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18 January 2023

We talk to RMI’s VP3 about the plans it revealed last week

We followed up last week’s story about Virtual Power Plants (VPP) by talking to the man at RMI who is at the center of this new development, co-lead on the project Kevin Brehm.

It turns out that this has been in gestation for about a year, after General Motors and Google Nest came to Rocky Mountain Institute (RMI) to see about creating a new organization entirely around VPP.

“When they came to us we thought this could really be the time that we see VPP and demand energy and DER step up and play a more important role in electricity markets,” said Brehm. He explained that RMI had carried out work in this area since the 80s, and that it has a broad base of past research to call on.

We then put to Brehm the idea that VPPs were a utility’s nightmare and that they might be against such a development. “when you talk about utilities it is the pace of change that worries them. Some of them are very actively supporting a distributed model, for instance by installing Distributed Energy Management Systems (DERMS).”

“They may not be incentivized to move quickly and while we may have solutions for this, they need policy to keep up with the solutions. The utilities are wrestling with the idea and for instance the FERC Order 2222 may deliver this, but the utilities want what’s in the best interests of their customers.” We think he is being a little naïve here, perhaps in the best interests of their customers and shareholders, would be more accurate.

Rethink Energy then put the idea that if one major utility had a comprehensive and supportive platform for VPPs – extending to include demand flexibility, use of EV batteries to run homes, and a revenue model – then wouldn’t other US utilities fold like dominoes?

“It’s more complex than that,” said Brehm, “there are state, RTO and regulatory differences from one region to another.” But he pointed to Hawaii, California and New York as areas that were embracing VPPs, but it’s clear that progress may be slow outside these progressive states.

So far the VPP effort is called VP3 and includes just 10 organizations pulled together by RMI including car heavyweights General Motors and Ford, SunPower, and Sunrun, two of the largest installers of home solar and batteries, along with Google’s Nest smart thermostat subsidiary, and demand response and VPP software suppliers OhmConnect, Olivine, SPAN, SwitchDin (Australian VPP player), and Virtual Peaker.

We said last week that this is a powerful grouping designed to build momentum, establish standards and solve technical software issues and that it could revolutionize and democratize electricity markets.

“That list of 10 or so organizations is not comprehensive by any means,” said Brehm. “and we expect to add more, there could be double that number, or more, in 6 to 9 months. Some of them are very big brands, others are start-ups, and they are used to operating in partnerships, as competitors or in collaboration.”

“We wanted to first attack all aspects of VPP right from the start, devices in  the home, coordinated software, multiple services, and we want to promote all of them through a regulated framework. Regulators themselves are often compartmentalized, so we wanted to operate across those boundaries,” Brehm added.

RMI sees multiple business models available to VPPs, but they fall into two camps – market participants with a power aggregator, and then a retail VPP. “We’re not sure peer to peer power sales is likely that this stage, but maybe down the line.”

Finally we talked about finance, and Brehm said, “A VPP itself is not very capital intensive, but once you extend this to grid interactive devices (solar and battery) then we will need to extend through to finance and find major funding wanting to get in on the act and we will then start to involve the financial community. All the time we will stay in dialog with utilities, so that we are not pulling them out of shape, but our membership are mostly vendors.”

For more details of the interview go to our Forecast and Data section.