With growing energy demand and the need for a rapid energy transition, creative solutions to meet demand and support the grid are cropping up.
One of those solutions, virtual power plants (VPPs), comes with the added promise of allowing anyone to participate and earn some money for doing so. So, what is a virtual power plant? More on that and how you can participate below.
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What Are Virtual Power Plants?
A virtual power plant (VPP) is a collection of small, distributed power and electricity production, consumption, and storage devices aggregated into a single system to support the grid's needs.
These devices include solar batteries, smart thermostats, electric vehicles, and appliances. When they work in concert, they can provide the grid with electricity or reduce demand in a flexible and meaningful way.
(Your utility may offer bill credits for reducing your demand or send out texts asking you to raise your thermostat a few degrees during the hottest parts of the day. Virtual power plants operate on the same idea but make the process automatic and, therefore, more reliable.)
How Do Virtual Power Plants Work?
VPPs consist of a bunch of smaller energy devices (like smart thermostats or home batteries) working together to reduce demand (by shifting their temperature setting, for example) or add power (by discharging their stored energy) to the grid.
Although participants in virtual power plants maintain ownership of their equipment, VPPs are controlled by aggregators, private companies, and other grid operators who can utilize enrolled resources in terms set out by a contract agreement.
For example, if you enroll your solar battery storage in a VPP, your stored power may be automatically discharged to the grid during peak demand hours, resulting in direct compensation or credits on your energy bills. Most VPP agreements have preset hours for discharges, and also allow participants to opt out of energy sharing during select events.
Virtual power plants vs microgrids
Microgrids and virtual power plants are two separate things. Microgrids can separate from the larger grid and operate independently from it. When the power goes out, a microgrid has the energy generation and/or storage to keep the lights on.
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Benefits of Virtual Power Plants
Linking together distributed energy resources, virtual power plants bring strength in numbers that deliver many benefits to consumers and society at large.
Demand reduction: Virtual power plants can ease stress on the grid by reducing peak demand. Because they must always match demand with supply, they may need to turn on more expensive (and often dirtier) power plants to meet peak demand. By reducing that peak, VPPs can reduce cost and carbon on the grid.
Decarbonization: Virtual power plantss can help utilities decarbonize their electricity by reducing demand for it. VPPs that utilize battery storage can get more solar energy on the grid, too.
Financial incentives: Most importantly, virtual power plants can help participants save and make money when they share their energy resources with the electricity grid. Because device owners give up some control, aggregators typically compensate them when they call events and adjust the owner’s thermostat, switch off their smart plug, or discharge their battery.
Should You Join a VPP?
Joining a VPP can earn you cash or rewards for what is typically a minor inconvenience or unnoticeable.
The benefit to you and the grid will vary depending on the devices you enroll and the policies of the aggregator. Rewards are typically modest, ranging from one dollar an event (about $30-$50 per year) to over $300 a year. Be sure you understand the policies and your potential to save before signing up.
One potential barrier is the availability of programs. An aggregator needs to operate in your area. While availability has grown, programs aren’t available everywhere.
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Frequently Asked Questions
What is a virtual power plant?
A virtual power plant is a collection of small energy devices — from smart thermostats to heat pumps to home batteries — that are operated as one by aggregators in order to reduce demand or supply energy to the grid.
How does a virtual power plant make money?
Virtual power plants and the aggregators that run them make money by selling demand reduction to grid operators. They pass some of that on to individual device owners in exchange for some control over their devices.
Andrew BlokWriter and EditorAndrew has worked as a journalist and writer for four years, over half of those dedicated to covering solar. He currently lives in Tucson, AZ, where you might run into him walking his dog and birding while dodging the heat. He has degrees in English education and journalism.
