Virtual Power Plants

In a world where a significant portion of our energy resources are derived from renewable power generation, wide-scale distributed storage makes integrating intermittent resources possible at scale. With a blanket of storage systems covering the power grid, operators can store electrons to ensure the balance of the system (additionally, with the introduction of bidirectional EVs, batteries can move electrons through space, time, and location). Batteries are energy assets with superpowers: they can both store excess energy during times of abundant resources or dispatch energy during extreme weather events or scarcity. Batteries allow us to align the demand curve with the supply curve instantaneously.

Additionally, distributed energy storage reduces the need for expensive expanded transmission and distribution infrastructure, reducing the total cost of an upgraded power grid. Vibrant Clean Energy, a renewable energy consultancy, estimates ~$500 billion can be saved by 2050 in the upgrade to a fully decarbonized grid through the flexibility distributed energy resources provide to the grid.

Home batteries are experiencing rapid growth, despite the fact that owners currently receive little economic benefit outside of increased resiliency of their home power supply. According to Berkeley Lab, residential battery assets were installed in 8.1% of residential solar installations in 2020; as net metering policies begin to be scaled back (as is currently occurring in California), these attachment rates will significantly increase. Wood Mackenzie forecasts battery deployments in 2021 to be ~3.5x that of 2020, with annual deployments continuing to increase at a ~25% CAGR through 2026.

The aggregate power of these assets is already meaningful. IHSMarkit estimates that the US will have 1 GWh of residential Behind the Meter batteries deployed by year-end 2022; assuming a standard 10 kWh battery, this equates to ~100,000 households with battery storage deployed. This represents a tremendous, predominantly unutilized set of assets that could greatly accelerate decarbonization.

Behind-the-meter stationary storage is not the only storage asset that will find itself increasingly common in residential and small business settings over the next decade. Electric vehicles are essentially large, rolling batteries. EV batteries have significantly more capacity than Behind the Meter stationary storage; a Tesla Model S has a 100 kWh battery, compared to 13.5 kWh for a Tesla Powerwall. EVs, with the proper battery design and charging infrastructure, have a capability known as bi-directional charging which enables EVs to discharge electrons from their batteries back to a home or the grid. The Ford F-150 Lightning (with 200,000 pre-orders, representing between 19.6 – 26.2 GWh of capacity) has made bi-directional charging a highly demanded feature in EVs, and will very quickly become industry standard.

The high growth rate in battery deployments is accelerated by substantial reductions in battery costs over the past eight years. R&D and the tailwinds from the Inflation Reduction Act continue to drive down the cost of batteries for consumers, and new battery chemistries are further increasing the density and usefulness of energy storage.

Controllable Load Resources

While energy storage is the highest-value grid asset due to its ability to move electrons through time with granular control, all dispatchable assets connected to significant load have value in the new system.

Dispatchable assets, or controllable load resources, are smart devices that control a specific load. They can include a smart thermostat, electric hot water heater, pool pump, heat pump, or any device attached to a large load, where a remote dispatch can result in the temporary curtailment of that load.

These devices do not store and release energy in the sense that batteries do. Instead, when dispatched, these devices temporarily curtail or modify their energy consumption. This temporary reduction in energy consumption results in a small change to the typical energy profile of that home or building. This flexibility helps improve the operation of the energy system in a similar fashion to energy storage.

Think about electrons flowing through wires like water flowing through a pipe. We cannot control flowing water- it simply follows available paths. Electricity is similar. When a controllable load resource like a smart thermostat is dispatched, it is equivalent to a faucet turning off. This allows the electrons that would be consumed to flow elsewhere in the system. At times of peak grid stress, this level of flexibility is critical to ensuring the system remains in balance.

Virtual Power Plants

Virtual power plants (VPPs) are networks of batteries and controllable load resources orchestrated together to provide load curtailment or supply injection to the grid, similar to traditional centralized power plants. Virtual power plants are coordinated through software known as a Distributed Energy Resource Management System, or DERMS, to intelligently identify, bid, and clear assets on the network into the power grid. The virtual power plant is able to generate revenue in the market, just like a traditional power plant.

Virtual power plants are community energy networks. They are comprised of individuals in a community pooling their resources together to benefit the broader energy system.

By incentivizing the deployment of energy monitors and connection of DERs, React is creating the data, connectivity, and orchestration layer to facilitate wide-scale VPP participation.

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