The world is changing. This isn’t news, of course. In fact, it’s rather old news – the world has changed. And the composition of the power grid has changed along with it. More roofs have solar panels. More garages house electric vehicles. The devices consumers plug into outlets have radically different load profiles than the devices of previous generations. Today there is an increased prevalence of wind farms, smart inverters, batteries and many other distributed energy resources (DERs) at the grid edge.
All these DERs offer tremendous potential through control and optimization. But while this capability presents copious opportunities, it also creates a few headaches, particularly for grid operators, often miles away (literally and figuratively) from where the DERs are located.
Yet DERs are becoming so entrenched in the daily operations of the grid that it’s tempting to ponder just where their limitations lay. With advancements in technology and business models, many innovators are looking to increase value from DERs, which leads to the latest question surrounding the capabilities of these assets: Can DERs play in utility and wholesale markets?
It’s not a small question. After all, wholesale power markets constitute three-quarters of the electricity supply in the United States. The question was closely examined at the recent Federal Energy Regulatory Commission (FERC) conference on DERs during panel discussions represented by regulators, utilities and DER providers. FERC, who oversees the wholesale markets, held the conference specifically to address the question of whether DERs have a place in wholesale markets. Arguments were voiced from all sides – and there were many – but the central conversation was less about whether DERs can play in wholesale markets than about whether they should.
And that question led to many others: Who would determine which DERs are allowed in? Should the utilities act as gatekeepers to the wholesale market? What happens if a DER is in both the retail and wholesale markets? What’s the best method for determining a DER’s fair market price?
RTOs and ISOs are particularly skittish about the notion of allowing DERs into the wholesale market because, understandably, they want to protect their grid, and many DERs such as photovoltaics and wind turbines are notoriously intermittent. Currently, the grid operators’ knowledge of the DERs on their systems is limited. What size is the asset? Where exactly is it located? How is it operating? All that uncertainty can make DERs appear unreliable from a grid operator’s perspective. The issue is about visibility. After all, it’s difficult to trust what you cannot see.
Fortunately, there is a possible solution. Enter the Virtual Power Plant (VPP). One of the key qualities of a VPP is flexibility, not just of capacity, but also of design. VPPs can be configured to match the needs of the grid while being highly inclusive to all types of DERs. For example, a VPP is able to provide visibility into every integrated DER, but this might be thousands or hundreds of thousands, of assets. For the purposes of a grid operator, that level of granularity might be overwhelming (too much of a good thing, perhaps?). In this case, the VPP can act as an aggregator, clustering DERs and reducing the level of complexity. It could even be designed to match the structure of the grid, with intelligently placed VPPs at specific nodes throughout the transmission network. In any case, the DERs could then appear to the RTO or ISO as a generator, able to respond with the same level of speed and accuracy, while the VPP manages the additional benefits of automated control and notification of the underlying assets.
Using a VPP to aggregate DERs is another means of simplifying the process of introducing DERs into the markets. Instead of a plethora of small dispersed assets making individual bids, the DERs would be represented as an aggregated VPP – a single well-defined, recognizable and dependable resource. On the market level, a VPP can be designed to allow for full automation of market offers and awards. The flexibility of VPPs can also be utilized to accommodate new market structures or control signals, such as price.
Basically, a VPP turns a problem into a solution by presenting an excellent option for grid operators to gain increased visibility, control and optimization into the DERs on their systems.
The notion of having DERs in wholesale markets isn’t a completely novel concept. In a way, the future is already here. PJM has had DERs participating in its wholesale market for frequency regulation since 2011. (Enbala not only contributed to the rule changes making that possible, but also successfully managed the first DERs in the program.) CAISO has also allowed DERs to dip a toe in their wholesale markets, allowing aggregated storage assets to participate through a demand response product. And of course, aggregators have reliably provided demandrResponse capacity in markets around the world.
While there are definitely still many details to be worked out, one thing is certain: The world – and the power grid – will not stop changing, and as tends to be the case when adapting to any change, flexibility is key.