Mixed-Asset VPPs Are Key to Supporting California Clean Energy Goals

Engaging the residential customer segment is a critical step in California’s efforts to double its clean energy output by 2030. In June, battery and energy service provider Sunrun announced a partnership with Southern California Edison (SCE) to launch a residential solar plus storage virtual power plant (VPP). The VPP is expected to aggregate capacity from up to 300 of Sunrun’s Brightbox rechargeable battery and home solar systems. 

A mixed-asset VPP model, the networked system is anticipated to take advantage of solar generation that can be stored and dispatched from behind-the-meter battery systems to meet both grid and customer needs. Batteries are expected to provide capacity to the grid during periods of peak demand, reduce customers' on time-varying rates, reduce costs during peak price periods, and provide resiliency with onsite power when the grid goes down.

Mixed-Asset VPPs Are the Way of the Future

Customer recognition of these benefits, in combination with falling lithium-ion battery costs, are driving the adoption of home battery systems. Guidehouse Insights finds that batteries are supporting the transition from automated demand response-based VPPs (which historically have focused on HVAC or process load) and generation-based supply-side models toward mixed-asset aggregation. 

In states like California and Arizona, where excess solar PV generation during the day mismatches with energy demand during residential peak evening periods, battery systems that can store and provide local load can help mitigate reliability challenges associated with the duck curve. Monetizing both solar and storage assets as part of a VPP sweetens the pot for residential customers by allowing them to earn compound incentives through a reduction in monthly utility bills and additional direct payments for supporting the grid.

Regulators Must Continue to Encourage Adoption of Solar and Storage Technologies

While the market incentives encourage some residential customers to adopt solar plus storage systems, regulatory efforts should continue to support the adoption of these technologies by the mass market. The Sunrun and SCE partnership, which is expected to continue through March 2021, should demonstrate the synergistic benefits of mixed-asset VPPs for the residential customer segment and the broader grid. As residential customers provide less load than their larger commercial and industrial counterparts, the ability to deploy both solar and storage technologies in tandem is key to the success of these programs. 

Despite the general support of grid modernization efforts, utilities and clean energy advocates continue to face challenges with the deployment of some of these clean energy resources. On June 15, 1 day prior to the Sunrun announcement, 16 state attorney generals, the California Energy Commission, and the California Public Utilities Commission submitted a formal request to the Federal Energy Regulatory Commission asking it to support state-level net-metering policies and reject a petition to restrict such programs. States noted that the end of such programs would reduce the rate at which consumers would deploy distributed solar in support of clean energy targets. However, it is important to note that some industry professionals find the removal of net-metering would further support the need to deploy battery storage. 

More broadly, stakeholders may create more opportunities to deploy mixed-asset VPPs that provide a wide array of grid services and meet end-customer needs by supporting grid modernization efforts. Utilities should also continue to develop innovative programs that drive the adoption of a variety of distributed energy resources. Programs like Sunrun and SCE’s solar plus storage residential VPP constitute the majority of residential-based mixed-asset models in the near term. However, grid operators around the world are also looking to bring in a variety of other smart technologies, including EV chargers and water heaters. Networking across asset types is expected to maximize the benefits brought to the system by mixed-asset VPPs.