Texans can now sign up for virtual power plant to help grid, make money

Texans can sign up to use solar-powered batteries and other energy devices to make money in the state’s power markets, under a pathbreaking new grid program.

So-called virtual power plants (VPPs) perform grid roles previously reserved for large-scale power plants, but they do it by aggregating hundreds or thousands of buildings with controllable energy equipment, like batteries charged by rooftop solar. VPPs often get mired in laborious regulatory proceedings before they ever become reality, but cleantech advocates in Texas worked with state regulators to push through a VPP pilot program last year with surprising speed.

State regulators approved the Aggregated Distributed Energy Resources (ADER) Pilot Program in October, and now the onboarding has begun. Households and businesses can sign up with participating electricity retailers if they live in parts of the state that feature competitive electricity providers, such as the areas around Houston or Dallas. They can also enroll with their municipal or cooperative utility if that entity chooses to participate.

The pilot allows up to 80 megawatts of capacity from assets in homes and businesses to bid into the state’s competitive wholesale markets, run by grid operator ERCOT. The devices have to be able to export power back to the grid, but they can’t be bigger than 1 megawatt. That means fossil-fueled generators technically could participate, but the key technology is likely to be solar-powered batteries, which can be programmed to respond automatically to market signals and don’t require paying for fuel to burn.

Companies looking to take advantage of the new program need to be licensed Texas electricity providers; they also need access to batteries or other controllable devices in customers’ homes or businesses. No one company is allowed to control more than 20 percent of the VPP capacity, but the overall program is expected to be expanded, pending positive performance.

So far, the entities jumping on the opportunity are forward-looking clean energy companies that helped design the policy.

Electric car-maker Tesla launched its own Texas retail electricity venture in December and is enrolling Powerwall battery customers in its virtual power plant. The company previously organized its own demonstration of 64 North Texas homes with Powerwalls to show state officials that these resources were technologically capable of providing value to the grid.

The U.S. branch of British clean energy retailer Octopus Energy is also looking for customers in partnership with Enphase, the solar-microinverter manufacturer that sells residential batteries. Octopus customers with an Enphase battery can knock $40 off their monthly power bill by letting Octopus use the battery for wholesale market activities, CEO Michael Lee told Canary Media.

A newer distributed-energy startup, David Energy, offers commercial electricity and recently launched residential retail service in Texas at a “friends and family” rate, said CEO James McGinniss. Over the next several months, David Energy will roll out features to control customer devices so they can participate in its VPP.

McGinniss believes the state's VPP pilot program "will advance the [distributed-energy] market in a lot of ways." The grid-services payments will add more firm revenue on top of what retailers can save by shifting customer energy consumption away from times when the cost of power is high, he added, further enhancing the rewards for investing in controllable energy devices.

Solar-storage company Sunrun participated in creating the policy. When Texas regulators approved the VPP, Amy Heart, Sunrun's vice president of public policy, posted on LinkedIn that it offers a model other states should follow. “Other states facing supply capacity constraints, high energy prices, and increased outages can, and should, replicate this model in developing a [distributed-energy-resource] solution through quick, effective collaboration with clear goals in mind,” Heart wrote.

But currently, it’s unclear how Sunrun, the largest rooftop solar installer in the country, plans to participate. The company declined to comment on whether it would enter the retail business or connect its solar-battery customers with existing retailers.

The first step for companies to participate in the VPP pilot program is to sign up retail customers who have the right kinds of devices. Notably, the validation procedures with ERCOT will take some time, so meaningful VPP participation in the markets is likely still a few weeks if not months away.

Once those households or businesses are onboarded, it’s up to the companies to figure out when and how to bid into the wholesale markets to make the most of the opportunity.

Octopus Energy, for instance, will have access to operate participants’ batteries at any time, Lee said. But the hours when it makes sense to bid are likely to change from day to day, based on fluctuations in ERCOT’s markets. The ancillary-services market really “pops” about 30 to 50 days a year, he said.

“We have to predict what's more valuable for the broader grid: use the battery when prices are expensive for energy, or high-value for ancillary-services revenue?” Lee said. “The customer’s interest is also our interest.”

What he means is that, as the retailer, Octopus has to buy the power to serve its customers around the clock. If it can use batteries to avoid expensive energy purchases, that’s beneficial. But if the ancillary-services market is running hot, focusing on that could save even more money.

As the VPP pilot gets rolling, the participating distributed-energy companies will be playing by market rules largely written for legacy power plants. That could make for some awkward mechanics in practice, but Lee said it’s important to push through.

“We have to show to the broader stakeholders that these [distributed energy resources] are such an amazing and low-cost force to take cost out of the system for everybody,” he said.