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9 December 2021

California pushes more virtual power plants

California’s Governor Newsom declared a state of emergency on the power grid in July, citing drought conditions undermining the 1 GW hydropower supply, high electricity demand from the heat, the Bootleg Fire which threatened the 4.8 GW grid connection to Oregon (California’s peak demand is 45 GW), other transmission lines’ exposure to wildfires, and an expected overall shortfall of 5 GW in 2022.

The primary focus of the state of emergency was building new clean energy sources on the grid, but there was also a secondary focus – Department of Finance funds for programs set up by utilities, which will incentivize citizens to reduce their consumption at critical times – $2 per kWh unused to be paid to consumers, or $0.75 if there was a day-ahead warning from California ISO (Caiso).

Those numbers appeared to be only for 2021, but now the California Public Utilities Commission (CPUC) has created new programs for reducing energy demand. One is the Emergency Load Reduction Program (ELRP), which continues that same $2 per kWh payment to 2025 in a pilot program. California’s existing demand response programs are being expanded, with measures to encourage EV and C&I sector participation. Agricultural water pumping will be shifted to off-peak times in a pilot for a Dynamic Rate plan, and the Flex Alert media campaign will be intensified. There is to be a $22.5 million incentive for smart thermostat installation – these thermostats will administrate fiscal rewards for a few degrees higher threshold on users’ air conditioning.

An especially interesting point is that another 2 GW to 3 GW of new supply and demand-side capacity is being required of the three big traditional utilities in the state – SCE, PG&E, and SDG&E. So this requirement has virtual power plants as an option which we expect will be pursued alongside the state’s constant buildout of renewables and energy storage.

Portland General Electric Company (PGE) announced a 4 MW VPP pilot project using 525 residential batteries in July 2020; while just this December it has partnered with Sunverge, a distributed energy resources (DER) control firm, and LG Electronics for storage systems, to implement a VPP across northern and central California to be active from the next quarter. For now it only covers 100 customers, but a joint statement from the involved companies claims this VPP is “one of the first in the US to incorporate both load control and PV/energy storage control holistically”. This VPP will be exploring time of use pricing, load shaping, demand response, frequency response, voltage support ancillary services and contingency reserve.

Southern California Edison (SCE) ventured into VPP technology way back in 2014, claiming $1 million in savings and 2 GWh total activity in 2018. It began buying energy from Sunrun’s 5 MW VPP in 2020, and it set up two VPPs in May based on its customer base in partnership with Swell Energy.

SDG&E is the slowest off the mark; in October it accelerated its timeline for a VPP pilot from 2025 to 2022.

We have previously covered a 550 MW VPP in California from Sidewalk Infrastructure Partners and more recently Sunpower’s VPP spanning several states.