How Utah —yes, Utah— found itself at the cutting edge of the energy transition
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How Utah —yes, Utah— found itself at the cutting edge of the energy transition

Episode 58 of the Factor This! podcast features Blake Richetta, CEO of the American division of sonnen, a German battery manufacturer and provider of the virtual power plant software that makes Rocky Mountain Power's innovative virtual power plant tick. Subscribe wherever you get your podcasts.

On a quest to find the cutting edge of the energy transition, Utah is unlikely to be the first stop. It may not even make the itinerary.

A Republican governor and supermajority state legislature lead the state. Rocky Mountain Power, a historically conservative, vertically Integrated utility, supplies most of its electricity. What's more, the company is owned by Warren Buffet's Berkshire Hathaway, which is heavily invested in fossil fuels.

But the Beehive State has laid out an improbable blueprint for clean energy and resilience. Here, more than 3,000 home batteries are intelligently managed to serve seven critical grid functions. Every single day. And, no, it's not a pilot.

Rocky Mountain Power's battery grid management system is one of the most sophisticated virtual power plants in operation in the U.S. today, in a region not recognized for embracing distributed energy resources.

So, how did it happen? The story behind the unlikely partnership could hold the key to unlocking the potential of VPPs.

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What is a Virtual Power Plant (VPP)?

The question can elicit a scattershot of responses.

A virtual power plant's ability to satisfy multiple critical energy and grid infrastructure needs fuels ambiguity in its name. To add to the confusion, virtual power plants are, sometimes, not power plants at all.

Under the simplest definition, a virtual power plant, or VPP, involves the use and coordination of distributed energy resources — solar panels, batteries, thermostats, heat pumps, and so on —  to do something. What that something is differentiates one VPP from another. Nevertheless, linking these resources together, and intelligently operating them to serve the needs of the grid, could accelerate decarbonization, advocates say.

They also could result in significant cost savings. A study by Brattle Group found that incorporating virtual power plants into resource adequacy plans could save utilities billions of dollars in capacity investments.

The study compared the net cost of providing 400 MW of resource capacity from three sources: a natural gas peaker, a transmission-connected utility-scale battery, and a VPP composed of residential demand flexibility technologies. Brattle determined that a VPP leveraging commercially proven residential load flexibility technologies could perform as reliably as conventional resources. The net cost to the utility of providing resource adequacy from a VPP is roughly 40–60% of the cost of the alternative options, the authors said.

While the label may be imperfect, virtual power plants are poised to make a real impact. And they may be just the right prescription for an ailing electric grid.

The blueprint for intelligent Virtual Power Plants

Most VPPs in operation today serve a single function: emergency load reduction. A handful of days in the year, the utility can call upon a fleet of aggregated distributed energy resources to cut demand and/or inject energy during a peaking event to alleviate grid strain.

For example, Tesla's battery VPP in California delivered 16.5 MW to help carry Pacific Gas & Electric through an extreme heat event last summer. Through PG&E's pilot, customers receive $2/kWh during an event.

Rocky Mountain Power — which preferred the title of "Battery Grid Management System" over VPP — directly controls its fleet of batteries, as opposed to using a third-party distributed energy resource management system (DERMS). The program performs seven grid functions: non-wires alternative, demand response, capacity planning, energy, frequency response (regulation up), duck curve mitigation, and resiliency.

German battery manufacturer sonnen provided the VPP software, which integrated directly into Rocky Mountain Power's grid management platform. Blake Richetta, the CEO of sonnen's US subsidiary, said an eighth function — battery swarm grid charge — is in the works. The program utilizes both sonnen and SolarEdge batteries.

Richetta said he believes that Rocky Mountain Power's program is a blueprint for deploying VPPs at scale while adding societal value. While emergency load reduction is a valuable resource for utilities, limiting VPPs to this function only highlights the fragility of the grid.

"Paying people to use their battery only when it's an emergency is fine as duct tape," Richetta said on the Factor This! podcast from Renewable Energy World. "But to be frank, it's not a long-term solution. I think as an industry we should be asking for more than that."

Radical collaboration is needed

The Rocky Mountain Power success story is the product of unconventional, but necessary, collaboration. It involves utility, developer, business, and regulatory agendas that are often misaligned.

The story begins in Salt Lake City, where Dell Loy Hansen, the founder and CEO of the Wasatch Group, was moved to make a legacy-defining impact.

Hansen, who had already built a real estate conglomerate with billions of dollars of assets, was drawn to the idea of fully sustainable living. He was also concerned that the clean energy industry, in his opinion, largely catered to affluent communities.

The plan for Soleil Lofts was to build a completely off-grid community with solar on the roof and batteries in every apartment for low- and middle-class residents. But he would need the support of the utility, Rocky Mountain Power, and regulators.

The credibility of Hansen and Wasatch Group, named after a nearby mountain range, brought Rocky Mountain Power to the table. The utility wanted direct control over the batteries 24/7. Recognizing the value of the opportunity, Rocky Mountain Power’s Bill Comeau, who Richetta described as a purpose-driven utility executive and industry leader, worked closely with regulators and managed to skip the pilot stage with their full support, implementing the program throughout the service territory.

In less than a year, Wattsmart was approved and launched, and now features more than 3,000 participants and 35 MWh of battery capacity. Customers receive a one-time upfront payment of $400/kW under a 4-year commitment if they are buying a new solar array + a Wattsmart battery or batteries, and $650/kW under a 4-year commitment if they are adding a Wattsmart battery or batteries to an existing solar array, as well as an annual bill credit of $15/kW beginning in the second year.

A Soleil Lofts apartment unit with a sonnen battery. (Courtesy: sonnen)

Soleil Lofts became one of the first apartment communities of its kind in the world to outfit all of its apartment homes (600 in the case of Soleil) with 20 kWh of battery storage in the unit to be directly dispatched by the local utility as a single grid asset, performing genuine grid services on a daily basis, also known as a “VPP.” In total, the community boasts 5 MW of solar, 12.6 MWh of energy storage, and more than 150 electric vehicle chargers.

Maybe the most important piece, the program hasn't resulted in increased rates for Rocky Mountain Power customers, Richetta said.

"They just did it," Richetta said. "They did it in less time than we have seen one program approved for a pilot in other states."

The blueprint is clear, in Richetta's eyes. Broad VPP acceptance requires innovative utility executives, purpose-driven regulators, and an engaged business community.

And while the investor-owned, vertically integrated utility model is often the punching bag of the clean energy industry, Rocky Mountain Power's unified operation allowed it to nimbly and quickly evolve, he said.

Vertically integrated utilities across the country have taken notice. Several, including Arizona Public Service, Duke Energy, and Idaho Power, sent representatives to a summit hosted by Rocky Mountain Power to learn more about the program.

"Can the vertically integrated model have its pioneers? I think the answer is yes. Can the semi-deregulated wholesale/ISO market have pioneers? Clearly. Can the fully deregulated Texas model have pioneers? I think the answer is yes," Richetta said.