Virtual power plants offer a climate-forward response to hotter summers

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As the country roasted in July and August under extreme heat made more intense by climate change, tens of thousands of Americans received text messages telling them they could get paid if they powered down their devices and appliances during specific periods of the day. If their homes were equipped with smart thermostats or smart water heaters, the devices may have powered down automatically.

It may have seemed like a simple action to conserve energy during hours of peak demand. But behind the scenes, a number of companies that have emerged in recent years were working with utilities to monitor and respond to the stress on the grid as people blasted air conditioners to stave off the blistering heat.

All of this was enabled through a virtual power plant, a portfolio of distributed energy resources that can be managed with software to scale to meet the power demands of hundreds or thousands of homes or businesses. The resources can include smart thermostats, rooftop solar or even EV charging stations.

While many consumers may not have heard of them before, virtual power plants are an increasingly important technology for cities to manage spikes in demand during extreme weather. And, according to energy policy experts, these platforms are also an important climate solution to reduce greenhouse gas emissions and bring more renewable energy onto the grid.

With more extreme heat expected to bring additional stress on the grid in years ahead, that’s a big deal for policymakers who also know that the country needs to move away from a reliance on fossil fuels.

“Virtual power plants are a critical and low-cost solution to enable a decarbonized energy future,” says Kevin Brehm, a specialist in carbon-free electricity at the nonprofit Rocky Mountain Institute, which advocates for improving energy policy.

Utilities rely on highly polluting fossil fuel-burning peaker power plants, which are fired up when demand surges. Brehm argued in a paper he co-authored for RMI that virtual power plants can directly reduce emissions by shifting demand away from the plants, which can emit carbon dioxide, nitrogen oxides and sulfur dioxide that can trigger respiratory problems among nearby residents, especially children.

“Why that really works for the climate and public health is that power plant supply gets dirtier as you get into the more difficult weather,” says Mike Jacobs, a senior energy analyst with the Union of Concerned Scientists. “Peaker power plants are the dirtiest.”

Little reliable data exists on the scale or total impact of VPPs. Wood Mackenzie, a global energy research firm, has identified 563 virtual power plants either operating or in development in the U.S. in 2023, with California having the highest concentration of them in the country, according to a spokesperson. Virtual power plants can be found in residential, commercial and industrial sectors.

The potential for virtual power plants is growing, and their impact on the environment could be significant in years ahead. Brehm and his colleagues have found that VPPs could reduce peak energy demand in the U.S. by 60 gigawatts (GW) — about the same amount of energy used each year by 24 million households — and reduce annual power sector expenditures by $17 billion by 2030. A separate analysis, commissioned by Google, found that VPPs could save U.S. utilities $15 billion to $35 billion over the next decade.

One of the country’s major planned virtual power plants would be based in New York’s Hudson Valley, where the nonprofit organization Sustainable Westchester is set to roll out a smart battery lease program for homeowners later this year that would be aggregated and harnessed to manage energy demand. The program could potentially reach 45 cities and towns, or one million people.

“The beauty of the virtual power plant is that it will allow every resident to participate in a two-way conversation — from home to grid and grid to home — to reduce fossil-fuel reliance,” says Leo Wiegman, the nonprofit’s director of solar. He says that once homes are outfitted with home battery storage they can store excess energy and “ship that back to the grid.”

In one study, researchers at the Vermont Law School’s Institute for Energy and the Environment found that virtual power plant projects in

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