• Virtual Power Plants
  • Distributed Energy Resources
  • Clean Energy
  • Resilience

Virtual Power Plants Infiltrate the Real Estate Market

Isabelle Branco-Lo
Apr 13, 2021

Guidehouse Insights

As you consider buying a new house or apartment, there are a number of questions that you may ask on your search. What is the neighborhood like? How old are the appliances? How much do utilities cost? Is there a virtual power plant (VPP)? 

Distributed energy resources (DER) such as solar panels and batteries can now be optimized through aggregation software to form VPPs. It’s all made possible by the Federal Energy Regulatory Commission (FERC) Order 2222, delivered in 2020, which allows aggregations of DER to participate in wholesale electricity markets through sales of power and participation in demand response, capacity, and ancillary services markets. This means fossil fuel-generating power plants are being replaced by VPPs made up of clean energy sources and that DER owners can now make passive income from wholesale market sales, reducing electricity bills by 10% to 20%. 

VPPs are being designed in new construction residential projects and retrofitted into existing buildings. The collaboration of real estate developer, Wasatch, electric utility Rocky Mountain Power, and solar and storage developer Auric Energy have built a complex of 600 apartments in Salt Lake City called Soleil Lofts with 5.3 MW of solar panels, 12.8 MW of battery storage, 150 EV chargers, and 73 solar carport structures to each residency to form a first-of-its kind VPP. 

It was announced in August 2020 that Wasatch is also supplying the same battery technology, developed by Shell’s subsidiary sonnen, in a retrofit project in for 417 units in a low income housing project. Eventually this project is planned to extend to 3,000 apartments providing 24 MW of power capacity. 

VPPs Create Benefits for Real Estate Developers, Homeowners, and Utilities Alike

Homeowners are uniquely positioned to provide electricity from DER or EVs to the grid and provide valuable grid services to utilities. Wind and solar resources are intermittent, making it difficult to balance supply and demand in real time. While utility-scale storage systems and upgraded and expanded transmission lines may help, orchestrated DER can plug the flexibility gap at a lesser cost and increase resilience in the face of extreme weather.

A great example is Con Edison’s Newtown substation in Queens, which faces such rapid load growth that the plant is approaching the limits of its existing capacity. Instead of building out expensive transmission infrastructure, the utility will test a VPP made of 500 kW of storage capacity to mitigate or delay the need for CAPEX on grid equipment. This 10-year contracted project will be completed by Swell Energy, a major player in the VPP market. 

Imagining Our VPP Future 

VPPs provide a number of obvious benefits including consumer savings, clean energy, resilience, and grid services. Over time, VPP cost will reduce as more and more homes adopt the technology. Eventually every home may have a standard model, just like a refrigerator or heating system. In this future, competition will not be based on cost but instead on factory build compatibility or retrofitting rollout speed and reliability. Collaboration between real estate and energy developers is key to making this vision a reality, with the added benefit of keeping utilities relevant and reducing the cost of renewables.