Transcript: Virtual Power Plants for a Climate-Safe Electricity Grid (CA Climate Policy Summit 2024)

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Kurt Johnson (00:00:00):
The next two sessions are going to go a little bit more into detail on a couple of specific solutions that are consistent with the grid for the future revolution and the opportunity to vastly increase the amount of clean distributed energy. We are using our first panel starting now on virtual power plants. If you still want to continue your conversation, if you could please move outside. I’m going to start naming names in a second. Okay. Moderating our virtual power plant session is Avery McAvoy. She is a senior associate with Rocky Mountain Institute, and she manages their virtual power plant partnership program. Yes. So without further ado, oh, I want to do a shout out of appreciation and thanks to MCE, which is the sponsor of this particular breakout session. Thank you. MCE, I am an MCE customer and a happy one. So thank you. MCE, take it away.

Avery McAvoy (00:01:06):
All right, thanks, Kurt. All right. Hi everyone. As Kurt mentioned, I’m Avery McAvoy. I’m a senior associate at RMI, formerly Rocky Mountain Institute, rebrand and I help run our virtual power plant partnership. So today’s panel is very exciting. I think about VPPs every day. I’m a California native. I’ve lived in California my whole life. I’ve lived in the Bay Area, I’ve lived in SoCal. I moved to Truckee, so I’ve been sampling all the different IOUs and CCAs for a while now, and I’m also a renter, so I care a lot about how to engage with my energy, but also feel sometimes powerless. So I’m excited to talk about this today. I’ll give a brief introduction, just some context setting, because virtual power plant is a term that is thrown around a lot, and oftentimes people aren’t necessarily talking about the same thing. So at RMI, we define A VPP as aggregations of grid, integrated distributed energy resources that can balance electrical loads and provide utility scale and utility grade grid services.

So we have adopted the Department of Energy’s definition. It is intentionally broad in order to encapsulate the full suite of solutions that a virtual power plant can be made up of. So in terms of the technologies that go into virtual power plants, you can think of electric vehicles, batteries, solar smart thermostats, plug loads, all of those controllable loads and devices that in aggregate can provide grid services that are reliable, cost effective, and can decarbonize the grid. So why are we talking about virtual power plants today? It’s a hugely hot topic. I was actually listening to the Energy Gang podcast on my drive down here from Truckee this morning, and they were talking about the increased loads that the grid is facing as a result of the amount of data centers that we’re building out and the use of ai, and they were citing virtual power plants as a potential solution.

So listen to that episode. If you haven’t. I’m not sponsored, but it was great to listen to that and hear it in a common podcast that a lot of people listen to. So virtual power plants, I like to think of them as an integrated repackaging of concepts that you’re familiar with. So I have a lot of conversations with regulators and utilities, and they’re like, convince me that virtual power plants aren’t just energy efficiency and demand response. And I say it’s yes and all of the other technologies that can help support that, but it is the supply side and the demand side. So that’s something that’s near and dear to rmis. Heart demand side first and then supply side. So that is VPPs are familiar. You are used to them. They’re just a repackaging of these concepts that have been around and proven for many years.

So the reason why we want to talk about virtual power plants today is because of their humongous potential. So the Department of Energy had a report, the commercial liftoff for VPPs that was published last September, and they said that there could be 80 to 160 gigawatts of potential for VPPs by 2030. Now, most people in here know a gigawatts is about the size of a nuclear plant, so huge amounts of potential. And the Brattle Group estimated that virtual power plants can save about 15 to 35 billion in capacity investment savings by 2030. So lots of potential. We want to untap it, and we’re going to hear from these panelists today on how to do so. My first question for introductions from everyone is tell us about yourself. Tell us about your organization’s role in the virtual power plant space, how VPPs show up in your day job and how you’re thinking about VPPs in California specifically. So I’ll start with Peter.

Peter Asmus (00:04:44):
Yes. So I don’t know, should we change this? There we go. Well, I’m with a company that just until recently was called Auto Grid. We were just acquired by a company called Uplight, and what’s common between those companies is the largest shareholder. Well, we were acquired by Schneider Electric Auto Grid a few years ago and now acquired by Uplight, which Schneider Electric is the largest shareholder. So I’m actually just learning about Uplight. This is the first week I have an Uplight email and I’m learning about all of their IT infrastructure. But here’s some stats up here. I would say, actually, I’ll talk a little more about Auto Grid. We are a global company. We have something like, well, it says here, 8.4 gigawatts of what we could call flexible capacity, which is another term that people often use for VPPs. My title is Director of Strategic Marketing, but what I really do is provide content.

So I host a podcast of which Avery has been on. There’s two parts, it’s up on the website. I sometimes host webinars. I do a lot of writing. I’ve been writing about energy for 38 years or something like that. And I actually started with VPPs back in 2011 when I did my first report looking atpps as an analyst. And so I’ve been following VPP since that time. And what we do, I said we’re a global company, but we are active in California. We work with a lot of CCAs, including Sonoma Clean Power, which is my local CCA as well as CPA and investor owned utilities and other sort of providers. But we also work with deregulated entities, including energy service as providers and large asset owners. So I’ll stop there and pass it on.

Raghav Murali (00:06:47):
Alright, thanks Peter. Hi everyone. I’m Raghav Murali. I am the head of policy and government affairs for Powerflex. Maybe I’ll Thank you. Give me a moment. There we go. So powerflex is an affiliate of EDF renewables. We’re headquartered in San Diego, and our focus is onsite generation, particularly in the commercial and industrial space. So that has kind of a broad application. It’s the Amazons and Walmart, it’s the other companies you think of when you think of CI. But it’s also public sector entities, city of Palo, Alto County of la. It’s airports like we do SFO, San Diego Airport, LAX. It’s healthcare facilities like most of Kaiser facilities throughout the state of California, mus, which is multi-unit dwellings, apartment buildings. So we really run the gamut. And at Powerflex, we’re focused on CI solar storage and EV charging. So all of the technology stacks that Avery mentioned, say smart thermostats.

And so grid services and virtual power plant programs are really important to us, and I’m proud to say that we’ve helped to shape the biggest one in California, which is the CEC’s Demand side grid support or DSGS program. That’s a $300 million program that just got through its first season this past year, 2023. And Powerflex actually had the most enrolled capacity in that program, which was 3.2 megawatts, which was just six sites, believe it or not. But when you’re dealing with the San Diego Zoo and places like that, you can enroll a tremendous amount of capacity with relatively little overhead. And we also participate in the ELRP or Emergency Load Reduction program through the CPUC. But beyond just participating, participating customers in these programs, I try to sort of proselytize the best way to actually navigate these programs and create programs that’ll actually work. So this slide sort of details some of the sort of basic tenants that we try to roll out when we’re thinking of grid services and virtual power plant programs.

I’ll be really quick here, but first foremost is we think programs should be simple and streamlined. So I try to push the eight and a half by 11 principle. In other words, if the program’s so complicated, it can’t fit in a piece of paper, we’re not going to be able to sell it, and customers aren’t going to be able to understand what we’re doing with their assets. We also want to streamline administrative complexity. So if a program has different rules across different IOU or CCA service territories with multiple different program administrators, that too can be particularly difficult to navigate. For those of you in California who have dealt with the CPCs S ship program, which is the state battery storage incentive, it’s a good example of kind of how you can create a Frankenstein that started off with good intentions and becomes kind of a mess.

We try to push for upfront incentives paid with pay for performance programs that actually pay customers for participating in grid services. And really importantly, we push for stackable incentives too. I think in California we’ve gotten to the point we’re really scared of improving the value proposition for customers. And I think we need to kind of get over that and realize that we as speakers throughout the day have been saying, are really behind on meeting our clean energy goals, and we need to make it easy for customers to be able to adopt storage and EV charging. And so make sure that if you’re creating a virtual power plant program, the customers are also going to be able to participate in a time of use rate and benefit from that, that there’s going to be an upfront incentive that they can take advantage of as well. And California is really kind of, to be blunt, fallen down on this.

There isn’t really an upfront storage incentive today in California, certainly not for the general market. And it’s really unfortunate because right now it’s administratively extremely burdensome. We also want to push for enabling technology by having measurement directly the device inverter rather than employing these antiquated baselines that a lot of demand wristbands programs that go back to the eighties and nineties still use, which really degrades the value proposition of the assets. And finally, we want to push for programs that allow for aggregation. Like I was saying earlier, powerflex was able to aggregate six sites and enroll 3.2 megawatts of capacity into California’s program. So that type of streamlined approach to us is really valuable. So with that, I’ll pass.

Alexandra McGee (00:11:23):
Great. Hello. Good afternoon everyone. Thank you for being here. Why am I here? I think I wanted to give a shout out to The Climate Center actually, the reason there’s a lot of community choice aggregators in the room right now, sister agencies, I saw you over there. I see you over here is because of local advocates making CCAs possible. So I just wanted to take a moment. The whole only reason I’m here is because of a whole slew of advocates who I know by name and I’m really grateful you’re here who fought to allow for the community aggregation model to pass through multiple barriers. We’ve all got scars from those early days, and so I just wanted to be grateful for you. That’s the reason I’m here. Okay, thank you. Thank you for being here.

So my role on this panel today is to represent the public perspective, actually. Thank you. Thanks, Avery. So for those who are a little less familiar, just a quick refresher. Community choice aggregation programs are public agencies, technically joint powers authorities, because I know we have a lot of wonky people in the room. jpa, these CCAs are, we have boards of directors that are made up by public officials. So here’s some of our public officials elected by the public to direct the revenue streams that the CCA benefits from. So in MCE service area, we have representatives from Marin, Napa, Contra Costa and Solano County. These are all electives that are chosen by the people and then get put onto the board and they set our rates. All the board meetings are open to the public. You can come on by influence, could public comment to the rate setting process.

But what’s very important for the VPP conversation is that the board also allows for various programs to be funded with the revenue streams generated by our business. Those programs are all the various pieces that Avery mentioned are being woven together to create a VPP. These are things that people are familiar with. He pump water heaters, storage EV programs, all of these things. 10 years of programs, MCE has been out in the community installing equipment, and now we have the opportunity to weave it all together into a unified package that we’re calling BPP. So representing kind of local governance that reinvestment in programs. I think Crystal from the former panel really emphasized the need to identify opportunities where people can have power. This is a sort of public power people power and driving towards decarbonization. So for the VPP, he doesn’t know I’m going to do this, but Richard is here in the front row.

Can I have you stand up? Just say hello. I just want to embarrass him. That’s Richard everyone. Thank you, Richard, for your role in the VPP that I’m about to describe. So Richard is with Z-N-E-A-Z-N-E-A, applied for a CEC grant. So if there’s any CEC people in the room, no. Okay. Well, thank you. Thank you to the CEC. We have a role in developing A VPP in the city of Richmond. I’ll talk about the environmental and the social benefits of that in the later slide, but essentially starting a VPP in one of our most disadvantaged communities that have older housing stock that deal with air quality emissions concerns that are unique to the region and making sure that low-income customers are benefiting from this technology, that it’s not just those who are the most affluent who can

Avery McAvoy (00:14:51):
Benefit from this VPP development. I’ll hand it back to you, Avery. Awesome, thanks folks for those introductions, helping orient us to how you attack this problem. So I’m going to do a specific question for each person and then we’ll go to more down the line and then we’ll be sure to leave time for audience. So Peter, I know Uplight and auto grid uphold customer experience above everything else as most other vendors and utilities and regulators, that’s what we all have in common is the customer experience. So bpps are nothing if customers can’t adopt these technologies and if there’s nothing for them to enroll them into. So can you speak to how uplight prioritizes the customer experience, why that’s important, and then some best practices that others should adopt?

Peter Asmus (00:15:39):
Sure. I think I’m going to start with a very short with personal story. So I moved into a new home a couple years ago and wanted to install solar and storage and become part of a VPP. I live in Sonoma Clean Powers service territory. It took me over a year and a half to get the solar battery system installed. One, I won’t name the solar vendor, but they were clueless about local regulations. I had an HOA who was worried about what the battery would look like, wanted the battery inside the garage. The solar company wanted it outside of the garage. I had to petition Sonoma County permitting officials. There was the deadline for the net metering where I was going to lose out on the lucrative thing. And so I actually wrote and complained and cajoled and finally got the system installed. But in the meantime, the vendor I thought could be part of the VPP with a company I work for.

Their partnership fell apart. And so I never became part of the VPP. So this is not what we want to have happen in California. If someone like me who’s in the energy industry, it takes that long, how are we ever going to get there? But what Uplight has done, Uplight specializes in what they call personalizing the digital experience to enroll in utility programs. So like you think of the virtual power plant outward facing, it’s virtualization of energy. What Uplight wants to do is do that in the enrollment process, help you buy the DERs that make sense for you and enroll in the utility programs, but not having to go through each program. It’ll personalize the offer to you. So for example, they like to use the stats, 78% of utilities believe they are, but only 7% of customers see theirs utilities as customer-centric. So obviously there’s a disconnect there.

So with Uplight, you can enroll in renewable programs, energy saving programs, EV programs, all through click of a button and all with just one sort of enrollment process. So that’s kind of what Uplight does. Like I said, uplight kind of new to them, but there is an example where one program in Indiana, thanks to Uplight, saw a 26% increase in autopay enrollment and a 67% increase in green energy program enrollment. So I think the idea is, I like to call ’em prosumers. That’s the word we like to use. They are the key to these virtual power plants. You have to make it much easier for people to enroll in these programs. We heard on the earlier panel, this is all new. If it’s too complicated, it’ll never get done. So that’s basically what Uplight tries to do. Sorry.

Avery McAvoy (00:18:44):
Thank you. So you mentioned the demand side grid support program, and because we’re focused in California today, I’d love to get a little bit deeper into that. It has been hailed as a great example of a VPP program, grid service program that was stood up extremely quickly, and I think that’s just kind of a rarity in general in the energy industry, something that stood up very quickly. So I want to hear more about why it was able to scale up so quickly and why that implementation was enabled and how other states that maybe are looking at extreme grid stress can model it after the DSGS program

Raghav Murali (00:19:31):
To be totally straightforward. The reason it was able to move so quickly is because we went through the CEC and not the CPUC. So not to pile on to this sort of CPUC slug fest today, but I guess I will. The CEC was extremely thoughtful in how they approached this program. In terms of stakeholder engagement, we worked through a number of trade associations, met with them numerous times directly, which frankly would’ve been difficult at the CPUC based on my experience. And if you did meet with them, it was sort of sometimes it can feel like a check the box meeting, not with the CEC. They really wanted to craft a program that was going to be beneficial, effective, and rapid. And I think they’ve done that. A lot of the tenants that I laid out in the earlier discussion really are embodied in the D SGS program.

It’s 300 million budget, and I think it’s flexible. It doesn’t incorporate any type of antiquated baselines, which is great. More recently where we were extremely heartened to see that they included bi-directional EV charging or V two X into this season, which is incredible because we met with the CEC, gosh six months ago, and I brought it up to them and I said, you should really consider doing this. And they said, commissioner Monaghan Al already talked to us about it. We were totally on board. Why don’t you guys give us a proposal? So we worked with another trade association, VGIC to develop a proposal and submitted it to them. Within two months, they had held a workshop and said, we’re going to adopt this not for 2025, but for the 2024 season, which is incredible. I mean, that’s what regulatory agencies should be all about. They moved ahead of where the technology in the market actually is, which is great.

I mean, it’s not all sunshine and lollipops though. I think we still have issues with the program. A, it’s still kind of a pilot program, which for those of us who are developers, it’s hard to sell a pilot program because we’re asking companies to dedicate a significant amount of resources and make multi-year commitments for a program that in two or three years might be exhausted. And so our goal is to make that program permanent, which is really important. And then there’s also still some institutional confusion between another program in California, which is the ELRP program. And I really don’t think the CEC and the CPC have necessarily reckoned with how those two programs interplay with one another. So they force developers like Powerflex and even worse end use customers to sort of run the modeling themselves and see which program do I want to participate in?

And like I said in my earlier discussion, we really want to remove that from the equation. We don’t want to force customers to say, well, there’s this one demand response program and then there’s this other grid services program. It should be simple and straightforward. They should know what their value proposition is, they should be able to easily enroll. And then I guess the final thing I’ll say that makes DSGS still somewhat imperfect is, like I said, there isn’t a storage incentive to pair with it. And the number one thing you can do to build virtual power plants is to actually bolster storage adoption. And I think more currently EV charging adoption as well. But you heard Aaron and others in the last panel talk about the impact that the net billing tariff decision has had 17,000 lost jobs in our solar industry, 87% reduction in solar demand, 50% reduction in storage demand prior to MBT, which is so counterintuitive if you think about it, the storage adoption rate’s gone up, but storage writ large has gone down.

And so it’s been really, really difficult. And yet one year out from that decision, we still don’t have a dependable storage incentive to actually transition to market. And so that’s the real impediment to programs like DSGS. That being said, there are other states, Colorado, Maryland, New Jersey, New York, just to name a handful off the top of my head, who are looking to push forward programs like DSGS. They’re looking to pair them with upfront incentives. And so yeah, we’re out there trying to proselytize the value of virtual power plants and to do it in the right way in these jurisdictions.

Avery McAvoy (00:23:47):
Cool. Just checking. Thank you, raha. So Alexander, this question is for you. So you mentioned the pilot in Richmond, and I think it’s an exciting one because as I’ve been working on virtual power plants for about a year and a half, the equity and affordability problem is not solved. I ask it at basically every industry event I go to, and people have a really hard time accessing the communities that can benefit from the most because virtual power plants can oftentimes require upfront investment in expensive technologies that has, it’s the same cost shift problem that happened with solar. So we want to make sure that doesn’t happen again. So for the Richmond VPP pilot, Richmond has 37% of its residents enrolled in the care program, which is the California alternate rates for energy, and that’s 12% higher than the state average. They also rank 99th percentile for asthma and CalEnviroScreen. So can you share more about the pilot and how it will deliver cost savings and environmental benefits to disadvantaged communities?

Alexandra McGee (00:24:47):
Certainly, and it’s a multi-prong answer. I think that what the VPPs are attempting to do are to weave together existing resources. So that could be existing infrastructure, it could be existing financial resources, and it can be very creative. So what I’ll describe to you, I really hope inspires others in the room because there are unique opportunities here, especially for disadvantaged communities, and those identified by Calen virus screen is disadvantaged. So some of the cost savings for you mentioned you’re a renter as well, making sure that renters are able to benefit from these investments, that it’s not just tied up with home ownership and the tax credits associated with home ownership. Instead, you can lower your energy bills by the daily load shifting, right? You’re just shifting yourself out of peak hours when it’s more expensive. That’s one way. The second thing is that this VPP has a unique tariff for CCAs in the room.

We can write our own tariffs. So we wrote a tariff. It’s a value sharing tariff that essentially says we want to pay the customer for the benefits that they’re providing to the grid. They’re not just providing those grid benefits, they’re also providing settlement benefits for MCE, right? If their devices are acting in a way that allows for our settlement to be a flatter shape, less of that duck belly tummy tuck the duck, as I like to say, we’re just tummy tucking a little bit. There’s a market here then that provides value to MCE to the grid, and the customer should be the ultimate beneficiary from that. So the unique, this value sharing tariff essentially provides bill credits on the bill per device that’s installed. Each device has an anticipated value that it could provide just given how big or small it is, that value is estimated and then paid on the bill on a monthly basis.

So that customer not only is seeing savings, efficiency and also load shaping, but then they have that credit as well. All of those have a direct benefit for the customer. You could be a homeowner or a renter and benefit from all of those things. There’s also the avoided costs for mce. If, like I said, if we can shape the, we can alter the load shape, then we have the opportunity to procure differently. If this aggregated VPP means that we can bid that into market, instead of having to go out to procure energy from a peaker plant, which we’ll talk about in a moment or some other resource, then these are decentralized pockets that we’re tapping on rather than one large industrial facility, which has additional benefits for the environment. Right? You’re doing very small. Small is beautiful. EF Schumacher, we’re doing a very thoughtful approach and the nerds laughed at that one.

These people, yeah, my stamp of approval small is beautiful. Go read it if you haven’t yet. So we can avoid transmission and distribution costs. Someone before said, if you can produce the energy where it’s needed, then you don’t have the transmission access cost. I know we have clean coalition, I saw you in the back, I assume you’re still with it. But yes, always advocating for reducing the tack. You obviously have fewer line losses if you can generate power for where it’s needed directly. So all those are ways to increase costs. What’s exciting about the VPP pilot in Richmond is that there’s another innovative financial model that we’re using called the Social impact Bond. The social impact bond is offered by the city and it’s leveraged by a local foundation. RCF connects to purchase and rehabilitate abandoned homes or homes that have fallen into blight. These homes are fully modernized into a state of the art home, a zero net carbon home.

It’s got all the gizmos and gadgets. It’s got solar, your EV charger, it’s got smart appliances. It’s nice. I would love it. And then these homes are sold at a discount to first time low income home buyers. And in this way we’re able to address some of the historical inequities of home ownership in a city that has been historically impacted by redlining and restricted deeds and covenants that have kept communities of color and families of color out of home ownership. So we can also address equity in that way with this social impact bond. And you mentioned environmental benefits as well. So any opportunity that we have to reduce reliance on natural gas peaker plants is an opportunity to reduce air contamination. Also, if you have a battery and you feel that you feel secure in your home to provide your own resiliency, you’re not as tempted by a diesel backup generator, which has direct air quality impacts as well. Air District is nodding at that, so that’s a good one too. Get rid of the bugs. And then also electrification. You’re increasing the indoor air quality, you’re improving indoor air quality, which has a significant impact, especially among community with an older housing stock.

Avery McAvoy (00:29:53):
Well, thank you. Anecdote. I got asthma at age 22 from living in LA and also RI post published a paper on how you have fans for a reason if you have natural gas stoves, right? It creates the indoor air pollution. So don’t worry, we can electrify the more those direct benefits can be delivered to households. So transitioning into general questions for all, it’s no secret that California energy bills have gotten very expensive. So I’m going to throw out a lot of statistics, but researching this, the amount of stats out there is actually insane. The California Environmental Justice Alliance did an analysis and since 2020, California residential energy bills have increased by 63% in PG&E’s territory, 52% in Southern California Edison’s territory, and 13% in San Diego Gas and Electric’s territory. So that is very material to Cisco’s earlier point, the affordability gap is going to kill us, and it’s the second highest cost that people have in their homes.

So there’s been a couple recent bill increases as well. In January, pg e increased their costs 13% or $34 a month for undergrounding the power lines in wildfire prone areas. A few weeks ago, the CPUC approved another rate increase of $5 per month for vegetation management. All things we need, I mean, my parents’ house was threatened by a wildfire, and I agree we need these things, but just stating they have a direct impact on rate payers. And then there’s another increase being floated for $10 a month for last year’s storm damage repairs. So that totals to about $50 a month, and that is a lot of money. And I don’t think it’s just because in my late twenties, and that sounds like a lot of money, I think that’s a lot of money for a lot of people. So how can VPPs help solve this affordability crisis that California residents are having? I guess that’s a question for everyone. So yeah, how can VPPs be part of that cost solution?

Peter Asmus (00:32:02):
Let’s see. I think I have a slide. Well, I was going to say, first of all, the irony of all these rate increases, if you want to look for a silver lining, I think it means more people will want to have their own energy systems and be more independent. So in a way, it’s going to encourage more people. Now what I forgot to mention is my solar and battery system. I paid no money upfront. So it is this whole model of energy as a service, which is sort of another trend here. I think what it also means is we’ve been hearing about microgrids panel’s on VPPs, but in my world, microgrids and VPPs are sort of a continuum. It’s all about DER. And then there’s even another buzzword derms. So at auto grid we call it grid to prosumer derms. So you start with enrollment with a prosumer, then you have the flexibility services of the VPP, and then you have the grid management to actually make sure the grid doesn’t fail.

So I think in one way, but the other way to look at it, and here’s a chart where we’re just saying VPPs, 60% of the money goes back to the community. This is sort of generic, but to your point about Richmond, but you can say you can benefit. You don’t even have to be a direct participant like we were talking about VPPs, displacing fossil fuel peaker plants, which tend to be in disadvantaged communities. I did a study that looked at Texas and New York and there was going to be enough DERs coming online within the next five years in both states where you could retire all fossil fuel peakers if they were aggregated into VPPs. I mean, those are kind of ballpark numbers. So I think that’s what I would say is as the grid becomes more expensive, ironically more people will want to get out and look for alternatives. They’re going to want to create microgrids, but then they’re also going to want to become part of vpp. So maybe that’s the silver lining in all of that.

Raghav Murali (00:34:10):
And I’ll just add in the last panel, there was a lot of discussion around sort of the utility business model and how it maybe misaligned with the growth of the DER market. One really, really important aspect of this that we haven’t covered yet is load management technologies. So if you’re dealing with solar and storage or EV charging, you’re dealing with power control systems, you’re dealing with automated load management technologies. I mean, at my company we have something called adaptive load management that we use to control and optimize EV load across dozens of EV chargers so that you can avoid distribution upgrades on both the customer side of the meter and the utility side of the meter. So in California here, there was a study in the high DER future proceeding that Commissioner Houk talked about earlier today commissioned by a research firm cavalla that said it’s going to cost us roughly 52 billion between now and 2035 to electrify our grid to essentially create a grid that can accommodate all the DERs that we need to have to achieve our goals.

So the public advocate’s office, to their credit, responded to that just a few months later with a study that said, well, wait a second. If you actually incorporate load management technologies, if you actually think about how we can control and optimize EV load and can control and optimize solar and storage load, which is essential to virtual power plants, you can cut that number in half. So that’s 26 billion between now and 2035. And that’s not money that’s going to go straight to the customer or to the developer. That $26 billion is going to be socialized across the entire rate base. And so that’s huge, huge savings born from conscientiously managing the load of these DERs. So that’s one. Two is we’ve talked about the net billing tariff and this sort of whole notion of a purported cost shift that underlined the CPCs effort to, in my opinion, swing the pendulum far too far in the opposite direction to be anti-solar. What we’re talking about here is essentially taking these DERs and socializing the benefits of them across the entire rate base so that during these critical peak periods, 40 9:00 PM particularly during May and October, particularly during wildfire season, it’s not just the DG customers that are benefiting from these assets. It’s the entire grid. It’s every rate payer, including low and moderate income folks, folks in disadvantaged communities, and that’s money that’s being saved by everybody. And so I think these are incredibly important and I think we need to reframe the conversation a little bit.

Alexandra McGee (00:37:05):
Thank you. Yeah, Avery, when you asked the question, I was really honed in on the wildfire bit. And for folks who have gone through a wildfire, it’s very scary. It leaves an emotional weight and there’s a lot of fear that lingers as a result. If you’ve ever evacuated from a wildfire, I’ve had to do it twice. So I feel like I can speak to this on personal experience, which is that when you therefore start to think about your vulnerability to that fire, some of the decisions you make could be fear-based. When you make a fear-based decision, you’re often trying to decide upon the thing that you’re most comfortable with. So when we talk about electrification and virtual power plants and you are trying to sell this model to people who might be traumatized by some of the natural disasters that we are experiencing, the consensus is going to go with what you know.

And in rural communities, what you know are diesel generators, there’s no interconnection queue, there’s no long wait period. There’s what you know and what your neighbors know, which are diesel generators. And so in my perspective and experience, anytime what one goes in, you’re exacerbating the climate crisis. Those are additional emissions that are being released and it’s a fuel, it’s a flammable fuel. You’re creating a more proximate source. And you hear these horror stories of people setting their own fires. They don’t know how to manage the generator. They keep it in an enclosed space in their garage, and that creates, it exacerbates the air quality impacts. And so I think that there is a lot to be done to educate in order to electrify. And that’s not just the consumer, that’s also the contractor base. Our contractor base has made their living on, sorry, not heat pump water heaters, natural gas water heaters, right? Convincing them to install a new model is difficult because it challenges what they’re used to. It’s additional technology. There’s additional training and that needs to be incentivized as well. So just education in order to allow for that. Electrification.

Avery McAvoy (00:39:24):
Thank you folks. Appreciate all the diverse perspectives to that answer. And I think something that we can all relate to living in California is this wildfire risk that necessarily doesn’t come up at every national conference that we go to, but it’s a very real risk that I think quite a few people in the audience have unfortunately experienced as well. So focusing a little bit more on VPP policy, it’s a hot topic right now in California, we’ve mentioned Senator Stern’s, Senate Bill 1305, that’s currently, I think it was amended today, and it directs the CPUC to open a proceeding to determine if there should be a procurement target for the purchase of capacity from virtual power plants. And if so, what that target should be. And this is a key confluence of multiple stakeholders. I think that’s something that we all deal with in our jobs.

There’s utility perspective, there’s the legislative perspective, there’s the regulatory perspective, but those are also all levers that you can pull to get virtual power plants done and scale them. But working across those stakeholders can be difficult when even working within one. Remember, these programs are made up of people and processes, and we know humans are imperfect. So it’s very much this person is working in this department that doesn’t talk to this other department. So how do we work through some of those barriers that these things are made up of humans and our processes? So thinking about this bill and the working across these different stakeholder lines, is this the way, should we have the legislature direct the regulator to direct utilities to do this? What are some best practices for working across the multiple stakeholders that need to cooperate to get VPPs done?

Peter Asmus (00:41:12):
Well, actually, I might have a slide on that somewhere about policy. Well, I think first of all, I think I’m excited. There’s an actual VPP bill. I think it would be the first in the country. California often is the first in the country. Doesn’t mean we always do it right, but if anyone remembers a deregulation way back in the Enron, the iCal, which passed unanimously, all Republicans and Democrats voted for it and it kind of exploded in our face. But not that that’s going to happen with the VPP bill, but I’m very excited about a VPP bill. One thing at, I was going to say auto grid, but I should say uplight in terms of what we have done for utilities. So a lot of utilities, as you can imagine, we’ve been doing a lot of utility bashing. But with VPPs, I think there’s still some skepticism out here.

So one thing Uplight now offers is what we call a turnkey VPP where we are saying you can buy, you need 30 megawatts. You can get that from a VPP vendor and we will do everything. We will sign up the customers, we will deliver the electricity exactly when you need it. We will do the measurement and performance, and we will even handle the incentive payments to all those prosumers that are out there. So that’s one way of dealing with that today is actually putting VPPs on the map for utilities. It’s just like in the old days, utilities ignored all solar. There was so little of it, they wouldn’t even accommodate it. Now you can’t do that. So one thing is about that, but a couple other things I wanted to bring up is also this idea of interoperability and open protocols. I think the old thinking of a lot of vendors is you want to lock in your customer to proprietary systems. Sounds like Apple maybe, or some other vendors like that. Well, I think in the VPP world, more people are starting saying, no, actually wouldn’t it be better if everybody’s devices could talk to everybody’s software and ideal world so that the customer isn’t What if the company goes under and you’ve got this contract? So I think another key thing is open protocols and then incorporating VPPs actually into utility plans. I think those are some things that, I mean it’s really DERs in general, but those DERs then are the seeds for future VPPs.

Raghav Murali (00:43:54):
VPP should theoretically be like a triple win. They should be a win for the customer because it’s an added value proposition for them. If the compensation structures are sufficient, it should be a win for developers like my company who can sell this to customers as a way to increase sales of renewable energy assets. And ultimately it should be a win for the grid. It should be a win for utilities. It should be a win for RTOs. It should be a win for those folks who don’t have distributed generation like I described earlier, because like I said, we’re taking these assets and we’re benefiting the entire rate base, but you can also really screwed up.

And so I do have my concerns that one pretty good way to do that right now at least is to say, Hey, CPUC, take a good hard look at this over the next six, nine months and let us know what you think for a lot of reasons that we’ve discussed today. And I fear that that’s where this bill is sort of per mutated to. So I mean, just to be somewhat cynical, I have my concerns about this. The state over the last four years has invested something like 500 plus million dollars into the creation of two massive virtual power plant programs. How about we dedicate our resources towards those programs or maybe choose one of those programs and ensure that those are made permanent and successful. Why would we then deputize the CPC to take a good hard look at this and issue a study?

The CPC issued a decision two weeks ago now on community solar. So Powerflex, my company happens to have the largest community solar project in America in Maryland, and the largest community solar project in the state of New York, which is sort of the basis for the proposal that was given to the CPC for a new California community solar program. After about a year of back and forth on that particular program, the CPC issued a decision to say, Hey, wait a second, we don’t want to do this. Let’s just go ahead and stick with the same IOU programs that by their own admission don’t work and haven’t at all for a decade. And better yet, why don’t we just say community solar potentially is illegal because it violates federal law. I mean, after a year of back and forth, their discrimination was that community solar might be illegal.

So now US advocates in the solar industry are saying, and you heard where we’re at from Aaron Weber Keel, the last panel, 8,000 megawatts of capacity potentially when we’re supposed to be 20,000 from distributed solar by 2030. We’re nowhere near it. And their decision is to say, community solar is illegal. So I say all that to say I don’t think it’s a good idea right now to vest the CPUC with the decision over what VPP should look like. There’s a whole host of ways that the way this can result, which has happened in Arizona, I think it’s happened a little bit in Utah and certain other jurisdictions potentially Washington, where due to derms restrictions, due to cybersecurity restrictions, due to restrictions around how you have to cycle your batteries, you essentially are seeding total ownership over your renewable energy asset. And we would never sell renewable energy assets to customers and then say now the IUs effectively own them. And that’s a dangerous and very insidious thing that could happen with these virtual power plant programs in the wrong hands. Sorry to be cynical, but that’s my concern today.

Alexandra McGee (00:47:32):
Well, I’ll provide some balance to the cynicism,

Which is that as ccca is the heart of why we exist, is to have the community decide what kind of energy they want to procure in their electricity supply. So we’re very protective of the autonomy that our agencies have participating in this space. So personally appreciate that rather than being a mandate out of the gate that the recent amendments have shifted it into a study bill, this particular bill, I do want to say that developing A VPP should be, like you say, a triple quadruple can top bottom line, but it’s really hard to actually make happen. And so the fewer challenges that we can put in the way the better, because what we want to do is create VPPs that are uniquely customized to each of our needs. I know Sonoma Clean Power is in the room over there, San Jose Clean Power is over there. We have very different constituencies. And so if we were to be approached with a cookie cutter option and say, Hey, you need to meet this kind of requirement for your VPP deployment, it would have to look very different if we’re going to serve our communities with these customized solutions that I think we’re prone to want to do.

Avery McAvoy (00:48:55):
Yeah, thank you. I think I was at Newark Winter Policy Summit a few weeks ago, and Neal from UPLIGHT had said VPPs that are unique to the customer’s risk profile. Right at VP three, the virtual power plant partnership, we try to write analyses and support regulatory engagement and legislative policies that can scale VPs in general, but it’s hard to standardize it when all the virtual power plant programs that currently exist today, every utility that wants to hire a vendor to put on the program is like, yeah, great, but also can you make it exactly custom to what we need? So trying to look forward, how can we standardize the different VPP programs maybe up to 80% and then the final 20% is customizable, dunno what the percentage units are, but it’s something that we’re trying to figure out is you’re trying to scale virtual power plants. You can’t just have them be all individualized. So that’s something that maybe the industry can work through. I want to make sure we have time for audience questions. So we’ll turn to the audience. What questions do you have for our panelists are burning VPP questions way in the left? We’ll get someone to jog to you. Just kidding. You can walk.

Speaker 6 (00:50:17):
Hey, thank you. Great panel. Thanks for all the great insights. So I was recently speaking to somebody who was very familiar with a DR 3.0 and had the idea that great support, they were a good supporter of realtime pricing, hourly dynamic pricing. They believed that as more and more devices become, you’re able to automate them. Eventually hourly pricing will replace the need for virtual power plants because customers will be able to directly tap in to differences in marginal cost and there won’t be the third party and the administrative costs. And they saw VPPs as more of a stop gap in between those things. I know there’s a lot of different thoughts on the advocacy of real-time rates, how are we’re going to get there, but I’m curious how you would respond to a perspective like that, and in particular, how you maintain the value proposition to customers such that they want to continue engaging, they want to continue you giving that demand flexibility since it is valuable and also could have some effect on their quality of life or the way that their appliances are working.

Peter Asmus (00:51:31):
I have one quick question. Was that Bruce Norman

Peter Asmus (00:51:37):
Yeah, he told me that the term VPP should be abolished and I went up to meet him in the Russian River at his home and we had an arm wrestling match. And I won’t tell you one, no, I don’t understand all of Bruce’s art. I mean he is in some ways an academic, just like when I did a report on nano grids about 10 years ago, he told me every car and every laptop was a nano grid. And I said, well, that’s great, but I’m doing a market research report that people want to pay money for. So if I size the nano grid market per your definition, it wouldn’t apply to a market. So I think in my view, dynamic pricing is key to making a VPP really make sense. So I’m not quite sure I follow what he’s saying. I guess it’s also, I once did a white paper for an Australian company and now I’m forgetting power ledger who believed in local energy markets, peer-to-peer energy trading, which is kind of what Bruce also likes to talk about, saying instead of A VPP in their view is still a centralized, even though it’s distributed, there’s like an ISO or a single entity kind of the traffic cop.

Whereas local energy markets, which was something that I think failed in Australia, the idea was maybe within VPPs you could have smaller subsets of just local people who would literally be able to trade peer to peer. So that’s all I’m going to say. I’m not going to say Bruce is right or wrong, but I just thought that was probably a Bruce Norman thing. But did anyone else,

Alexandra McGee (00:53:25):
Do you mind if I go got to meet this Bruce Guy? I think that there’s a lot of idealism in the question and that we have such basic problems to get to a place where we’re only responding to those kinds of market signals. Someone mentioned before, there’s an enormous lag for data transaction for load serving entities including CCAs. And so our customers, we can’t even have full transparency into what a customer load looks like from the smart meters that they have installed on their homes. Someone, your representative said, we paid for that data, why can’t we have access to it? And at that very basic level, we don’t currently have access to the data sufficient to be able to solely respond to the market signals. So I think that you’re probably describing an ideal situation. We’re just so far from where we could take action on it. But if there were to be some policy people in the room, which I think there might be focusing in on that data transparency would be a key to unlock a lot of the potential that we’ve talked about on this stage.

Raghav Murali (00:54:35):
And just one final point on that is, as I said earlier, we want to create a situation where we can stack incentives and value propositions for customers. So in that token, I think right now it’s really critical that we’re able to take advantage of cycling for time of use rates because that both benefits the customer in terms of being able to do some rate arbitrage. But it also improves, it does the tummy tuck on the duck curve, it improves the daily load shape of the grid, whereas you can sort of compound the benefit of the assets on top of the tummy tuck by also participating in these programs that benefit the grid during those most critical peak periods. So I do think that transactive pricing, dynamic pricing is a gold standard. We want to get to a place where it’s not just these sort of basic time of use rates. It’s more highly differentiated and dynamic, but we are a few years away. I think the CPUC and Commissioner Houk talked about that opened a proceeding last year called the expanding demand flexibility through rates proceeding, which does seek to create a host of dynamic and transactive pricing options based on the CEC’s Midas tool. But that’s like three, four years away still. And so I think we’re speaking very hypothetically if we’re trying to replace VPPs already with them.

Alexandra McGee (00:55:58):
Question over here.

Speaker 7 (00:56:03):
Hi. Thank you. I’m going back to a point on a previous slide about VPPs being compensated for t and D investment deferral. And one of the ways of doing that that seems to me to be potentially very valuable is increasing hosting capacity on circuits. We’re very aware of where is the hosting capacity, which circuits are congested, and it seems like one could operate a VPP at a circuit level and flatten the load profile on that circuit with operation of the batteries, et cetera, and then be able to increase the hosting capacity without having to actually build capacity. I’m wondering if you know of any examples where that’s being applied or if not, how do you see that that might get monetized? How would that value be conveyed, say from the distribution utility to the VPP operator so that it becomes a commercially viable option for the VPP?

Raghav Murali (00:57:12):
Well, in terms of load management technologies, like I talked about earlier, we’ve been pushing, and there’s bills actually actively moving right now in Maryland and Illinois and New York and New Jersey and Colorado that seek to require the utilities when they’re submitting their distribution resource plans to the public utility commissions to include consideration of load management technologies so that we can determine exactly what upgrades actually need to take place, not just those under sort of a worst case scenario basis. And then sort of on the other end of the spectrum, to allow for our flexible interconnection option wherein the customers can actually utilize the term of our various power control systems or automated load management technologies to determine what their capacity is at the time that the interconnect. Because right now, the way the utilities do it is they just aggregate the nameplate capacity of every inverter on your site.

What’s the worst case for your EVs? What is the worst case for your solar? What is the worst case for your storage? That’s the load that we think that you’re going to put on the grid. It’s perverse, right? And what do they do with that? And they use it to underwrite a check that gets rubber stamped by the commission for distribution upgrades. That’s the business model. That’s just the reality of the situation, but it’s not an accurate reflection of what the actual hosting capacity is and what upgrades actually need to take place. And so for me, that’s sort of a critical thing. We’re pushing for that within the high DER future proceeding because yeah, right now it’s completely divorced, I guess, from reality, right? They’re using this integrated capacity analysis and that’s got nothing to do with how much load’s actually being created on the grid.

Avery McAvoy (00:59:07):
Yeah, I think one thing I do want to advocate for too that’s involved with that is the term like integrated distribution system planning gets thrown around a lot with VPPs, but making sure you’re actually integrating that process where folks that work on the transmission grid are talking to folks that work on the distribution grid that are doing hosting capacity analysis to actually have that visibility into that part of the grid. Not everyone’s doing that, but we’ve seen a couple examples from a couple other countries that are hopefully good models. I know we’re at time, so I just wanted to end with, thank you so much to our panelists for attending the panel. You’re providing your perspective, and I’ll end with one byline that RMI Tweeted yesterday is keep calm and integrate VPPs.

Kurt Johnson (00:59:55):
So the single largest massive untapped VPP resource will be vehicles. So the next session, which is starting in 20 minutes, we’ll talk about that. So I think there’s goodies outside and we’ll reconvene here at four o’clock. So thank you everybody.