Climate Tech

Texas grid operators are plugging into virtual power plants

The state approved a pilot of the tech in July, and details are still being worked out.
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Francis Scialabba

· 4 min read

While virtual power plants might sound like some made-up metaverse feature, they are very real—and they’re powered by actual homes and businesses.

As more homeowners and business owners invest in technologies that can form the foundation of virtual power plants (VPPs)—like rooftop solar batteries, smart thermostats, or electric vehicles—grid operators are exploring the tech as a potential solution for reliability and demand challenges in strained energy markets, according to Ignacio Guajardo, executive director of the Texas Advanced Energy Business Alliance (TAEBA).

Texas is one region experimenting with VPP tech, which uses software to let a decentralized network of people and businesses distribute power from their own energy systems as needed.  In July, the Public Utilities Commission of Texas (PUCT) approved a virtual power-plant pilot project intended to help solve grid-reliability issues. At the time, TAEBA called the program “an important step toward a more reliable power grid in Texas.”

“Currently, owners of these systems are able to supply power to their own loads at times, and in general, they receive credits for the excess energy they produce,” Guajardo told Emerging Tech Brew. “But these technologies can actually partake in grid operations much more broadly.”

“It creates massive cost savings [for home and business owners],” he added. “And it also probably contributes toward affordability, reliability, and resilience for the grid.”

Reliability in Texas

Texas has faced a number of grid challenges. In February 2021, the Texas power-grid crisis resulted, in part, from its power plants’ inability to operate in extremely cold weather during a rare winter storm. As recently as this July, the state’s grid operator, the Electric Reliability Council of Texas (ERCOT), requested residents voluntarily cut back on energy use in order to avoid rolling blackouts amid a summer heat wave. The grid failures have prompted external investigations into the state’s response, and some have said that Texas is not looking closely enough at its grid’s lack of resiliency.

Distributed energy resources (DERs) “whether they’re on the supply side or the demand side, are going to be instrumental in providing a long-term solution to the system,” PUCT Commissioner Will McAdams said during a June meeting.

To incentivize individual asset owners to participate in the state’s pilot, Guajardo said home or business owners that opt in can potentially receive compensation for their contributions. While the incentive structure has yet to be determined for the Texas pilot, in California, pilot project participants earn $2 for “every additional kilowatt-hour they feed to the grid during designated ‘events,’” when it’s under stress.

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Since proposing the pilot in June, PUCT has solicited input from representatives from ERCOT, Oncor Electric Delivery Company, Tesla, and other community stakeholders about testing out VPP tech. The details, like mapping energy resources, determining who is eligible to aggregate energy, and defining compensation for participants, are still being worked out, Guajardo said.

While VPP pilot projects are underway in other markets, employing the tech is not a one-size-fits-all model, said Caitlin Marquis, policy director at TAEBA.

For example, she mentioned that some TAEBA members warned against copy-and-pasting California’s existing VPP models.

“Not just because, you know, the markets are different, and that won’t work, but there are barriers in the California programs, the way that they’re set up, that we would be seeking to avoid in a Texas program,” Marquis said. One difference is that California’s program is subject to oversight by the Federal Energy Regulatory Commission, but Texas has its own grid.

Last month, California kicked off a partnership between Tesla Powerwall and Pacific Gas and Electric (PG&E). When the program began in Northern California last month, PG&E and Tesla invited around 25,000 customers to participate. A week after the invitation, Electrek reported that 1,500 Powerwall owners had joined the pilot.

For its part, PUCT looks to start the Texas pilot in the first quarter of 2023 after presenting governing documents to ERCOT by October 11 of this year.

“The winter, this Christmas, is a transformational time for what we are doing here at the commission and on the ERCOT system…in trying to formalize a framework of tools to combat and solve for reliability moving forward,” McAdams said at the June PUCT meeting.

Editor's note 08/17/2022: This piece has been updated to clarify a reference to California's existing VPP programs from Caitlin Marquis of TAEBA.

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