• Virtual Power Plants
  • Demand Response
  • Grid Infrastructure
  • DER

Mixed-Asset VPPs Are Key to Market Expansion in the US

Jessie Mehrhoff
Jul 28, 2020

Guidehouse Insights

In mid-July 2020, Kiwi Power released that it will bring its VPP solution to the US by serving its major client and investor ENGIE North America in the ERCOT market. Kiwi Power offers a mixed-asset VPP model that brings together generation, load, and energy storage to provide a synergistic sharing of grid resources. The mixed-asset model represents the end goal of VPPs, as it coordinates and optimizes a range of distributed energy resources (DER) according to market conditions. Kiwi Power’s entrance into the US market comes on the heels of a variety of other new VPP projects in the US, including a Sunrun and SCE solar plus storage VPP that uses the AutoGrid platform.

Why Use a Mixed-Asset VPP Model?

Historically, VPPs in the US were demand response (DR)-based and took advantage of automated controls to secure load in response to market signals. However, mixed-asset VPPs are opening the door to new VPP opportunities in the US and around the world. Falling technology costs, market opening, and customer engagement will support the expansion of the VPP market in the US:

  • Falling technology costs: Declining energy storage costs will lead to a slew of interconnecting battery assets. Mixed-asset VPPs can combine storage capabilities with automated DR. This optimization is already happening; according to Guidehouse Insights, mixed-asset VPP models already make up over half of VPPs across global markets in 2020. This share will likely escalate to more than 80% of all VPPs globally by 2029.
  • Market opening: Mixed-asset VPPs will also expand as wholesale markets open to a broader array of DER technologies. Battery power may be able to support the real-time nature of frequency regulation in ancillary services markets. The integration of quick-responding assets will be critical to balance electricity supply with demand as more intermittent renewable energy connects to the grid.
  • Customer engagement: Desires to install solar plus storage systems abound in the residential and commercial customer segments. Utility customers recognize the ability to save on electricity bills, improve resiliency in the event of a grid outage, and meet voluntary or mandated greenhouse gas reduction goals using the technology. Mixed-asset VPPs allow grid operators to tap into these devices and use them to support grid services while providing customers with an additional revenue stream from the system.
The Core of the Mixed-Asset Model Will Be Software

The maturation of software platforms will also drive mixed-asset VPP value and market growth in the US. As noted in a recent Guidehouse Insights white paper, “Software is the glue that binds all the different pieces of technology enabling a VPP together into a coherent, user-friendly solution.” Intelligent software platforms will allow for an ecosystem-level approach to DER network orchestration, as illustrated in the following figure.

Value Add Generated by VPP Platform Evolution

Value Add Generated by VPP Platform Evolution

(Source: Guidehouse Insights)

Falling storage costs are contributing to the proliferation of solar plus storage in the US and around the world. Market opening further incentivizes the engagement of these devices to support broader grid stability. Millions of flexible assets in the broader grid ecosystem can be coordinated and dispatched in real-time through the continuous development of VPP software platforms.

Newly announced VPPs signal that platform providers are taking advantage of these technological developments and the continuing evolution of the US market landscape. For example, the Kiwi Power VPP will enable DER to bid into ERCOT’s ancillary services market, and the company has also cited a desire to expand its solution into PJM. As VPP projects prove valuable to the entire supply chain, the mixed-asset model will cement itself as a necessary tool in digital grid management.