What is Demand Response and How Are Virtual Power Plants Connected

Part 2 of 2

Let’s continue our conversation about how demand response programs can affect your home, then move on to commercial/industrial applications. Then let’s talk about Virtual Power Plants, the latest fad with renewable energy as they try to make it work mainstream.

Other Home Automation Demand Response

My LG refrigerator has a Smart Grid function. As our everyday appliances join the Internet of Things (IOT), these types of functions are becoming increasingly common. Not only on refrigerators, but washers, dryers, freezers, water heaters, even your range may have this software installed. It’s an expanding attempt to collect some extra revenue reducing demand from your home appliances. Even home lighting is on the list. Fortunately, at least for now, these programs are all opt in.

What is in it for the Consumer

Frankly the rewards for the consumer for putting up with the inconvenience of having their thermostat tweaked, their water heater turned off during peak, their refrigerator setting turned up, are pretty small. I asked in the ecobee user groups what compensation customers were receiving. The vast majority said a good feeling knowing they were helping to prevent a blackout. For those receiving compensation, $25/year was the most common, with Chicago Con Ed doing $10 per event, and a utility in Texas doing $100 a year. All were tied to participation, if you opt out more than a few times the bonus is void. Regardless of the limited or non-existent compensation, there seems to be a strong sense of “doing my part” pride among those who participate.

Commercial/Industrial

It goes without saying the opportunities for utilities to control load are magnified in customers with larger electric loads. It also goes without saying that a business is probably not going to allow the utility to impact their operations without some sort of offsetting compensation. Whether it’s a more attractive rate structure, or other financial benefit, businesses regularly engage in these contracts with a wide variety of actions that can be performed based on the unique nature of each company.

Internal Corporate Demand Control

Controlling demand is not just a utility thing. Manufactures have engaged in demand control for decades, sometimes turning to internal co-generation to have a way to control energy flow. Large retail chains now control all the functions of their facilities from central locations. They receive an energy “pulse” from the utility meter they use to drive their energy management system in each location with instantaneous data. One of their aims is to control energy flow. Once your electric service goes over a certain size you begin to pay a capacity charge called demand charges in addition to your kwh energy charge. It is determined by your maximum energy flow over a set time period, often 15 minutes. It is charged as a MW Month, or your MW demand for that billing period, and it isn’t cheap. Businesses that can try to make sure the energy they use flows at an amount as close to that demand as possible. It’s using the capacity they paid for to the fullest extent. Called load factor or demand factor, most businesses that can try to achieve over a 50% load to capacity use ratio, with 80% being about as good as it gets. That’s why you see grocery store lights cycling on and off, and refrigerated cases seem like they could be cooler. It’s money, and hey if you get a little food poisoning, it’s just business. You are unlikely to find an adjustable thermostat at a Wal-Mart anywhere.

Time of Use (TOU) Rates

I would be remiss if I didn’t mention Time of Use rates, for both consumers and Commercial/Industrial. Basically you pay a different amount per kwh for electricity based on the time of day you use it. Most places it is optional, I believe it is the only option for IOUs in California. Needless to say on peak energy can get pretty spendy, but you can make bank on energy used during off peak. The TOU rate can also apply to demand charges, which makes for a pretty complex bill. The intent is to incentivize you to not use power during peak hours.

The Next Generation of Demand Response - Virtual Power Plants

With the green energy boom and the issues Variable Renewable Energy (VRE) have caused with controlling the energy supply, demand response in suddenly the new apple of the green energy promoter’s eye. If we can’t control the generation, let’s control the load!! In the last couple years this movement has pushed a new buzz word to the forefront, the Virtual Power Plant (VPP). Hardly a day goes by that I don’t see a new multi-page presentation posted somewhere declaring the virtues of VPPs and how they will save the grid. I’m also seeing broad claims that we do not need additional generation, that VPPs can do it all and do it better. All these presentations are given by people in two-thousand-dollar suits with marketing degrees. The presentations have lots of brightly colored charts and bar graphs. Obviously, there is money to be had.

The Definition of a Virtual Power Plant

What it is not, is a power plant. By definition, it is an aggregation of diverse resources controlled as a group to act like a single resource. In plain English, it’s a group of small devices with a master control that makes them work like a single large device. They do not need to be the same type of device, just as long as they contribute to the total.

Examples of VPPs

The largest VPP player in the USA market is Sunrun Solar. They are just like many of the solar installers who will install their equipment on your house, then charge you a monthly fee to lease the equipment to you, pretty common business model in rooftop solar (here is Central Ohio it is Blue Ravin Solar). Where VPP comes in is Sunrun pushes to install batteries with the solar panels. They have very good market penetration in California where the state has required rooftop solar on new residential construction since 2020 and required batteries since late 2022. The Sunrun inverter/chargers can be controlled by Sunrun Grid Services, which can ramp solar down, or ramp battery output up to support the needs of the grid.

Generac rolls the resources of their product line into their VPP. Generac does not sell solar panels, but they do sell their PWRCell inverters and batteries. They market it as a standby power system for your home. They, of course, also sell standby generators. Generac has equipped their inverters and their generators with software called Smart Grid Ready. The large commercial/industrial generator line does require an added optional module to enable Smart Grid Ready. In addition, Generac purchased ecobee smart thermostats. Under their business arm called Generac Grid Services, these devices are brought together to provide VPP services under control of their Concerto software suite. Concerto is also designed to integrate with other demand respond resources to pull them into a single control package. here are several additional Generac links regarding ecobee. https://www.ecobee.com/en-us/newsroom/press-releases/ecobee-thermostats-now-able-to-integrate-with-generac-home-standby/ , https://investors.generac.com/news-releases/news-release-details/ecobee-and-generac-expand-thermostat-integration-capabilities , https://www.generac.com/about/news/ecobee-releases-new-product-update-to-help-protect-communities-from-power-outages/ .

CPower is a resource VPP integrator. They roll commercial facilities into their portfolio, including putting batteries on commercial and retail businesses with rooftop solar to expand on the Sunrun and Generac model. They go after any Distributed Energy Resource (DER) connected to the system and try to roll control into their VPP suite. They also follow the standby generator model but are not limited to one brand. They cooperate with OmniMetrix, a supplier of remote generator monitoring, to leverage their aftermarket modules to provide demand response capability to any generator where those modules are installed. CPower and Generac Grid Services are also technical partners. (Note that CARB in California does not allow standby generators to be used for demand response)

These are just three, and not necessarily even the largest three, working in the VPP space. All of the major electrical manufacturers, plus a host of other startups, have popped up and are vying for a piece of the pie. The advantage these three have is functional software, and hardware. Below are links to some of the top listed VPP integrators, there are more joining the list every day. There are also software vendors creating VPP solutions .

Ohmconnect Leap Autogrid Voltus Tesla LimeJump

The Next Great Thing

The proposed next great thing in DER/VPP implementation is EV batteries. The push is to make the EV chargers two way, especially the level two home chargers. This will eventually of course expand to all EV chargers including heavy trucks if it gets off the ground. The Ford charger for the Ford Lightning EV light truck is already capable, in partnership with Sunrun. Checkout this drawing of how complex the system is to set up your Lightning for home standby.

The issue is the industry is still developing, and there are few standards in place with virtually no standard protocol for bi-directional chargers (check this link on bi-directional chargers). The idea is to “use” the charge in your EV battery to support the grid during peak, or system stress. Proponents claim the average driver only uses 30% of their charge on a daily commute. Of course compensation, if any, hasn’t been worked out. Personally, the pessimist in me sees the homeowner sitting in the dark with a dead EV and dead solar batteries after the homeowner did his part as a team player, then was shutoff on a grid emergency. As for right now this hasn’t had much success, and outside of California there are just not enough EVs to make it worth investing in. It should be noted that Generac sells EV chargers, but they are not bi-directional ….. yet.

The Future

It’s clear that the renewable power movement is pushing very hard to make VPPs mainstream as a way to help implement their vision of the future grid. Rooftops without solar and side yards without batteries are viewed as a waste. Right now, these programs are voluntary, but there is already noise to codify their use in California, including the demand response features on thermostats. As I mentioned, if you build a new home in California, it’s already code to have rooftop solar and batteries. Code creep is always a case, and these codes will slowly just be the way things are unless there is strong pushback. One has to ask what became of the obligation to serve that was at the heart of utility operation for over a century. As they say, we live in interesting times.