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Report highlights the power of VPPs

Illustration of a some plugs plugged into a cloud with outlets, and some plugs unplugged on the ground.

Illustration: Gabriella Turrisi/Axios

Virtual power plants that use devices like smart thermostats and EV charging could meet California's shifting energy demands while also saving customers money, according to a new report from The Brattle Group and GridLab.

Why it matters: The surge in demand for clean electricity has utilities scrambling for new sources, and virtual power plants could provide an important low-cost, flexible tool.

Catch up quick: Virtual power plants aggregate customer energy load using technologies like smart thermostats that control air conditioning, EV chargers and batteries in buildings.

  • Utilities can tap into that aggregated load during peak demand times. The customers that allow their devices to participate receive compensation.

Driving the news: The report released Thursday found that by 2035, VPPs could grow by five times their current levels to aggregate 7.5 gigawatts of electricity for California utilities, meeting 15% of the state's peak demand.

  • That rise in VPPs could save Californians $550 million per year on energy bills.
  • In addition to the savings, VPPs could make the grid more reliable and could be deployed quickly and cost-effectively, says the report.
  • VPPs also reduce carbon emissions, since they're adding capacity but not new fossil fuel-generating power.

Yes, but: VPPs haven't been adopted at levels desired due to issues like regulatory lag, lack of consumer acceptance, and wholesale market barriers.

Katie's thought bubble: The VPP market is filled with both older companies that come from the established world of demand response and younger upstarts that specialize in aggregating certain types of loads or are utilizing new tech like AI.

  • Given the slow movement of the VPP market, there's been some consolidation as big players look to get bigger and smaller ones are swallowed up.
  • Working with utilities is a hard business, but companies that are able to maintain good relationships will have an edge.

The big picture: VPPs could help solve a few tricky problems for utilities.

  • While there are long queues for connecting solar and wind to the grid, VPPs don't have interconnection delays.
  • Utilities in some regions are facing soaring demand for clean electricity due to data centers being built for AI. VPPs could quickly and cost-effectively help alleviate that burden.

Bottom line: The VPP market has been slow-moving but has massive potential.

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