VPPs Enable Emissions Reductions and Greater Energy Equity

Grid-edge solutions such as virtual power plants (VPPs) are ramping up. Why? They offer resiliency, respond to the growing climate change threat, and can take advantage of the exponential growth in distributed energy resources (DER) assets around the world. They also help democratize our energy system by not only addressing environmental justice issues associated with the siting of polluting and often aging fossil fueled peaker plants but also allowing prosumers to contribute and benefit from new advanced digital platforms.

VPPs become especially attractive if market rules are intelligently designed to foster the monetization of grid services such as frequency regulation. The greater the number of diverse assets that can be aggregated into a VPP, the greater the value that can be created for retail asset owners and the larger wholesale grid—if a digital platform is designed to be modular and scalable and addresses interoperability challenges.

Comparing Peakers to VPPs in New York and Texas 

In North America, the primary challenge of power grids is meeting peaks in electricity demand. Fossil fuel peaker plants are the traditional means to meet these peaks, which are increasingly common due to variability of wholesale renewable supply and retail demand. Unfortunately, these seldom-used fossil fuel peaker plant resources are among the most polluting and expensive resources in the system. They can also negate some of the environmental value of bulk renewable energy supply because their emissions still contribute to both regional air quality issues and global climate change. 

In a new white paper sponsored by AutoGrid, a deep dive analysis compares projected fleets of DER assets forecast to come online over the next 10 years with existing peaker plant fleets. The analysis also incorporates expected peaker retirements. The focus is New York and Texas, two states with vastly different regulatory environments and cultural differences.

New York has aggressive environmental regulations and is contemplating major reforms to the utility-customer relationship. Environmental justice issues come into play because, according to the Peak Coalition, 750,000 residents of New York City live within 1 mile of peaker plants. The coalition also maintains that aging peakers account for 94% of nitrogen-oxide emissions on hot, high ozone days while costing ratepayers up to 1,300% more than the average electricity price. 

Texas represents the heart of the nation’s fossil fuel industry, but also features the largest wind power fleet in the US. The Texas power outages in February 2021 were largely due to the state’s heavy reliance upon natural gas operations and related supply chains.

Bottom-Line Results Speak to Sustainable Energy Solutions

Aggregating into VPPs the forecast DER capacity to the existing demand response assets in New York could displace the entire existing New York fleet of gas-fired peakers by 2024. In Texas, where the peaker plant fleet is larger and less DER capacity is expected to come online, the timeline for peaker plants could extend out to closer to 2030. 

It is important to note that these VPPs also make economic sense on a simple bottom-line assessment for utilities and grid operators, especially those operating within a deregulation environment (such as New York and Texas). Yet with the right policies in place and enough prosumer assets available, VPPs can transform the power grid into something much more democratic. The prospect of replacing the nation’s fossil fuel peakers is a major step forward as the US and the world transition to a net-zero energy future.