German utility RWE implemented the first known virtual power plant (VPP) in 2008, aggregating nine small hydroelectric plants for a total capacity of 8.6 megawatts. In general, a VPP pulls together many small components—like rooftop solar, home batteries, and smart thermostats—into a single coordinated power system. The system responds to grid needs on demand, whether by making stored energy available or reducing energy consumption by smart devices during peak hours.
VPPs had a moment in the mid-2010s, but market conditions and the technology weren’t quite aligned for them to take off. Electricity demand wasn’t high enough, and existing sources—coal, natural gas, nuclear, and renewables—met demand and kept prices stable. Additionally, despite the costs of hardware like solar panels and batteries falling, the software to link and manage these resources lagged behind, and there wasn’t much financial incentive for it to catch up.
But times have changed, and less than a decade later, the stars are aligning in VPPs’ favor. They’re hitting a deployment inflection point, and they could play a significant role in meeting energy demand over the next 5 to 10 years in a way that’s faster, cheaper, and greener than other solutions.
U.S. Electricity Demand Is Growing
Electricity demand in the United States is expected to grow 25 percent by 2030 due to data center buildouts, electric vehicles, manufacturing, and electrification, according to estimates from technology consultant ICF International.
At the same time, a host of bottlenecks are making it hard to expand the grid. There’s a backlog of at least three to five years on new gas turbines. Hundreds of gigawatts of renewables are languishing in interconnection queues, where there’s also a backlog of up to five years. On the delivery side, there’s a transformer shortage that could take up to five years to resolve, and a dearth of transmission lines. This all adds up to a long, slow process to add generation and delivery capacity, and it’s not getting faster anytime soon.
“Fueling electric vehicles, electric heat, and data centers solely from traditional approaches would increase rates that are already too high,” says Brad Heavner, the executive director of the California Solar & Storage Association.
Enter the vast network of resources that are already active and grid-connected—and the perfect storm of factors that make now the time to scale them. Adel Nasiri, a professor of electrical engineering at the University of South Carolina, says variability of loads from data centers and electric vehicles has increased, as has deployment of grid-scale batteries and storage. There are more distributed energy resources available than there were before, and the last decade has seen advances in grid management using autonomous controls.
At the heart of it all, though, is the technology that stores and dispatches electricity on demand: batteries.
Advances in Battery Technology
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