Words by Tina Casey – FEB 01, 2023 from Brands Taking Stands
Crusaders against socially responsible investing have been holding forth about the evils of “woke capitalism” in recent years. For all the red-hot rhetoric, though, leading U.S. businesses continue to promote clean power. The latest effort involves GM, Ford, and other leading stakeholders in an effort to grow the market for virtual power plants.
What is a virtual power plant?
Although the idea may seem somewhat exotic, a virtual power plant is simply a networked grid system that enables individual electricity producers to interact with each other and with individual users. The overall aim is to avoid the cost of building new centralized power plants — and especially to avoid building new fossil power plants — while improving reliability and resiliency.
This network-based approach to grid planning is made possible by new smart grid and smart metering technology, along with the proliferation of rooftop solar and other small-scale renewable energy systems. It is a sharp contrast with the traditional strategy of building additional centralized power plants to get communities through periods of peak demand.
In addition, virtual power plants provide electricity users with new opportunities to save or even make money, depending on the incentives offered by their grid operator.
In a blog post last May, the U.S. Department of Energy described how virtual plants have come to include not only individual meters, but also individual appliances that are designed to interact with the grid, as well as electric vehicle charging stations and energy storage facilities.
“Operators gain the flexibility to better reduce peak demand and, as a result, defer investment in additional capacity and infrastructure to serve a peak load that is expected to increase as we electrify the nation’s economy,” explained Jigar Shah, director of the Energy Department’s Loan Programs Office.
Why don’t we all have virtual power plants?
For all their potential benefits, virtual power plants are a relatively new phenomenon, and they still account for a vanishingly small percentage of grid activity in the U.S.
In a followup blog post last October, Shah noted that the market for virtual power plants has only been open since 2020, through an order of the Federal Energy Regulatory Commission. “Nearly two years later, VPPs are just beginning to compete in organized capacity, energy, and ancillary services markets at a meaningful scale at the regional level,” Shah wrote.
In particular, Shah focused on the need for virtual power plants to secure revenue contracts. “To unleash the capital that makes ratepayer and wholesale power cost reductions possible, incumbent financiers need to see lower customer acquisition costs and consistent revenues for the critical services provided,” Shah noted.
Heeding the VPP call
GM and Ford have heeded the call for virtual power plants under the banner of the VP3, the new Virtual Power Plant Partnership hosted by the clean energy organization Rocky Mountain Institute (RMI). Other VP3 founding stakeholders include Google Nest, OhmConnect, Olivine, SPAN, SunPower, Sunrun, SwitchDin and Virtual Peaker.
GM and Google Nest served as seed funders of VP3. RMI also hopes to build on the success of its Renewable Energy Buyers Association partnership, of which GM is also a founding member.
“VP3 is an initiative based at RMI that works to catalyze industry and transform policy to support scaling VPPs in ways that help advance affordable, reliable electric sector decarbonization by overcoming barriers to VPP market growth,” according to a press announcement from the Rocky Mountain Institute.
“Our analysis shows that VPPs can reduce peak power demand and improve grid resilience in a world of increasingly extreme climate events,” added RMI CEO Hon Creyts, in a statement. “A growing VPP market also means revenue opportunities for hardware, software, and energy-service companies in the buildings and automotive industries.”
As a collaborative effort, VP3 will work to raise awareness about the benefits of virtual power plants, develop best practices and standards across the industry, and promote supportive policies.
The electric vehicle connection
Electric vehicles are in a perfect position to contribute to and benefit from virtual power plants, due to their mobility, flexibility and large energy storage capacity. That explains why Ford and GM jumped at the opportunity to get involved with VP3 as founding members.
Mark Bole, GM’s head of V2X and battery solutions division, noted that the V3 collaboration “underscores GM’s commitment to creating a more resilient grid, with EVs and virtual power plants playing a key role in helping to advance our all-electric future.”
In a separate announcement, Bill Crider, head of global charging and energy services at Ford, explained that electric vehicles are “introducing entirely new opportunities for consumers and businesses alike, creating a greater need for sustainable energy solutions to responsibly power our connected lifestyles.”
“Supporting grid stability through the introduction of technologies like Intelligent Backup Power is central to Ford’s strategy, and collaborating to advance virtual power plants will be another important step to ensure a smooth transition to an EV lifestyle,” Crider added.
Who’s next on the virtual power plant bandwagon?
Among the Big Three legacy U.S. automakers, Stellantis has yet to engage with VP3. That could change as the company that now owns Dodge and Chrysler ramps up its interest in virtual power plants.
In 2020, Stellantis began work on a large-scale virtual power plant in Italy based on electric vehicle-to-grid technology. The company, which also counts Fiat and Peugeot among its subsidiaries, may be waiting on the results of that project before committing itself to a policymaking endeavor in the U.S.
Interest in virtual power plants is also growing at Volkswagen and other overseas automakers that have an eye on the U.S. market. In addition, Tesla has embarked on virtual power plant ventures in California and Texas, deploying both its vehicle batteries and its Powerwall home batteries.
It remains to be seen if Tesla will collaborate with VP3 on industry standards, though. Tesla CEO Elon Musk established a well-known reputation for not collaborating in the early days of electric vehicle commercialization. He held out Tesla’s charging system as unique to Tesla, even as other automakers worked to create the standard CCS charging technology for Europe and North America.
Since its introduction in 2011, CCS has been supported by almost all other auto manufacturers in those two markets. Even Tesla itself leans on CCS to some degree, since it provides Tesla owners with an adapter to use at CCS charging stations. (Note: Japan and China continue to use their own charging systems.)
More recently, Musk further cultivated his outsider status in the early days of the COVID-19 lockdown when he criticized the U.S. government’s public safety guidelines and upstaged an inter-industry collaboration to restart U.S. factories. He also spread confusion and misinformation about the virus and the COVID-19 vaccine on social media.
When U.S. President Joe Biden convened a major media event for auto manufacturers in August of 2021, it was no surprise to see Tesla left out in the cold. Last year, the S&P 500 also took Tesla to task for not keeping pace with its peers in the auto industry on corporate ESG (environment, social, governance) issues.
Musks’s use of social media also makes Tesla an outlier among CEOs in the auto industry and elsewhere, in regards to his willingness to amplify and normalize white nationalist rhetoric.
With or without Tesla, though, VP3 is yet another instance in which industry leaders are swatting away the anti-ESG agitators like flies to take advantage of new opportunities to grow their businesses and attract new customers.
Image credit: hasan/Adobe Stock