Distributed energy is changing how we create and use power. Virtual power plants use these new resources to reduce demand on the grid when it’s needed most.
When you think of power plants, you probably picture big, hulking buildings with tall smokestacks or cooling towers. There are thousands of massive power plants in the U.S. that produce electricity by burning coal or natural gas or with nuclear reactors.
But, with the right software and optimization, power for the grid can now also come from lots of distributed energy devices, such as:
- Residential and community solar
- batteries in electric vehicles (EVs) or stand-alone energy storage
- smart thermostats, like Nest
- commercial building controls
- smart electric hot water heaters
Devices such as these, also known as distributed energy resources, can be coordinated together into what is known as a virtual power plant (VPP).
VPPs use advanced software to essentially mimic the impact of a traditional power plant, except instead of only producing electricity as large generators do, they can also reduce the amount of energy needed to keep the grid in balance. By aggregating many devices, small amounts of load can come from a lot of places so that users don’t even notice.
VPPs are sometimes part of a utility’s clean energy strategy to rely less on peaking power plants, which can be inefficient, fossil fuel-powered plants that only turn on during times of high power demand.
VPPs are not just a futuristic idea of how to balance the grid. They are already in use as distributed energy resources grow:
- During two days of California heat waves in early September 2022, Nest enabled users to reduce an average of 75 megawatts each day of peak load to the grid through Rush Hour Rewards program partners. This is larger than the typical peaker plant in California. Rush Hour Rewards allows Nest thermostat customers to get rewarded for using less energy during times of high demand and support their communities without sacrificing comfort. Nest thermostat users are always in control and can override any settings if you are uncomfortable.
- In New York City, electric utility Con Edison paid customers in specific areas of Queens and Brooklyn to enroll technology like batteries or take part in energy efficiency programs to create a VPP that was called upon during times of high energy use. The program cost a fraction of the $1 billion price tag of a new distribution substation that would have otherwise been needed to reliably deliver power to the neighborhoods.
- In summer 2022, energy from 2,500 Tesla Powerwall batteries were tapped to act together as a VPP to help support the grid during one of California’s intense heat waves.
- Customers of Hawaiian Electric that have home solar-plus-storage can sign up to earn cash back for sending power to the grid while still having the energy from the batteries available to back up their homes when needed.
- Arizona Public Service taps more than 50,000 smart thermostats, like Nest, on the hottest days of the year as part of its Cool Rewards program to create a VPP that alleviates stress on the power grid by automatically reducing demand while rewarding customers who have elected to enroll.
Smart thermostats like the Nest Learning Thermostat or Nest Thermostat can be a key part of VPPs because they can respond to signals to shift energy usage. Not only can Nest thermostat owners participate in Rush Hour Rewards programs to help alleviate electricity demand, but if you have a compatible Nest thermostat and join Nest Renew1, you can enroll in Energy Shift, which allows you to take advantage of cleaner or less expensive energy.2
- 1 Nest Renew available in select locations. Nest Renew requires 3rd generation Nest Learning Thermostat, Nest Thermostat E, or the newest Nest Thermostat (sold separately), connected to a Google account.
- 2 Energy Shift makes small adjustments to your Nest thermostat set points which can shift electricity usage from your heating and cooling system. Learn more. Only available in areas served by major continental US grids (see here). Prioritize less expensive energy only available for customers on certain electric utility time-of-use rates (check availability).