Clean Energy Storage and Virtual Power Plants

At the 2023 Solar Summit, held October 20, 2023, at South Seattle College, Nora Hawkins, Senior Energy Policy Specialist Washington State Department of Commerce, and a Solar Washington Board Member, invited and moderated a panel on Strategies for Clean Energy Storage. The panel generated a lot of interest and many questions, so we decided to provide a summary of it, based on the transcript of the presentations.

Overview of Energy Storage Technologies

Panelist Jeremy Twitchell, an energy research analyst at the Pacific Northwest National Laboratory (PNNL), provided an overview of energy storage and the benefits it can provide to the grid. Energy storage, he said, is fundamentally different than any other type of electricity resource we have on the grid. It is “energy limited”, meaning it does not produce energy and is limited in how much it can hold.  Size is defined both in terms of its maximum potential output and the size of its reservoir in kilowatt-hours (kWh) or megawatt-hours (MWh. Its useful life is based on the number of times it can be charged and discharged. For lithium-ion systems, the useful life is about 10,000 cycles or, if you're cycling it every day, roughly 10 years.

There are 3 main types of energy storage:

1) Electrochemical: A typical battery, most often Lithium-ion, though other chemistries including lead, zinc, sodium, iron, and other materials being developed.

2) Mechanical energy storage: Stores excess energy to be recovered later using gravity. For example, a pump is used to pump water uphill and the water is released down to turbines when electricity is needed.

3) Thermal energy: Energy is stored as heat. For example, a solar plant reflects the sun's light to a molten salt substance and then steam generates electricity after the sun goes down.

Between 2020 and 2024, there is forecast to be a 30-fold increase in storage.  Despite their growth, batteries still only account for about 10% of the energy storage capability in the US because pump storage hydro facilities are big and store a lot of energy.

Benefits of energy storage

A key benefit of using storage is that it's flexible. The main job of a utility is to keep load and generation balanced at all times, so that the amount of energy produced is exactly equal to the amount of energy being used. If that gets even a little bit out of balance, it can damage the grid. Storage helps balance the two sides, as it can take energy off the grid and charging or discharging can be adjusted.

A second benefit is that it's scalable. The Moss Landing (CA) Energy Storage Project is the largest in the world, at 400 MW/400 MWh. At the other end, at 5 kW/13.5 kWh, a Tesla Powerwall can power an average home for a few hours and is small enough to be mounted on a wall.

Behind-the-meter Energy Storage Programs

Consumers can use storage to offset their usage during high demand periods or if there is an outage. In some states, such as Hawaii, distributed solar must be kept on the consumer’s property and energy storage enables that process.
However, it costs more. Economies of scale are lost when consumers buy smaller bits of it, so it's more expensive on a per unit basis. If storage is located at a public facility such as a community center or police station, it provides important backup. You can provide targeted community benefits that help with energy justice and energy equity goals.

Some programs have also begun offering tiered incentives to enable participation by low- and moderate-income customers, which improves energy system equity.

A case study is Green Mountain Power in Vermont, which established a network of distributed batteries by cost sharing the purchases of batteries with their customers. Customers can enjoy bill savings if they have time of use rates or backup power. To share the benefits with the entire customer base, customers yield control during normal operations to that utility. The utility can take these assets and turn them on at the same time during peak periods to help meet peak demand and help reduce the need for transmission expansion. This program saved the utility $3 million. In just one day in 2022, the utility saved $1.5 million because they avoided needing more power on the most expensive day of the year.

Virtual Power Plants

A virtual power plant is a network of small to medium power generating, consuming, and storage devices that are remotely operated to respond to respond to increases in demand on the electrical grid, balancing supply with demand and regulating power quality in real time. By harnessing the collective power of individual energy resources, VPPs offer a more sustainable and resilient energy future.

Panelist Patrick Sterns leads SunPower's policy and regulatory work in West Coast states and Hawaii, with a focus on virtual power plants (VPP) program development, multifamily solar, and enabling low-income adoption of distributed solar and storage technologies. He talked about lessons learned and implementation strategies for VPP.

The basic premise of VPP is to leverage the investment that homeowners and business owners are willing to make to get resiliency to avoid or delay the need to invest millions of dollars into the grid for transmission and distribution upgrades. It can often be cheaper to enable virtual power plants than to build utility infrastructure that would do the same thing.

Panelist Jen Downing, senior advisor contractor with the loan programs office at the Department of Energy, worked across the Department of Energy to pull together Pathways to Commercial Liftoff for Virtual Power Plants and spoke to over a hundred industry players including utilities, virtual power plant companies, manufacturers of devices, and regulators, to create a common fact-based database for investors and policymakers and industry actors to understand the opportunity of virtual power plants, where we are today, and what it will take to get to where we need to be. She reported on her work.

For the first time in over a decade, peak load on the grid is growing. The forecast is that 60 gigawatts of peak demand will be added to the grid nationally by 2030, moving from about 740 gigawatts of peak to about 800 gigawatts. Traditionally, industry players build up supply infrastructure such as natural gas peaker plants that to meet demand by turning on facilities on 5%-10% of hours of year or building up grid infrastructure to handle the highest peaks and then running it at 15%-20% of capacity the rest of the time. One critical function of virtual power plants is to decrease that peak on the grid.

If a consumer comes home from work and turns up the air conditioning because it's a hot day, and a neighbor plugs in the EV that draws a lot of electricity from the grid all at once, it creates a big spike in demand. With a virtual power plant, some homes may have been pre-cooled at 3 pm so the air conditioning doesn't have to work as hard to keep it cool in the evening. Some EVs can be scheduled to begin charging at 10 or 11 pm, instead of when the car is plugged in. The changes can push demand outside of peak hours, make better use of the infrastructure outside of peaks, and bring down the peak so there is no need to turn on those peaker plants that are disproportionally polluting low-income communities.

Sterns said people who buy batteries tend to buy them for backup way. There's inertia to how people set their reserve levels and batteries. The best way to set up a VPP is through an open participatory program with open parameters so that different technologies and participants can join in. Ideally, batteries should be sold alongside the program, with an incentive to pay customers on an ongoing basis.

Solar is very helpful in the middle of the day, though not in the morning and evening peaks. Storage targets these peaks with clean energy. This practice has broad societal implications for greenhouse gas emissions and also for energy justice, because peaks are going to be handled by polluting gas at peaking plants that are often located in black and brown communities. The Northwest is different because there is so much hydro. Three or four years of drought could change the energy mix, so now is the time to look at batteries for grid resilience.

There is also lower customer adoption and retention when consumers receive a big chunk of money or a big free gift up front than when customers are paid as they go. Sterns recommended the process to be technology agnostic and not limited to one particular manufacturer's battery.

Jen Dawning said that the report lays out illustrative economics and the cost of running the program. It shows that the majority of the money spent on VPP ultimately flows back to consumers instead of paying for natural gas peaker plants and fuel, which is why the Department of Energy is so excited about virtual power plants.

As a perspective, 4 to 6 gigawatts of flexible demand is equivalent to adding about 50 peaker plants to the grid. While these numbers are big, they pale in comparison to the capacity needed by electric vehicles.

To add to the problem, many generating facilities are being retired. Old coal plants are going to come offline, and old gas plants are being retired. Those facilities provide about 140 gigawatts for the peak demand. New resources need to be added to the grid by 2030 to provide 200 gigawatts for peak demand. Tripling the capacity of virtual power plants from about 30-60 gigawatts now to about 80-160 gigawatts in the future could address 10%-20% of peak demand through distributed energy resources and aggregations that provide utility grade services.

DERs face installation hurdles in some service areas. The report identifies 5 imperatives to expand distributed energy, resource and adoption with equitable benefits.

1. Expand DER adoption with equitable benefits: Governments, nonprofit organizations, utilities, DER manufacturers, and VPP platforms can collaborate on holistic support for DER adoption and VPP deployment that prioritizes equitable benefits, including electricity bill savings, grid reliability and resilience, air quality improvements and job opportunities. Offering low-cost financing and rebates for energy-efficient VPP-enabled devices, for example, can induce consumers to shift spending on equipment or vehicle upgrades toward DERs with greater potential system benefits.
2. Simplify VPP enrollment: Utilities, DER manufacturers, VPP platforms, consumer advocates, and regulators can develop a phased approach to streamline VPP participant enrollment. Measures include consumer education, automatic enrollment of DERs into VPPs at the point of purchase with opt-out options, and wider VPP-enablement of DER devices.
3. Increase standardization in VPP operations: Private sector and public sector stakeholders can improve coordination and resourcing for the development of guidelines, standards, and requirements that make VPPs more repeatable and shorten the design and pilot stages of individual VPP deployments. Priority areas include improved DER and VPP forecasting tools, standardized service agreements, and measurement and verification (M&V) methods. Standardization of distribution grid operations overall will accelerate liftoff. Key areas include distribution system reliability standards and formalized grid codes to govern system participants, DER interconnection and data standards, and cybersecurity.
4. Integrate into utility planning and incentives: Governments, utilities, and nonprofit organizations can increase resources and personnel support for utility to revise or introduce new distribution system planning requirements, procurement processes, ratemaking, and customer programs that promote cost-effective DER adoption and VPP deployment while accounting for potential necessary grid upgrades.
5. Integrate into wholesale markets: In restructured markets, ISOs and RTOs may benefit from targeted support for the timely and inclusive integration of VPPs into system planning and marketplaces, as outlined in FERC Order 2222.

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