownouts and this.
7:46
SPEAKER_00: And boy, it created quite a ruckus out there in the EV world.
7:49
SPEAKER_00: And then I was listening a month later, two months later, they were interviewing one of the utilities, and the utility was saying, well, we weren't as worried about it.
7:58
SPEAKER_00: And then they got in talking about EVs and such, and the utility made a comment.
8:02
SPEAKER_00: I don't remember what utility it was, one of the California-based utilities, they made a comment around using these EVs as essentially battery storage devices that the customer was buying.
8:12
SPEAKER_00: And boy, that got me thinking about this.
8:14
SPEAKER_00: Is that one particular type of virtual power plant that could be considered, anyways?
8:19
SPEAKER_01: Yeah, it is.
8:20
SPEAKER_01: And I often find too the term virtual power plant can be a little confusing because what does virtual exactly mean?
8:26
SPEAKER_01: It's talking about that software aggregation, as I learned through my research, but distributed power plant is another term, and that kind of helps folks envision it a lot better because it's really all these distributed assets.
8:37
SPEAKER_01: And that can, yes, be EVs with bidirectional charging capabilities, where you're able to essentially use your electric vehicle as a battery in the same way you would use um a Tesla power wall or sig energy unit of your house.
8:49
SPEAKER_01: And I think, yeah, what you mentioned earlier, it's an interesting distinction between residential programs as compared to commercial and industrial programs.
8:57
SPEAKER_01: The first virtual power plant globally was leveraging utility scale assets.
9:02
SPEAKER_01: So it's actually using large-scale hydroelectric infrastructure in Germany.
9:06
SPEAKER_01: In the United States, most of our virtual power plants tend to be at the residential level.
9:10
SPEAKER_01: However, there's a lot of programs that are starting to expand more into that commercial and industrial space, realizing that there's a lot larger, excuse me, there's larger assets that they can then aggregate as opposed to having to aggregate thousands of more smaller resources that residential uh homeowners would be providing.
9:27
SPEAKER_01: But both are equally important.
9:29
SPEAKER_00: Yeah.
9:29
SPEAKER_00: In your, in your study on this, you know, what are some examples?
9:33
SPEAKER_00: Are there, is there anything in the Western US, any of the utilities that have participated in these programs?
9:38
SPEAKER_00: You know, I I'm my next question is going to be like, where do we stand with actually doing this?
9:43
SPEAKER_00: It's a is it a concept or is it a is it a reality?
9:46
SPEAKER_00: Because we hear a lot about, you know, especially today, about the data centers and the electrification movement, the demand on the grid and stuff.
9:52
SPEAKER_00: And so are there some success stories out there?
9:55
SPEAKER_00: Are there some utilities that have tried, you know, this technology?
9:59
SPEAKER_00: What what exactly did they promote?
10:01
SPEAKER_00: I don't know if you talk about that a little bit.
10:02
SPEAKER_01: Yeah, there definitely are.
10:03
SPEAKER_01: This is it's moved past the pilot stage for most programs, and there's active implementation and honestly grid events where a region is calling upon virtual power plants to help provide that capacity during those heat waves, winter storms.
10:18
SPEAKER_01: We saw examples of that in New England a couple of years ago in their wholesale market region, as well as uh obviously California's ran a couple of those events with substantial success.
10:28
SPEAKER_01: Out in the West, uh, a lot of the major programs I'd say you're seeing predominantly in California as well as Texas.
10:35
SPEAKER_01: But that being said, I think we're seeing a lot of those programs because they're in wholesale markets that actively are incentivizing some of that price arbitrage from virtual power plants, or you might not be seeing that in other regions of the West due to the market structure, like Pacific Northwest, where it's a regulated region.
10:52
SPEAKER_01: It's all bilateral transactions of one utility selling to another.
10:55
SPEAKER_01: So there's not that whole market-based approach where virtual power plants can really provide the best bang for the buck.
11:01
SPEAKER_01: That being said, in both of those regions, we're seeing a couple of example utilities in our area: Portland General Electric, Civic Power, Fugit Sound Energy all have virtual power plant programs.
11:13
SPEAKER_01: Those ones are with battery storage as well as smart thermostats, both operating functionally the same, compensating customers on a per event basis or per amount of energy provided basis.
11:25
SPEAKER_01: So it kind of depends.
11:26
SPEAKER_01: Each utility runs a program a little bit differently.
11:28
SPEAKER_01: Uh, there's not really a common consensus on how these programs can be operated, which gives a lot of flexibility to utilities if they want to prioritize certain technologies that they know are going to be best for their ratepayers, or if they have particular reasons to to promote a certain program style with their existing incentive uh operations to maybe help support some of their operations a little bit more efficiently.
11:52
SPEAKER_00: Yeah.
11:52
SPEAKER_00: So what what does that look like?
11:54
SPEAKER_00: Like what does it look like from the utility when they're you know they're going to their customers?
11:58
SPEAKER_00: Are they is the utility helping cost share on a battery pack, like a power wall or something to be installed in their residence?
12:05
SPEAKER_00: And then, you know, the the smart thermostat too, giving them a rebate to put us install a smart thermostat or you know, and then to follow that up, the event you mentioned the events.
12:15
SPEAKER_00: Is this uh, you know, once a year, 10 times a year, weekly?
12:19
SPEAKER_00: I mean, I have you know, I I'm thinking it's gonna be when there's these events that are uh uh heat dome or high demand on the grid and they're looking to either trim or add generation to the grid.
12:30
SPEAKER_00: I don't think you speak to that a little bit.
12:31
SPEAKER_01: Yeah, I guess uh starting off with the like when these events are happening.
12:35
SPEAKER_01: Yeah, typically it's the goal of a virtual power plant is to prevent power outages and any sort of grid interruption.
12:42
SPEAKER_01: So the goal is to smooth these demand spikes.
12:44
SPEAKER_01: So when you're seeing a heat dome or a winter storm or even uh points in time where there's super high cost of electricity on a wholesale region for the utility to buy it, they're gonna try to leverage that virtual power plant to help trim down some of that demand from their customers and from their ratepayers.
13:01
SPEAKER_01: So that could happen honestly anytime from maybe 10 events a year, a couple of events a season.
13:08
SPEAKER_01: You're not typically seeing these VPPs drawn upon on a weekly basis in most cases.
13:13
SPEAKER_01: And as for how customers are compensated, that varies from utility to utility as well.
13:18
SPEAKER_01: So there's a lot of a lot of flexibility with how they can be structured.
13:21
SPEAKER_01: The approach remains the same.
13:23
SPEAKER_01: In a lot of cases, I'd say you're seeing folks who are compensated at the front end with rebates for the installation of a smart thermostat or of a battery system or bidirectional charger.
13:33
SPEAKER_01: And then also a lot of times utilities will provide practice payments and essentially they're paying their rate payers on a per event basis or for the amount of energy that they're actually drawing from their rate payers to as a part of the virtual power plant.
13:48
SPEAKER_01: So it's tough to say because it's honestly very flexible depending on how each utility wants to operate their program.
13:54
SPEAKER_01: I will say there's kind of three ways you can break a virtual power plant down into like types of VPPs.
14:00
SPEAKER_01: First one being this turnkey approach.
14:03
SPEAKER_01: And that's where you're working with a third-party aggregator.
14:06
SPEAKER_01: Examples of that would be Tesla, Sunrun, Voltis, Uplite, some of those names you might be familiar with, household names in the energy space.
14:13
SPEAKER_01: Others are maybe a little bit newer.
14:14
SPEAKER_01: And what they'll do is they'll essentially run the program from top to bottom.
14:17
SPEAKER_01: They will enroll customers and ratepayers into the VPP, they'll manage the incentives, and then they will then sell that electricity from the VPP either to a utility directly with a contract or to a wholesale market.
14:30
SPEAKER_01: So that's kind of your turnkey approach, where it's really hands-off on the utility side.
14:34
SPEAKER_01: They'll just reap the benefits of the electricity and help stabilize their grid.
14:38
SPEAKER_01: Then you've also got a utility-managed third party operated.
14:41
SPEAKER_01: That's where the utility is still managing the assets, the flow of electricity to different parts of their own grid.
14:48
SPEAKER_01: And then that third party is managing maybe the customer enrollment and onboarding.
14:52
SPEAKER_01: Um, and the utility can then still have the flexibility to set the different rates that are gonna be most beneficial for their for their customers and ratepayers.
15:00
SPEAKER_01: You've also got a utility orchestrated.
15:02
SPEAKER_01: So that's think of it as a vertically integrated virtual power plant.
15:06
SPEAKER_01: That's where the exact opposite, the utility is running it all themselves.
15:09
SPEAKER_01: There's no third-party engagement, um, and it's all utilities providing incentives, they're providing the actual management, customer interactions, and that differs substantially from that utility managed third-party operated method where you'll see organizations like Tesla kind of acting as that catch-all organization.
15:28
SPEAKER_01: Utility is playing a role, but not necessarily as large a role.
15:32
SPEAKER_01: So there's a couple of different ways that this can play out, which I think is beneficial because you've got a lot of smaller utilities with maybe short staff, less capacity, especially in a lot of our rural areas where they're they're smaller organizations and they're running a variety of different programs.
15:47
SPEAKER_01: So maybe that would be a good use case for that turnkey third-party operated virtual power plant as compared to a larger investor-owned utility in an urban center might opt towards that vertically integrated approach.
15:58
SPEAKER_01: So there's kind of a couple of different avenues for whatever's gonna best fit the utility.
16:02
SPEAKER_00: Yeah, because that's that's what I was gonna ask you was a few of the examples you shared.
16:07
SPEAKER_00: You'd mentioned California and Texas and then some of these larger investor-owned or larger utilities in general.
16:14
SPEAKER_00: Like, how does what number of participants do you need to have, you know, how many customers do you need to sign up to make this worthwhile that it's gonna make an impact versus a couple of people and it's a minimal, minimal, minimal impact and stuff?
16:27
SPEAKER_00: And so I, you know, how how does this in our work, most of our work is in the rural areas?
16:32
SPEAKER_00: Like, have you looked at that?
16:33
SPEAKER_00: Have you looked at like what what would it take for this to be a a project that would be meaningful to a rural electric cooperative that you know doesn't have a hundred thousand customers type of thing?
16:45
SPEAKER_01: Right.
16:45
SPEAKER_01: And that's exactly what the goal of my my thesis work was is how can I explore potential avenues for rural serving utilities and their their customers, ratepayers, members?
16:55
SPEAKER_01: So not necessarily just cooperative utilities, but also investor-owned utilities and municipal utilities that do serve rural communities.
17:02
SPEAKER_01: I think the largest barrier there is you need to have a substantial amount of customer repair enrollment in order to be able to functionally make this program work.
17:13
SPEAKER_01: So the challenge is with those smaller utilities, how do you justify the cost for the software, the staff time to do that upfront engagement, and also then the rebates?
17:24
SPEAKER_01: And I think the best way to do that is to really work on like a regional approach to work with some of your your other uh local utilities right next door.
17:33
SPEAKER_01: So maybe instead of one cooperative utility operating this program just themselves and for their service territory, if they could work with a couple in their same region and some of their the larger uh networks of cooperative utilities, is probably gonna be your best bang for your buck.
17:47
SPEAKER_01: Everyone using the same software platform, um maybe the same third-party aggregator, if that's gonna be the better avenue for them.
17:54
SPEAKER_01: And most likely it will be for rural utilities just to help minimize some of that staff time that's necessary to operate the program.
18:01
SPEAKER_01: And then we also looked at is there organizations who kind of like broader trade organizations who might be able to provide a role there, such as uh the National Rural Electric Cooperative Association and can Enrica maybe play some play a role in that larger aggregation of several different cooperative utilities.
18:17
SPEAKER_01: So then you've got an entire system approach that's all operating from one unified platform to hopefully make it a lot simpler, not only for member engagement, but also for the utilities as they're running so many different other programs.
18:30
SPEAKER_01: Because this is meant to be complementary to existing programs.
18:32
SPEAKER_01: It's not a replacement of traditional demand response.
18:35
SPEAKER_01: It's simply another way to utilize demand response and renewables.
18:38
SPEAKER_00: Yeah, that's interesting.
18:39
SPEAKER_00: Uh you know, I think we, you know, I'm gonna say at the Pacific Northwest, we see a few different concepts around uh community or cooperatives, or we've seen some of the rural electric cooperatives install solar panels and then the customer can buy buy a panel per se and participate in that way.
18:59
SPEAKER_00: But this is kind of a next level approach, I guess.
19:03
SPEAKER_00: And so you had mentioned, you know, neighboring utilities, because some of these utilities just, you know, they don't have you know substantial loads anyways, and it's it's spread out over, you know, a large geographic area, you know, the customers per acre are pretty small in some of these rural electric cooperatives.
19:20
SPEAKER_00: And so it does it does it make sense to have a couple utilities in the same region, or would it matter if you know they're spread throughout the region?
19:29
SPEAKER_00: Uh you know, is it you know, just if from your knowledge of looking at the electrical grid and and those types of things, is there a benefit one over the other?
19:37
SPEAKER_00: You know, I'm just thinking about if uh if uh a utility in in Southwest Oregon and a utility in northeast Oregon were does it is that help or or not geographically location?
19:49
SPEAKER_01: Well, I think at the end of the day, you couldn't have utilities spread throughout an entire region.
19:54
SPEAKER_01: And the reason that could be beneficial is perhaps a VPP that's operating in, let's just say uh northeastern Oregon up in the Wallawas area.
20:03
SPEAKER_01: Maybe they're what they're doing is they've got a massive storm that's rolling through that area.
20:08
SPEAKER_01: So they wouldn't want to be able to leverage some of the resources preemptively from other regions.
20:13
SPEAKER_01: So you can you can do it both ways.
20:16
SPEAKER_01: You could have it all across one region, or you could have it distributed.
20:20
SPEAKER_01: And that's the the resiliency behind this approach is the distributed nature.
20:24
SPEAKER_01: So the distribution of all of the individual grid assets through residential battery units, smart thermostats, but then also distributed across an entire utility service territory.
20:35
SPEAKER_01: Because you can think of it as kind of a way to limit potential like errors within not errors, but uh challenges within the system.
20:42
SPEAKER_01: You got one line that goes out on a major feeder line, then that might jeopardize an entire part of their grid.
20:47
SPEAKER_01: Whereas a virtual power plant is not a centralized power plant with one line in, one line out.
20:53
SPEAKER_01: It's truly distributed.
20:54
SPEAKER_01: So you can call on assets from across an entire region.
20:57
SPEAKER_01: Okay.
20:58
SPEAKER_00: So how does this differ than a microgrid?
21:00
SPEAKER_00: Because we hear, you know, last 10 years, I've heard a lot about microgrids.
21:04
SPEAKER_00: And I know there's been some folks working on some of the state policies and stuff around microgrids and stuff like that.
21:10
SPEAKER_00: So how would you compare a microgrid with a virtual power plant?
21:13
SPEAKER_00: Is it one and the same?
21:14
SPEAKER_00: Is it are there differences or kind of what's your what's your findings there?
21:18
SPEAKER_01: Yeah, so microgrid is we're typically defining it as really like a mini electrical grid.
21:24
SPEAKER_01: So it's all still interconnected with tangible lines, resources in a defined geographic space.
21:31
SPEAKER_01: A virtual power plant and keyword virtual in this case is that the software is really what's combining it.
21:37
SPEAKER_01: You're utilizing existing transmission and distribution lines, so it avoids the build out of any new new lines.
21:43
SPEAKER_01: And then the software is kind of what's bringing it all together.
21:46
SPEAKER_01: So it can be very geographically distributed.
21:49
SPEAKER_01: And you think about some of these larger, especially co op uh service territories that stretch, I mean, clear across a state, you could have a V VP operating across that entire region where you might.
22:00
SPEAKER_01: have assets in the far northern section and assets in the southern section that are still contributing, whereas a microgrid is pretty localized to a particular site or series of sites, maybe like a small community.
22:12
SPEAKER_00: Okay.
22:12
SPEAKER_00: Okay.
22:13
SPEAKER_00: Yeah.
22:13
SPEAKER_00: I wanna what else did you find?
22:15
SPEAKER_00: You did you spent your this was your project for your uh master's degree.
22:20
SPEAKER_00: And you know, what are some other key findings in there that you think either one was surprising or kind of your aha moments.
22:28
SPEAKER_00: And uh you know what do you got?
22:30
SPEAKER_01: Yeah, I think the lack of standardization in definitions, in interoperability standards.
22:36
SPEAKER_01: So there's, and yes, I recognize the technology is very new, but we are also seeing other new technologies like EV charging that's adopted a lot of standards to help make this process simple across the board, VPPs are not there yet.
22:48
SPEAKER_01: They're making strides and we're seeing organizations like IEEE who's putting out standards and starting to make that progress.
22:54
SPEAKER_01: But if one utility is running a virtual power plant and they have to run it completely different from another utility that wants to do that has the exact same goals, that's a challenge.
23:05
SPEAKER_01: And how can we integrate the system across the board a little bit better to make sure that it truly is a turnkey approach from the beginning.
23:12
SPEAKER_01: And some of that is all these different technologies, what can actually fit into a virtual power plant?
23:16
SPEAKER_01: A Tesla PowerWall has different API interconnection standards than a SIG energy unit as an example.
23:23
SPEAKER_01: So half the time it's making the hardware talk with the software and how can we standardize that across the board so that way a utility doesn't have to design a program around one OEM or are forced to operate in that way.
23:35
SPEAKER_01: Because obviously you want to have a larger potential number of devices that can be tied into your program.
23:43
SPEAKER_00: Yeah just just on that real quick I I've seen that in so many different industries where there you know equipment that uh you know it it doesn't sink.
23:52
SPEAKER_00: You have everybody speaks their own language you're trying to uh you bring in data from different resources and it's like we need this this big black box that's the translator and and reads the signals and the data in from all these different devices and then puts it in a common language.
24:08
SPEAKER_00: And it sounds like that's still something that they're that they're working on around this VPP technology whether it's a a smart thermostat or a your solar controller or your your Tesla power wall or your SIG energy unit or what have you and so any idea?
24:24
SPEAKER_00: I mean is that something you're thinking we'd see in the next 10 years, five years?
24:29
SPEAKER_01: Is it yeah I'd say even I think five years maybe even sooner considering how fast this technology is rapidly evolving.
24:37
SPEAKER_01: I was as I was doing this research quite literally I was seeing weekly developments.
24:41
SPEAKER_01: So I had to really keep track of all that's that's happening in the space.
24:44
SPEAKER_01: And I as you mentioned earlier you didn't even know about it a couple years ago and now you're hearing about it all the time.
24:50
SPEAKER_01: And I think that's as different utilities and even large load users such as data centers or large industrial applications, they're starting to realize the benefits of virtual power plants as well.
25:00
SPEAKER_01: So it's not just the utilities but it's the large load users on the grid that are realizing okay instead of having to bring my own capacity to bring in my own my own generation sources, could I leverage something like a virtual power plant to help provide some of that additional capacity while also providing resiliency to the end users.
25:18
SPEAKER_01: I think that's the biggest takeaway about all of this is this is not just a grid solution.
25:23
SPEAKER_01: This is a solution for the farm down the road for the homeowner up valley is you can have a backup battery in your home that is or you're at your business, at your farm that's contributing to your own localized resilience during the during power outages, public safety power shutoffs and during day-to-day operations can also help manage the grid to prevent those outages.
25:46
SPEAKER_01: So it's truly a solution that's benefiting not only your utility but also really benefiting uh you as a ratepayer and you're being compensated for your participation too.
25:55
SPEAKER_00: Yeah.
25:56
SPEAKER_00: Well I think I think that resiliency is a such a huge factor especially for us folks that live in the rural area is uh you know it's midsummer right now we're always you know concerned about the wildfire situation and especially this year with it being so dry and being in the drought and everything and and uh you know what I think I think about kind of a couple of things that came to mind for me.
26:15
SPEAKER_00: One is the resiliency, just energy resiliency.
26:17
SPEAKER_00: Will this technology allow us to to have power when the grid goes down or I know you'd mentioned it it it's a system to try to prevent the grid from going down but when the wildfire situation is a little bit different.
26:30
SPEAKER_00: It's that's not necessarily on the power demand.
26:32
SPEAKER_00: That could be the infrastructure itself's compromised and or they'd have to do a power safety shutoff for a specific area and stuff.
26:40
SPEAKER_00: And so I guess kind of three things I'm thinking about energy resiliency and how that works with the virtual power plants.
26:46
SPEAKER_00: The other thing I'm super interested is is in vehicle to X.
26:50
SPEAKER_00: You know it used to be called V to G vehicle to grid and then now it's V to X because it could be to home to building to you know you name it in utilizing these electric vehicles and stuff.
27:02
SPEAKER_00: And then the third thing is is on-site batteries.
27:05
SPEAKER_00: And I know years ago you know the only people that had on-site batteries were folks that usually were off grid and they'd have some old lead acid batteries hooked to a solar system and and they could run the lights for a few hours but that whole technology just seems like it's really grown.
27:19
SPEAKER_00: I think one of the one of the more recent you know bigger manufacturers would be your Tesla power wall but I know we've also been looking at the SIG energy units and then there's many other systems out there.
27:30
SPEAKER_00: So can you just talk about that just real briefly you know kind of resiliency the vehicle to grid and um and batteries and I know that's like three in your own very large conversations but how does that play into your thoughts and your findings around virtual power plants?
27:46
SPEAKER_01: Yeah a lot of the utilities I spoke with during this research, their the utility goal was essentially how to play with their prices and arbitrage on their demand charges.
27:56
SPEAKER_01: That was the predominant goal from the utility is how can we provide greater cost savings.
28:01
SPEAKER_01: However, when I was asking about what are some of the benefits to your members, to your ratepayers, top one was resiliency.
28:08
SPEAKER_01: So as a homeowner, yes I'm getting compensated for this and that's great, don't get me wrong, but now I also have a battery backup.
28:14
SPEAKER_01: So when there's a power outage I can power my home.
28:16
SPEAKER_00: Yeah.
28:16
SPEAKER_01: So I think that's looking at in terms of types of virtual power plants, yeah, we could do a lot with smart thermostats and load control and being able to effectively manage with demand response.
28:27
SPEAKER_01: But I think the biggest bang for your buck in especially rural communities is going to be a battery virtual power plant because not only are you having that the grid supporting benefits and frequency control and the other ancillary benefits that a VPP provides to the grid, but now you got that backup power.
28:42
SPEAKER_01: And I also am really excited to, I'd say it's a lot newer even in the VPP space, which is saying something, but seeing some of the vehicle grid technologies being integrated, I'd say typically we're seeing time of use rate schedules incorporating that with a virtual power plant.
28:58
SPEAKER_01: So really managed charging and using the the VPP to manage charging for electric vehicles and the time the timing of that as opposed to directly discharging vehicle batteries like you would a residential battery unit.
29:13
SPEAKER_01: But that's also being looked at by several utilities and that's I'd say a little bit more of the pilot stage with the vehicle to grid capabilities as compared to discharging a residential battery unit.
29:23
SPEAKER_00: Yeah.
29:24
SPEAKER_00: So what are some other findings is there anything else in there that really stood out to you or anything you know that would be good to discuss?
29:30
SPEAKER_01: Yeah one of and this is very recent honestly as I was just kind of finishing up my report was looking at now you're seeing data center companies fund virtual power plants in their data center communities.
29:41
SPEAKER_01: There was a recent Google deal with Vultis which is a third party aggregate virtual power plant aggregator for 100 megawatts of capacity in PJM.
29:51
SPEAKER_01: So that's your wholesale market on kind of the eastern seaboard also is where data center alley sits in Virginia there.
29:56
SPEAKER_01: And what this deal is with Vultis was that they're as a third party aggregator Vultus is working to bring in different capacity through batteries, smart thermostats, adjustable loads and then Google is then actually procuring that capacity from Vultis.
30:12
SPEAKER_01: So kind of like a almost like a power purchase agreement, but Google is footing the bill for those units for customers.
30:19
SPEAKER_01: So it's really kind of a first pilot approach that we're seeing from data centers actually paying for virtual power plants.
30:26
SPEAKER_00: Yeah that's interesting because when I think about it I think it would be something from the electric utility but uh you know I mean we we hear so much about the new loads from data centers and stuff and and I know that the Pacific Northwest region's currently working on the ninth power plan.
30:41
SPEAKER_00: And one of the things I read in there was and we we know because we work in this space that the the the future growth of the area the new demand of energy traditionally for years now have been covered with energy efficiency and energy conservation and that was kind of the least cost resource for accommodating new loads.
31:01
SPEAKER_00: But the the Ninth Power Plan makes a comment in there about they're expecting to see a 50 to 100% demand on electric electricity increase.
31:12
SPEAKER_00: And there's no way conservation can cover that.
31:13
SPEAKER_00: So they got to look at these other programs and stuff.
31:15
SPEAKER_00: And so I guess you know seeing the data you know knowing that that a lot of that additional load is going to come from the data centers now seeing them get involved in some of these programs to it you know it may move them forward.
31:26
SPEAKER_00: I guess is kind of what I'm thinking where the utilities uh especially the small utilities are so so strapped with staffing and and uh you know kind of have their budgets they have to work within and even so there's a lot of there's a lot of financial things going on with the larger utilities with some of the um different lawsuits around the fires and and and and all these different things and stuff.
31:47
SPEAKER_00: So to see the uh the the uh data centers get involved with this is quite interesting.
31:52
SPEAKER_00: Is there anything else in your findings?
31:53
SPEAKER_00: Because I want to I want to move into you've talked about your information and your report almost being outdated within months of you actually finalizing it.
32:01
SPEAKER_00: So I I want to know like well what's that like what's outdated what's the what's the latest and greatest you know or or I guess what's the new technology that you're seeing around virtual power plants.
32:12
SPEAKER_01: Yeah um I think just one of the other findings to kind of address is the substantial cost savings compared to alternatives.
32:20
SPEAKER_01: So there was a a report from Brattle, which is an electricity consulting firm uh that's I'd say one of the ones that's at the forefront of some of this this research and they looked at the comparable cost over uh natural gas peaking plants to uh utility scale battery storage and virtual power plants and they had peaking plants at about$99 a kilowatt year versus utility scale storage substantially cheaper at$68 and virtual power plants coming in at around$42.
32:47
SPEAKER_01: Wow.
32:47
SPEAKER_01: So quite substantial in terms of the cost savings even on the utility side.
32:52
SPEAKER_01: And as we know with uh looking at the cost of everything going up, this might be a pretty financially viable pathway.
32:59
SPEAKER_01: Um and then not to mention too a lot of these utilities are are having emission reduction goals so that could be another way to help manage that as well.
33:07
SPEAKER_00: Yeah no that's interesting I I guess what I'm thinking about too and uh the consumer the customer of the utility it's like uh we hear so much we hear quite a bit of negative feedback on like the smart meters that the utilities are putting in and these types of things so this is you know the next level we want to control uh we want control of your car's battery uh we want control your thermostat these types of things and so I guess any thoughts on that like you know how's that been received so far are there is there any level of trust there with the con with the average consumer in this technology or you know kind of what what's your thoughts on that?
33:42
SPEAKER_01: I think the more flexibility in program design that can be built into these programs from the get-go, allowing uh ratepayers to decide if they want to opt into an event as opposed to automatically opting in their devices, uh giving them 24 hours notice before the utility wants to be able to leverage one of those events.
33:59
SPEAKER_01: I think those are important considerations.
34:01
SPEAKER_01: So that way customers still have the control of their own units.
34:05
SPEAKER_01: And it's not like we're giving away control of our devices to utilities.
34:09
SPEAKER_01: Oftentimes and I'd say by normally with almost all the programs I saw, there was a stipulation saying that the utility could not drain a battery down past 20% or even giving customers the ability to say, hey, I want my battery only drained down to 50% and giving that flexibility to the customer and how they want their resources leveraged by the utility.
34:30
SPEAKER_01: And I think the programs that build in those types of approaches into their program design are ultimately going to help develop that trust.
34:37
SPEAKER_00: Okay.
34:37
SPEAKER_00: Yeah so basically building some safeguards because I know for me it's like you know I'd I'd consider being involved in some of these programs, but uh if I need to go someplace and my car is at 20%, I'm not gonna be happy about that.
34:48
SPEAKER_00: Or same thing you come home and your house is at 85 degrees you it may not be too you know on a hot summer day you're thinking you're coming into air conditioning.
34:56
SPEAKER_00: So I'd want some safeguards around that and everything.
34:58
SPEAKER_00: Anything else you know kind of as we as we get ready to wrap up here any anything else you want to make sure that uh that you share about this study and stuff around virtual power plants?
35:08
SPEAKER_01: Yeah I think one of the biggest things I noticed about this and we see it in our day-to-day work every single rural serving utility is unique.
35:16
SPEAKER_01: Their members are unique their service territory is unique the communities they serve are unique.
35:21
SPEAKER_01: So this is not like a perfect silver bullet.
35:23
SPEAKER_01: And I think we you I talked earlier about some standardization with the technology.
35:28
SPEAKER_01: I think that's great to see.
35:29
SPEAKER_01: But also recognizing design your programs for your communities that you're serving.
35:33
SPEAKER_01: And I think that's what's been exciting to see about some of the uh the rural serving utilities that I did speak with is they were designing programs that are going to best fit the needs of the communities that they serve.
35:43
SPEAKER_01: So it's not a one size fits all approach.
35:46
SPEAKER_01: And I think also to just recognizing this is a rapidly developing field of of technology of approaches and a year ago you weren't seeing any sort of uh data center involvement in virtual power plants and that so that's a very that's a pretty new development even within the last six months.
36:02
SPEAKER_01: And now we're seeing other larger organizations Tesla, Sunrun and new home which is smart uh smart thermostat uh company they just are doing an aggregation deal with 16.8 gigawatts worth of capacity.
36:18
SPEAKER_01: So you're seeing a lot of these larger uh companies organizations really coming into this picture whereas traditionally it was just utilities.
36:25
SPEAKER_00: Yeah.
36:25
SPEAKER_01: So we're seeing involvement from the broader technology sector and energy sector, which I think is exciting because hopefully that'll help spur along uh the development of this approach.
36:34
SPEAKER_00: Yeah.
36:35
SPEAKER_00: That it it always intrigues me too.
36:37
SPEAKER_00: You know, you you think you buy an electric car and you know you've mentioned Tesla a few times and and and not to single them out, but they're involved in all these other kind of energy related projects you might say.
36:48
SPEAKER_00: And it's just interesting the how they're moving, they're always moving us to the next level, you know?
36:53
SPEAKER_01: Well one of the first virtual power plants at scale was actually a Tesla one in Southern Australia.
36:58
SPEAKER_01: So the South Australia project was at the time the largest in the world.
37:03
SPEAKER_01: I think it's been surpassed now that was in 2014 if I remember correctly.
37:07
SPEAKER_00: Okay.
37:07
SPEAKER_01: So we're definitely seeing a lot of development uh and it helps too that they produce their own batteries they also have their own aggregation software so Tesla is able to run their own uh turnkey program as a third party aggregator.
37:19
SPEAKER_00: Okay.
37:19
SPEAKER_00: What what should we look out for?
37:20
SPEAKER_00: Like in the coming in the next six months what what should we be watching?
37:24
SPEAKER_01: I'd say just look at your your local utility and see if they offer this program and learn a little bit more about it.
37:30
SPEAKER_01: If that's something that you'd be interested in participating in.
37:32
SPEAKER_01: But then also just watching the news uh they follow several different publications just to kind of keep up to speed with all this because it's quite literally changing day to day new technologies are being integrated.
37:43
SPEAKER_01: You're seeing new third party aggregators that are coming to the table to run these programs on behalf of utilities and you're constantly seeing the utilities themselves trying to innovate and figure out what's going to work best for our region and for our our members, our customers.
37:56
SPEAKER_00: Yeah, yeah.
37:57
SPEAKER_00: And maybe even what we could do too is is share some resources for I'm sure there's organizations and and maybe US Department of energy that has websites and stuff talking about this just to try to give folks an ability to go in and learn more about themselves because I'm I'm sure there's a lot of folks out there just like me like what the heck are you talking about virtual power plant.
38:17
SPEAKER_00: That don't even make sense.
38:18
SPEAKER_01: And I was the same way when I started this first I had to understand how do we actually define this because everyone kind of talks about it differently.
38:24
SPEAKER_01: So trying to yeah look at some of those resources for sure.
38:27
SPEAKER_00: Yeah.
38:27
SPEAKER_00: Okay.
38:27
SPEAKER_00: Anything else in closing you want to make sure you get out there?
38:30
SPEAKER_01: No I just think this is a potential uh energy solution for the future.
38:34
SPEAKER_01: It's not a silver bullet nothing is but let's see uh where this can go and how we can better uh serve especially our rural communities and make sure that we're not leaving behind rural as innovation comes at table.
38:47
SPEAKER_00: Yeah yeah I think that's that's important all of us is trying to make sure we have the opportunity to participate in some of these things that would benefit us.
38:53
SPEAKER_00: And I I go back to kind of two things that you talked about earlier.
38:57
SPEAKER_00: One of those is is the cost you you'd mentioned some numbers from like a peaking natural gas peaking plant versus these virtual power plants and how much less it would cost.
39:07
SPEAKER_00: You know, we hear a lot about that in these high demand times of of substantial expense to buy electricity on the open market when we get in these situations.
39:16
SPEAKER_00: And so the the other thing is that that I'm sitting here thinking about is the utility has a priority and then the customer has a priority.
39:26
SPEAKER_00: And but this technology may fit in and help both where the utility is more on the demand response type of thing and the customer and I and I would be in this boat would be I have some backup power now.
39:37
SPEAKER_00: Exactly you know I have this battery pack and I I can run four hours or whatever that is.
39:42
SPEAKER_00: You know it gives you some time to kind of figure out get a game plan if you're gonna have a longer term outage and stuff.
39:46
SPEAKER_00: And so that's that's super interesting.
39:48
SPEAKER_00: So all right well hey Michael thanks for for being on with me and and sharing this virtual power plant.
39:54
SPEAKER_00: And I'm sure this will be one of many conversations about this technology and stuff, but I think that we're all the world's changing fast and I and uh I've heard more about energy and energy demand it seems like in the last couple years you know it just seems to be front of mind.
40:09
SPEAKER_00: I've I've seen some recent studies you know of surveying a people you know top concerns or whatever and energy is is typically on the top 10 list for the general consumer.
40:19
SPEAKER_00: And uh you know I I think years ago, 10 years ago, you know, and and before it just we turned the lights on and the lights come on and we just hear all this talk now.
40:27
SPEAKER_00: And we've seen some areas in the US where they've had brownouts or outages from storms and and high demand situations.
40:33
SPEAKER_00: And so it's all kind of a little more front of mind to us.
40:35
SPEAKER_00: And so anyways, thanks for coming on today and joining us and and we look forward to hearing more about this.
40:41
SPEAKER_00: And I guess I want to keep up with you as far as like what the new the new information is and kind of where things are going and maybe even down the road if we've as these projects develop and everything that we could even bring some of those folks on and talk to them about what's working, what's not and and uh just be interesting to hear to hear about that.
40:59
SPEAKER_00: So anyways, thanks Michael.
41:00
SPEAKER_00: Thanks for having me.
41:01
SPEAKER_00: Yeah appreciate it we'll wrap it up with that and so uh anyways thanks for tuning in to Ruley