As part of last week's 2020 New York Climate Week, Credit Suisse and Dynamo Energy Hub co-hosted an informative online panel in collaboration with IBM. The panel, titled Cleantech, Collaboration and Climate Action: Driving the Clean Energy Transition Through COVID-19, brought together industry leaders to discuss their experiences and insights on trends over the previous — very disruptive — six months.
In 1994, California restructured its electricity market, introducing competition as a theoretical means to bring down the price of power. The end-goal was to help revive an economy that was struggling due to a blend of issues, including high energy costs that were driving major manufacturing companies to leave the state, taking jobs and expendable income with them.
But despite good intentions, the restructured system lacked normal power market stabilizers. This, coupled with sharp, adverse changes in supply and demand, led to opportunistic (and occasionally illegal) behavior from out-of-state energy traders that caused power shortages, extreme price spikes and rolling blackouts during the infamous California Electricity Crisis of 2000-01.
A decade later, as California’s two major utilities teetered on bankruptcy and immense uncertainty, the California Public Utilities Commission (CPUC) established a policy framework in 2004 to prevent this from happening again. The resulting Resource Adequacy (RA) program created the rules for how load-serving entities (LSEs) contract for electricity capacity to ensure demand is met in case of an unexpected event.
Energy systems are changing. As variable renewable energy generation replaces retiring fossil fuel-run power plants, we see a shift from our century-old mindset of centralized supply following demand, to a more distributed grid with distributed energy resources (DERs) playing an essential role in a sustainable energy future. In order for renewable energy resources and DERs to replace conventional power plants, they need to be able to act like power plants – virtually at least.
At technology and innovation’s finest hour, we are able to aggregate disparate, geographically dispersed DERs and orchestrate them in such a way that they are able to respond to the grid’s needs at the same speed and accuracy as a traditional power plant. That’s where the Virtual Power Plant (or VPP for short) comes in. Navigant Research defines a VPP as:
VPPs are critical for the transition to more sustainable energy systems – so where is the technology at? Where can we find VPPs? And what can we expect in the future?
Utilities and regulators evaluate grid modernization initiatives using economic paradigms. They determine if investments at the grid edge are cost effective relative to investments made in traditional generation, transmission and distribution assets. The Intergovernmental Panel on Climate Change (IPCC) recently published a special report titled ‘Global Warming of 1.5°C’, with an accompanying Summary for Policymakers. The Summary stated that if global warming continues at its current rate, we will likely reach a 1.5°C increase in global mean surface temperature (GMST) compared to pre-industrial levels between the years 2030 and 2052. The Report and Summary provided a comparison of outcomes we can expect if GMST increases to 1.5°C versus 2.0°C. It also presented solutions to support limiting global warming to the smaller value.
Peak demand is the highest rate of electricity use. Fortunately, it only occurs a few times a year – usually on the hottest days of the year or on the very coldest days of the year, depending on your geography. Our power systems are prepared for these peaks (otherwise we risk potential blackouts), but as urban populations increase, and we add more variable renewable energy resources to our grid, we see more need to accommodate increases in peak demand. Traditionally, utilities would forecast demand in their service territories and resort to upgrading or building new peaking power plants to supply the anticipated increase in electricity demand. This solution tends to be land-intensive and has resulted in significant increases in greenhouse gas emissions.
I take the bus to work. On any given weekday, you can find me waiting on the side of a road while vehicles of all shapes and sizes whiz by, leaving behind a trail of noise and exhaust. It would be all well and good if this was just another weekday annoyance that could be easily shrugged off, like a fresh pile of snow blocking the sidewalk or a texter blissfully skipping the line at a busy coffee shop. But that’s not the case. Vehicle exhaust is a known pollutant that significantly affects human health and the environment. Regulators put limits on emissions – but these generally focus on new car sales, and then they can still be tampered with. So as a commuter waiting at the side of a busy road, I don’t feel too reassured. But, when I see that clean technology goals for electric vehicles are on track, hear announcements from companies like Tesla, Thor and Volvo electrifying trucking fleets, and read about commitments by governments to support these efforts, I do feel hopeful.