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Virtual Power Plants Are Coming to Save the Grid

Networks of thousands of home-based batteries could be key to a cleaner, more reliable electricity system.

Fred Closter checks his Tesla Powerwall battery system on Thursday Feb. 17, 2022, at his home in Boynton Beach, Fla. Closters $40,000 solar power installation, which includes $24,000 in solar panels and two $8,000 Tesla storage batteries, enables the retiree and his wife to live almost completely free of the local grid.
(Susan Stocker/Sun Sentinel/TNS)
This summer could be the first one in which virtual power plants—networks of small batteries that work in tandem to function like power plants—are large enough to make their presence felt by helping to keep the lights on during the hottest days.

After years of pilot projects, utilities and battery companies now have networks with thousands of participants in California, Utah and Vermont, among others.

The batteries in virtual power plants add megawatts of capacity to the grid when electricity demand is at its highest. And most of the electricity from the batteries is generated by rooftop solar.

This combination of renewable energy and groups of batteries is “a recipe for the grid of the future,” said Blake Richetta, CEO of U.S. operations for the battery maker sonnen.

Yes, sonnen has a lowercase “s,” the kind of frustrating—at least for copy editors—branding that seems appropriate for virtual power plants, a concept whose name does little to explain what it is.

So what is it? A virtual power plant is like a swarm of bees or the Power Rangers’ Megazord or any other group of parts that join forces to do big things, which in this case means stabilizing the grid.

I’ve been following sonnen for a while and in 2019 had a tour of its global headquarters in Wildpoldsried, a village in Germany. The resulting story had a lot about Wildpoldsried and made only a brief mention of sonnen. But the company made an impression on me because of its entrepreneurial nature and its vision of how batteries can reduce the need for conventional power plants.

Since its founding in 2010, the company has been a leader in emphasizing how batteries can serve a larger function than just backup power, and it has developed software to manage groups of batteries. The company is among the market leaders in home-based energy storage in Europe but is a smaller player in the United States. Its rivals include Tesla and LG Chem.

This week, I spoke with Richetta to get his view of a moment in which sonnen is part of several major initiatives that are helping to popularize virtual power plants.

The purpose of a home-based battery shouldn’t be to just “sit there all year until there’s a power outage,” Richetta said. Instead, that battery can be a building block for serving the entire grid.

Here are some specifics on how this idea translates into action:

Rocky Mountain Power, the utility serving parts of Idaho, Utah and Wyoming, is working with sonnen on a virtual power plant in which the utility provides a rebate to encourage customers to participate.
So far, about 3,500 customers have signed up. They have purchased a sonnen battery system, which starts at about $10,000, and received rebates that start at $1,920.

Then, at times when electricity demand is highest, the utility has the ability to draw electricity from the batteries to support the grid. Customers receive credits on their bills for the electricity they contribute.

The Rocky Mountain Power program is one of many virtual power plants across the country. Some other projects, all from the last two years:

Richetta started at sonnen in 2016 following some time at Tesla, where he was sales manager for the Powerwall battery storage system.

He was part of sonnen’s management in 2019, when the company agreed to be purchased by Shell, the London-based oil giant.

Environmental advocates have warned the public to be skeptical when oil companies tout their clean energy investments. Ken Cook of the Environmental Working Group summed up this view in 2022, when he said, in response to evidence at a Congressional hearing, that “Big Oil has zero intention of divesting from fossil fuels” and is instead “engaging in greenwashing tactics.”

I asked Richetta about this criticism. He said the sale to Shell has been good for sonnen, giving the company the resources to expand much more than it could have on its own.

“By next year, we will have grown approximately five times since we were acquired,” Richetta said. “Shell absolutely, positively is not greenwashing.”

Much of sonnen’s expansion has been in the United States, where the company has about 140 employees and a manufacturing plant and headquarters in Stone Mountain, Georgia, part of a global head count of about 1,500.

We are in the early stages of realizing the potential of virtual power plants. Clean energy researchers speak of a future in which batteries are just one of several resources that can be turned into networks, with nationwide capacity that would be in the tens of gigawatts.

RMI, the research and advocacy group, sketched out what this might look like in a report this year showing the potential for 61.9 gigawatts of capacity in the United States in 2030.

Batteries would have a small share, 9.9 gigawatts. Electric vehicles would have 17.3 gigawatts, most of which would be from reducing the use of EV charging during times of high electricity demand. The bulk of the capacity would be in buildings, including 19.8 gigawatts in homes and 14.9 gigawatts in businesses, most of which would come from using networks to reduce electricity demand by adjusting thermostats, among other measures.

Mark Dyson, a managing director at RMI, told me that he and the other co-authors of the report were deliberately broad in defining what a virtual power plant can be, including resources that can send electricity to the grid and those that can reduce demand. The common element is that all of the resources are located at homes and businesses and have the ability to work in tandem to make the grid more reliable.

“Virtual power plants can help us keep the lights on and keep electricity affordable, using devices we’ve already bought and paid for, without building new power plants,” he said.

Even if you don’t define it so broadly and focus just on batteries, 9.9 gigawatts, or 9,900 megawatts, is huge, like a dozen natural gas power plants. I don’t have a good number on how that compares to current virtual power plant capacity, which is likely less than 1 gigawatt.

If virtual power plants come anywhere close to that kind of growth, sonnen is among the companies that stand to benefit the most.
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