Feb 15, 2024 · 35m · green-blueprint
Virtual power plants: the ‘sandwich’ for the grid
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Carbon Copy, host Stephen Lacey and Department of Energy official Jen Downing explore how virtual power plants (VPPs) can cost-effectively meet surging electricity demand, replace retiring fossil generation, and reshape utility business models by 2030.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The hosts as informed peer 5.2 Guest teaching 4.1 Guest disagreement 1.1 The hosts pushing back 1.8
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:14 Reframing the wholesale vs utility dichotomy
Downing respectfully pushes back on Lacey's binary framing of control points, arguing wholesale market pricing alone provides an incomplete price signal that overlooks distribution-level investment deferral.
Hardest push from the hosts ▶ 14:07 Challenging broad capacity rangesLacey directly interrupts to interrogate the wide 30 to 60 GW estimate, pressing Downing to justify how definition shifts cause such a massive variance.
Biggest teaching moment ▶ 23:30 The missing distribution grid value propositionDowning educates on why bilateral contracts with distribution utilities often capture higher localized value (such as deferring substation upgrades) than straightforward wholesale market participation.
The host holds their own ▶ 26:09 Lacey breaks down FERC Order 2222 implementationLacey demonstrates extensive regulatory fluency by reciting the 2020 origins of FERC 2222, ISO pushback, and regional delay ramifications without prompt.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| The History and Naming of Virtual Power Plants | 6 | 3 | 1 | 2 | Lacey provides deep historical context dating back to 1990s Saratoga Springs symposiums before interviewing Downing. Downing shares lighthearted background on the DOE Loan Programs Office's adoption of the term VPP and the 200 GW peak load challenge. | |
| Comparing Traditional Peaker Plants with Virtual Power Plant Economics | 5 | 4 | 1 | 1 | Lacey frames a structured comparison between vertically integrated peaker plant investments and VPP adoption. Downing details the economic modeling from the Brattle study showing VPPs are roughly 60 percent cheaper with consumer-directed incentives. | |
| Exploring the Diverse Flavors and Categories of Virtual Power Plants | 5 | 4 | 1 | 1 | Lacey asks for categorization of VPP flavors, and Downing uses the sandwich metaphor to categorize solar plus storage, pure batteries, managed EV charging, and flexible commercial load. | |
| Estimating Current VPP Capacity and the Coming DER Tsunami | 6 | 5 | 1 | 4 | Lacey actively pushes Downing on the wide 30 to 60 gigawatt current capacity estimate, prompting Downing to clarify demand response accounting overlaps and unpack the incoming tsunami of DERs. | |
| Utility Business Models and Innovative State Policy Frameworks | 5 | 4 | 1 | 2 | Lacey asks Downing to candidly assess the utility landscape between forward-thinking utilities and those sticking to gas peakers. Downing walks through the Massachusetts multi-layered incentive model as a best-in-class example. | |
| Determining Points of Control: Wholesale Markets Versus Bilateral Contracts | 5 | 6 | 2 | 2 | Lacey presents a dichotomy between utility control and aggregator wholesale bidding. Downing reframes the problem, explaining that wholesale market pricing is incomplete because it ignores localized distribution deferral value. | |
| Navigating Implementation Challenges of FERC Order 2222 | 6 | 4 | 1 | 2 | Lacey demonstrates solid regulatory literacy outlining FERC Order 2222 history and ISO delays. Downing elaborates on specific regional implementation friction in MISO and NYISO. | |
| Driving Innovation in Utility Regulation and Frictionless Consumer Experience | 5 | 4 | 1 | 1 | Lacey inquires about upcoming innovation sources, and Downing outlines the necessity of performance-based ratemaking alongside frictionless, automated consumer device orchestration. | |
| Defining Commercial Liftoff and the 2030 Vision for VPPs | 4 | 3 | 1 | 1 | Lacey prompts Downing for DOE's 2030 vision of commercial liftoff. Downing lays out the metrics of broad consumer access, standard utility planning menus, and 20 percent peak demand management. |
Statements from this episode (19)
Downing: DOE accepted 'VPP' because it couldn't erase market terminology
“We may have influence at the Department of Energy, but we didn't think we had so much influence we could erase the term VPP from the market.”
DOE issued a $3B loan guarantee to Sunnova for aggregated solar and storage
“And the agency has thrown support behind projects, including a three billion dollar partial loan guarantee to Synova for 568 megawatts of rooftop solar and batteries that are tied together.”
Lacey: Tripling VPP capacity is necessary for an affordable zero-carbon grid
“If we want any chance of building a grid powered by a hundred percent zero carbon resources and do it affordably and reliably, we need to triple capacity of VPPs.”
Downing: VPPs are hard physical assets aggregated via software, not abstractions
“People misunderstand the word virtual to mean, you know, not real. When these are hard assets on the grid, it's not phone calls anymore. It's software integrations, and it's large aggregations of small resources that really add up to something very valuable.”
Downing: Gas peakers and grid lines operate at 5% to 25% utilization
“You know, that peaker plant may turn on for five percent, maybe 10% of hours of the year, and you're increasing the capacity of your transmission distribution lines to serve that higher peak, but then on average across the year, they're running at maybe 20, 25…”
Downing: VPP peaking capacity can be 60% cheaper than gas peakers
“For a utility, procuring peaking capacity from a VPP can be 60% cheaper than procuring it from a natural gas peaker plant.”
Downing: Most VPP spending goes directly to participant incentives
“But what's even more striking is that the money that is spent on virtual power plants, the majority of those costs are actually participant incentives.”
Downing: Sunrun was first to bid VPP capacity into wholesale market
“Sunrun, and they participate in many different ways across the country in different markets with utilities, but, you know, they were the first to bid VPP capacity into a wholesale market. They bid capacity into ISO New England in and then deliver that energy i…”
Downing: Green Mountain Power saved millions replacing peakers with batteries
“Another example of a pure battery VPP is what Green Mountain Power is doing with their batteries where they have chosen to offer batteries to their customers at a low cost instead of procuring that capacity from peaker plants. And they've saved, Green Mountain…”
Downing: US currently has 30 to 60 GW in VPP capacity
“Well, depending on how you define it we have about 30 to 60 gigawatts of capacity in VPPs today.”
Downing: US electric grid must serve 200 GW of new peak demand
“Well, we have the need to serve 200 gigawatts of new peak demand between now and 2030.”
Downing: Tripling US VPP capacity by 2030 would save $10 billion annually
“But if we can triple the capacity of VPPs between now and 2030, we could serve 10 to 20% of peak load nationally through virtual power plants. And if we did that, because they are a lower cost solution, we'd be saving about ten billion dollars per year.”
Downing: US adding 20 to 90 GW of EV charger demand annually
“So between now and 2030, we're adding roughly 20 to 90 gigawatts of charger demand per year.”
Downing: US has roughly 5,000 utilities or load-serving entities
“We have somewhere around 5000 different utilities or load serving entities across the United States.”
Downing: Wholesale prices for VPPs do not capture distribution value
“I think when you have virtual power plants bidding into wholesale markets and earning a price that represents the value to the bulk power system, It's an incomplete price, because it's not taking a, it's not taking account of the value to the distribution grid…”
Downing: Utilities will increasingly procure virtual power plants directly
“And so I think what you'll end up seeing is utilities recognizing the value that they can get out of these VPPs and procuring VPPs directly.”
Downing: MISO and NYISO cite IT and staffing constraints delaying Order 2222
“You have MISO saying that they have, you know, multi-year timelines for the IT systems that need to be upgraded to implement this. You have New York ISO saying, you know, we don't have the staff capacity to register large numbers of very small DERs, so we're s…”
DOE's Downing: Only a minority of states use integrated distribution system planning
“Right now, a minority of states are doing integrated distribution system planning, where they're taking a look at, you know, what capacity they have on their distribution systems in relation to the bulk power system needs. But more and more states are adopting…”
Downing: Utility CapEx return models heavily disincentivize low-cost VPP adoption
“The utility business model of compensating CapEx spending with maybe a seven to nine percent margin and passing through OPEX at cost to the consumer does not give utilities the right incentives to choose low-cost options such as VPPs”