Battery-Based VPPs: The Future of Resilient Energy

Virtual power plants (VPPs) are an interconnected system of distributed energy resources, such as battery storage systems, rooftop solar panels, EVs with bidirectional chargers, and wi-fi enabled smart thermostats. Customers enrolled in a VPP program allow their resources to be used by a utility or third-party aggregator, providing valuable grid services in exchange for compensation.   

Over the past decade, battery-based virtual power plants (BVPPs) have become operational in 30 states plus DC, Puerto Rico, and the US Virgin Islands, with more programs currently in the works. To document these programs and identify emerging best practices, CESA has created a table detailing the 82 currently active BVPP programs in the US. The recently upgraded table includes newly added programs and details many elements of their design, such as what technologies are included and how participating customers are compensated for grid services. To aid in finding programs with specific characteristics, the table includes search and sort functionalities. This table, and many other resources, are part of the VPP Acceleration Initiative, a collaborative effort led by CESA, Clean Energy Group, and World Resources Institute (WRI). 

As a fast-growing new class of programs, BVPPs exhibit a wide variety of models as states and other actors try to figure out what works best. For example, Connecticut’s Energy Storage Solutions program, co-administered by utilities and the Connecticut Green Bank, offers customers an upfront rebate from the Green Bank combined with a performance payment from the utility. Customers from low-income and underserved communities, including multifamily affordable housing facilities, receive a 2x rebate adder to make participation more accessible. By contrast, the ConnectedSolutions program, now offered in Massachusetts, Rhode Island and New Hampshire, omits the upfront rebate in favor of a zero-interest loan, performance payments, and newly added locational bonuses for customers who can provide localized grid services. In Vermont, customers may lease the batteries instead of purchasing them. In exchange for a monthly lease payment, Green Mountain Power installs two utility-owned batteries in customers’ homes, that provide extended whole-home backup power in case of a grid outage.  

Many BVPP programs are limited to a certain utility service territory or community, but some have broader ranges. Texas and California have both adopted statewide programs. Other programs span states, such as ConnectedSolutions, which operates in several New England states, and the Wattsmart program, which is offered in Idaho, Utah and Wyoming. 

Because each state and utility has different needs, there are a number of questions to consider when developing a BVPP. These include:  

• Who owns the batteries and associated resources? 
• Which technologies are eligible to participate? 
• What types and rates of incentives are offered to participants? 
• Are affordability provisions offered to help lower-income customers participate? 
• What types of customers are eligible to participate? 
• What types of grid services are provided?  
• Will third-party developers and aggregators be able to participate? 

The answers to these questions define the operating structure of the BVPP and therefore impact everyone involved, from utilities to contractors to consumers. CESA’s BVPP table readily displays this information and more for current BVPP programs across the U.S. 

CESA has also published a short report, Program Design for Battery-Based Virtual Power Plants, that highlights some BVPP best practices that have emerged from program experience and comparison to date: 

• Programs should incorporate affordability considerations (carve-outs, incentive adders and low/no-cost financing) to ensure broad accessibility. 
• Programs should provide both upfront rebates/enrollment incentives and performance payments. 
• Upfront payments help initial affordability 
• Performance payments incentivize customers to allow batteries and associated resources to be utilized during times of peak electric demand to achieve grid benefits 
• A variety of ownership options should be allowed (utility-owned, customer-owned, customer-leased). 
• Programs should allow participation by third-party aggregators. 
• Programs should allow a wide variety of equipment options (solar, controllable loads, EVs/managed charging, etc.) to make the program more accessible and cost-effective. 

Growing project experience and data, as well as the projected rapid growth of peak electricity demand in many areas of the country, will likely accelerate the scaling of BVPPs in the coming years. CESA will continue to support state energy agencies and regulators to ensure that the full potential of BVPPs and distributed energy resources is realized, and that resource aggregations operate efficiently, effectively and accessibly. Read more about CESA’s BVPP research and recommendations, and our new VPP Acceleration Initiative, here.