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Utilities should be putting more emphasis on a VPP future. Here’s why

As semiconductor chips proliferate, collecting data by the second and providing more intelligent input into systems that have never had that level of insight before, it’s exciting, and maybe a little terrifying, to think about the future.

“If someone told me 15 years ago that semiconductors chips in cars are going to take over most of the mechanical parts, we all would have laughed,” said Ananth Sundaram, senior manager of Grid Asset Engineering at Portland General Electric (PGE), in an interview.

Sundaram sees a future where small distributed energy resources (DER) aggregated into virtual power plants (VPP) play an enormous role in the electricity industry and he’s interested in hearing from his peers whether or not they see the future in a similar manner.

“The whole impact of the semiconductor industry on the transportation sector has completely changed us,” he said, adding that he believes “the same thing is going to happen” in the electric industry.

“We are going to have more and more semiconductors, more types of batteries, and more and more technologies on those batteries,” he said. That will change the way that chemistry is going to behave. And that’s important because “right now chemistry and physics are fighting against each other, as we are testing the limits. This will increase affordability and adoption.”

GO DEEPER: Kiran Bhatraju, founder and CEO of Arcadia, joined Episode 38 of the Factor This! podcast to discuss the role of data in upending the energy industry’s long-held power dynamics. Subscribe wherever you get your podcasts.

Why the VPP?

Sundaram is cognizant that lithium-ion storage technology might not be the future storage medium based on limitations to supply chain and issues surrounding sustainable mining. However, he is sure that a system of distributed energy storage, coupled with distributed solar, electric vehicles and smart appliances that talk to smart panels in the home is a future that could be upon us sooner than we all imagine.

“The VPP is probably going to be a compelling answer for us if we are going to sustain in this market,” he said of utilities, adding “if utilities don’t adopt and start building the ubiquitous layer of how to manage those DER [they are] going to miss this opportunity of participating in this transformation.”

Sundaram said the community that PGE serves demands clean energy, the terrain is such that it can’t support large-scale renewables and climate change is bringing more destructive weather events to the region. It’s those three external forces that put his utility in a position to say “’Let’s invest in VPP. Let’s proliferate DER as much as possible. Let’s engage the customer. Let’s engage the community. Let’s engage the industry.”’

“That’s why we are putting all eggs in the VPP basket,” he added.


Virtual Power Plants are a hot topic today. But for the most part, when people think about aggregating, say, energy storage and bidding that into a wholesale market, they are really just reducing demand via demand response. Indeed, in today’s VPPs, customers generally stop drawing power from the grid and instead power their own operations from an onsite energy resource. This reduces peaks and smooths the load.

“That’s the difference between DRMS (demand response management systems) and DERMS (distributed energy resource management systems)” said Sundaram. He added that a lot of vendors simply re-label a DRMS as a DERMS.

“I’m saying no to that,” he said. “DRMS is peak shaving and load smoothing system, which most of us had in the last decade, whereas DERMS is the ability to manage the utility owned/customer owned/3rd party owned DERs to participate in the energy markets. DERMS has a bigger role to play.”

Utilities as distribution system operators

Ultimately, the shift from controlling VPPs via a DRMS to a DERMS comes as utilities take on the role of distribution system operators (DSOs).

“DERMs is basically managing DERs and their power flow. Taking the voltage from the battery and putting it into a neighborhood.”

Sundaram sees a world where if a car hits a utility pole on a circuit and the power goes out, a DER sitting on the balance line can feed power to the people who need it, such as those who depend on oxygen or who have other critical needs for power.

“That is the world I want to move towards. A transactive energy market where the arbitration happens at the edge level,” he said.

While that model changes the function of distribution utilities today, he said he firmly believes that as the companies who have served electricity to consumers for the past 100 years and have invested time and money in poles and wires, utilities ought to have first right of refusal to operate as a DSO and earn the business to be the DSO.”

“But having said that, I want competition,” added Sundaram. Competition means the utility will work smarter, quicker and develop rate structures in an appropriate amount of time.

“Give me 5-10 years and I’ll prove to you that utilities can come up with different tariffs and rates that will be competitive in the market and make the utility indispensable in this area,” he said.

Regulators will, of course, need to be heavily involved and he urges them to work closely with utilities to develop innovative models towards a DSO strategy.

Markets and secondary markets

Much in the same way the telecom industry shifted from a business model that billed customers for the minutes they spent on the phone to one in which minutes were purchased in blocks, Sundaram said a similar shift could take place with electricity. “I’m thinking there are going to be subscription models coming very quickly,” he said.

Sundaram gave a neighborhood cluster of residential homes/communities as an example of how a secondary energy market could be created. If 100 homes all have solar and energy storage, using machine learning and artificial intelligence, customers could quickly understand how much energy they need to power their homes and purchase that energy in a block. Then, whatever energy the neighborhood generates in excess is available for export during times of peak demand. 

Looking out even further, the meter itself could go away, according to Sundaram, and be replaced with a smart panel. 

“The smart panel would be communicating with all of the devices (behind the meter) in the neighborhood,” he explained. “In this way, the panel knows the energy consumption of all devices and effectively has the intelligence to drop the load on a home because some other device needs more power.”

“I’m talking about 15-20 years from now, but we need to start planning for that now,” he said.

The standard conclusion

The quickest path to realizing this type of future — one in which outages are a thing of the past and clean energy powers everyone’s home — is if appropriate standards are in place across the industry. Devices that use different charging plugs can’t talk to each other and Sundaram would like to see greater government influence on the creation of standards.

“I want to see how the industry is going to forge alliances,” said Sundaram. “Standards adoption is going to be the most important thing.”

“If a utility wants to participate in this transformation journey, you have to adopt and enforce standards.”

Originally published on Power Grid International

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