Home Energy Devices Hold Untapped Potential for Strained Grids

This summer, as a historic heat wave strained Texas’ electrical grid and hiked power prices, Scott Stambush’s electricity bill went negative.

His four Tesla PowerWall battery chargers and 48 rooftop solar panels supplied the grid during times of peak demand, earning him revenue that amounted to a $649.71 credit on his monthly bill ending Sept. 12. The Sugar Land, Texas, resident said he wasn’t motivated by environmental causes. He just wanted to keep his lights on, and saving money was an added perk.

“I don’t think much about climate change and all that,” Stambush said. “I’m big on defending my home and defending my country, and energy independence does both.”

Those eye-popping savings and the potential grid reliability benefits are at the center of a debate over consumer-owned energy devices. Stambush was part of a pilot program in Texas supported by the Energy Department to test out virtual power plants—the bundling of hundreds or thousands of connected, controllable devices such as water heaters, thermostats, refrigerators, electric vehicles, and residential batteries into something matching the scale of a power plant.

The department sees a path to roughly tripling the capacity of virtual power plants to 80-160 gigawatts by 2030, which could save about $10 billion a year in grid costs, the DOE found in a liftoff report published last month.

That’s enough capacity to meet about 10% to 20% of peak electric demand, making the grid more flexible and responsive to prevent outages and spiking power prices, and lower emissions. Two-thirds of fossil fuel plants that kick on during peak demand are located near communities with a higher percentage of low-income households than national average, the DOE found.

Illustration: Jonathan Hurtarte/Bloomberg Law

Utilities’ Concerns

Electric utilities that operate the distribution grid point out that consumer devices are not real power plants as they’ve always known them.

Utilities have long pushed back on aggressive demand response programs that incentivize customers to curtail usage during peak times of peak demand. They’ve argued rooftop solar gives preferential treatment and incentives to owners, while the rest of the customer base pays disproportionately more to fund maintenance of transmission wires and poles.

Virtual power plants take that challenge to a new level. Utilities need much more visibility into how consumer devices operate, said Emily Fisher, executive vice president of clean energy and general counsel for the Edison Electric Institute, a trade association representing investor-owned utilities.

Today, grid operators send signals when more or less power is needed, and power plants are held accountable for responding to those requests, Fisher said.

“They want us to integrate VPPs into utility planning, but how can I do that if I’m not confident that they’ll behave the way I need them to?” Fisher said. “If you want to get treated like a power plant, then you have to act like one.”

Fisher said she doesn’t disagree with the DOE’s finding that the devices can be useful to minimize near-term investments in new transmission lines and offset the need to operate higher-emitting power plants at peak times. “But I find the report to be very glib about the number of distribution system investments that would be required to really reap all these benefits,” she said.

Power Market Competition

Utilities’ concerns about transparency and control of consumer devices are valid, said Jigar Shah, director of the Loan Programs Office. The software connecting the device needs to improve, and “that work is ongoing,” he said.

In 2020, the Federal Energy Regulatory Commission issued a rule requiring grid operators to allow virtual power plants to compete in the wholesale power markets. Some advocates think utilities and state regulators are resisting the spirit of that rule and dragging their feet.

Last week, Tesla told FERC the country’s largest grid operator, PJM Interconnection, intends to implement market rules that block its products from participating in its wholesale market, which spans 13 Eastern states and the District of Columbia.

“Erecting unnecessary roadblocks up front,” Tesla wrote, “will hinder, if not completely handicap, the development of DER aggregations of residential and small commercial customers.” Distributed energy resources (DER) refers to consumers’ smaller generation units such as battery storage and rooftop solar.

In April, the department announced a conditional commitment for an up to $3 billion partial loan guarantee for Sunnova Energy Corp. to expand rooftop solar, battery storage, and virtual power plant-ready software. Sunnova will focus on disadvantaged communities and homeowners with lower credit ratings, with the goal of providing loans for clean energy systems for approximately 75,000 to 115,000 homeowners.

The loan office has an additional $12 billion in virtual power plant applications, Shah said. Some have come from utilities, while others have come in from aggregators and equipment providers, he said.

Agency Efforts

The Energy Department has 25 programs that support virtual power plants, such as funding to implement building codes, demonstrate virtual power plant technology, and convene state regulators and independent researchers. In 2021, the DOE awarded $61 million to 10 projects that integrate buildings with distributed energy resources.

The DOE also supported a fellow to help Texas regulators and its power grid operator, ERCOT, launch the virtual power plant pilot program that aggregated Stambush’s Tesla Electric solar panels and batteries with other customers.

“When we talk to electric utilities across the country, they are seeing unprecedented amounts of electric load growth,” Shah said. “They now recognize that they need a suite of tools necessary to meet some of the near-term challenges, and virtual power plants are at the top of their list.”

The consumer devices and technology to link them are proven to work, said Michael Smith, CEO of CPower Energy Management, a Baltimore-based aggregator of distributed energy resources for the commercial and industrial sector.

The company is managing 6.3 gigawatts—roughly the capacity of six nuclear reactors—across 20,000 customer sites, the most capacity under management of any US firm. Smith said CPower deployed about 50 gigawatt-hours worth of consumer energy resources to support the regional grid during Winter Storm Elliott, a cold-weather blast that hit the Eastern US in December 2022.

“We’ve proven, as an industry, that it will show up when you need it to show up, and it is beneficial,” Smith said. “Utilities are typically kind of slow-moving, and that’s actually a good thing in a lot of cases. This is a case where we think we’ve spent the time and resources to get utilities really comfortable with this.”

The debate is only going to heat up as technology improves and extreme weather hits the grid.

During Winter Storm Uri, which knocked out power to Texas in February 2021, Stambush stayed warm by huddling in his Tesla with his wife and teenage daughter and binge-watching Netflix.

“We were the only house in the neighborhood with power,” he said.