When a bipartisan group of senators introduced a permitting bill late last month, much of the enthusiasm was around its potential to speed up the process of building large-scale energy projects, including renewables, fossil fuels, and transmission lines.
Buried in the 400-plus page document are also several provisions aimed at smoothing the way for scaled deployment of virtual power plants, which the draft bill calls “dispatchable energy systems.”
The bill, which won’t go up for a vote at least until the November midterms are over, directs electricity markets to bring in distributed assets into wholesale energy, capacity, and ancillary services markets within 18 months of enactment — doing legislatively what a 2020 order from the Federal Energy Regulatory Commission sought to do through tariff revisions. Order 2222 had a lot of initial enthusiasm from VPP aggregates, but in the years since implementation has been slow and uneven, with several regional grid operators delaying their compliance dates to 2028 or later. The permitting bill, if it passes, could accelerate that process by providing a firm, nationwide deadline.
But it’s still early days. Jen Downing, a former senior advisor at the Department of Energy’s Loan Programs Office, who authored the agency’s “liftoff report” on VPPs, said during a live recording of the Open Circuit podcast this week that while she has “cautious optimism” about the bill’s impact, it’s too soon to “let our guard down.”
Specifically, the bill would require grid operators to open their markets to aggregations of distributed energy resources within 18 months. It would also set strict rules against paying distributed resources twice for the same grid service, and require aggregators to publicly report what they deliver. Many of those provisions are designed to “knock down the hurdles that distribution utilities can throw up to block DERs from participating in wholesale markets,” said Downing, who is now an operating partner at Ara Partners.
Speaking onstage at Latitude Media’s Flex Summit in Austin, Texas, Downing pointed to a provision barring utilities from requiring VPP providers to add physical meters to their devices, something that currently adds expense and delay to deployment. They must also allow DERs to be compensated for exporting energy back into the grid
These provisions “go a long way towards allowing better participation,” Downing said. “But I’m very hesitant, given the track record of Order 222, that this is going to allow us to declare victory.”
If the bill passes, there are still “all kinds of hurdles” that are likely to come up in implementation. The technical details of VPP participation are key to whether the bill’s market access provisions actually work in practice, Downing said.
“The way DERs are getting greater access to wholesale markets is organizations like Voltus and CPower doing the hard, extremely technical work of picking apart the wholesale market participation rules,” Downing explained. For example, VPP companies currently have to rely on distribution data to measure the impact of their aggregations, for which they need reliable data streams. But the data stream from utilities sometimes isn’t available, which makes it hard, and sometimes impossible, to verify a VPP’s performance and receive full payment.
Another potential hurdle has to do with how DERs are accredited in the capacity market. Not sufficiently accrediting them is one way to “erode the margin on a business model of VPP participation in the wholesale markets,” Downing said. “The devil is in the details, and we need people fighting at every step of the way on exactly how it gets implemented.”
