Public utility commissions (PUCs) are increasingly charged with meeting higher demand loads. Virtual power plants (VPPs) can make it easier for utilities to meet peak demand without having to build new generation, which ultimately helps bring down energy costs for everyone.
VPPs are an aggregation of consumer-owned distributed energy resources such as solar-plus-batteries, electric vehicles, appliances and backup generators. The aggregation of these resources can be collectively controlled to benefit the grid and potentially remove a utility’s need to activate a traditional peaking power plant. At their heart, VPPs enable a flexible, resilient grid that can adapt readily to shifting electricity demand on a more localized basis than centralized power.
“Most of these PUCs are heavily under-resourced and overtaxed,” Ted Ko, executive director of the Energy Policy Design Institute told pv magazine USA. While the amount of work has grown, the processes haven’t caught up.
“It’s pretty slow, contentious and difficult,” he said, comparing it to herding cats. “We’re trying to help that process go better.”
How? Personalized roadmaps tailored to a PUC’s unique situation and status around a certain energy topic.
For instance, Colorado, Maryland and Virginia have each implemented policies requiring VPPs, while states like Illinois and California have tried. From a regulatory standpoint, however, it can be difficult for staffers to know where to start.
“The vast majority of PUCs are still in the ‘I don’t know what to call this’ and ‘I don’t know how to organize this’ stages,” Ko said. This often leads to missed opportunities.
But a guide can help. Ko said that states within grid operator PJM’s territory are already asking if a resource for implementing VPPs in the regional transmission organization exists. In his eyes, creating those standards comes down to one thing: clear definitions.
“Good definitions make really clear regulations,” Ko said, adding that a common approach to organizing policy would function similarly.
The Energy Policy Design Institute partnered with a PUC in the PJM region to lay out the beginnings of a VPP policy framework that will help the state implement FERC Order 2222 and enable future VPPs to bid into the PJM market. FERC Order 2222 lets distributed energy resources to participate alongside traditional resources in the regional organized wholesale energy markets.
Ko said that PUC had difficulty organizing stakeholder input, expert testimony and current policies. But arranging the data into a framework made it easier to determine what was and wasn’t in scope.
Now, he noted, that PUC is talking to other PJM states to try to find a common VPP policy that sets best practices.
“States don’t have to start from scratch,” he said. “They can use the terminology and frameworks to more efficiently and effectively build policies that make sense for their state.”
Even with a template, however, PUCs can’t sprint to a solution before learning to walk.
“It’s okay to be at the crawl stage to get the minimum policies going and get VPPs up and running,” he said. “Break it down to ‘what’s the first step we need to get done?’ And go from there.”
PUCs have historically tended toward addressing immediate problems for the immediate future, Ko said, but shifting that mindset to focus on long-term goals will be critical to implementing policies that age well.
Ultimately, it all comes down to economics.
“Your milestone in the market is making it possible for VPPs to provide grid services,” Ko said, adding that you need to decide which grid services are most important right now and then determine if and how a VPP can provide that service and get paid for it.
“You as commissioner want to provide the most cost-effective grid as possible; your job is to enable that and make sure all the policies are in place,” he said.
(Also read: What are states doing to make virtual power plants a reality?)
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