Unlocking Grid Flexibility with Virtual Power Plants (VPPs) and Managed Charging: Insights from a Discussion with EnergyHub’s Seth Frader-Thompson

In today’s rapidly evolving energy landscape, load flexibility is emerging as a critical tool. As intermittent renewable energy sources like solar and wind become an increasingly larger share of the generation mix, the traditional model of dispatching centralized power plants to meet energy demand is shifting and expanding to include more sophisticated integration of DERs and demand-side management.

Seth Frader-Thompson, President of SEPA member company EnergyHub, and I had the opportunity to record a live podcast together at RE+. We discussed the future of the energy grid, focusing on the potential of Virtual Power Plants (VPPs) and managed electric vehicle charging strategies. Our conversation shed light on how utilities are leveraging distributed energy resources (DERs) like EVs, smart thermostats, and batteries to optimize the grid for flexibility, efficiency, and reliability.

The Challenge and Opportunity of a Flexible Grid

As renewable energy sources take on a more significant share of electricity generation, the grid becomes more complex to manage. Unlike traditional thermal plants that can be dispatched on demand, solar and wind energy are intermittent, meaning that they generate electricity only when the sun shines or the wind blows. This can create a mismatch between when energy is generated and when it’s needed.

“Now you kind of have to schedule and flex demand to match when the power is available from wind or the sun,” explained Frader-Thompson. This situation introduces new operational challenges and creates opportunities for innovation in grid management.

One primary opportunity comes from the increased deployment of DERs, which are small-scale, decentralized power-generating or power-consuming devices such as solar panels, batteries, smart thermostats, electric heat pumps, and EVs. As these resources become more common, they present a new form of grid flexibility, enabling utilities to balance supply and demand more effectively.

Virtual Power Plants: An Adolescent Term for a Maturing Concept

The concept of a VPP is simple: By aggregating DERs like solar panels, batteries, and controllable loads like EVs, smart thermostats, and heat pumps, utilities can create an aggregated resource that mimics a traditional power plant, shifting demand when needed or providing power to the grid. The term “virtual power plant” is becoming increasingly popular, but Frader-Thompson noted that it’s still going through what he called an “adolescent phase.”

“A lot of people are talking about VPPs, but I think we’re still figuring out exactly what the term means,” Frader-Thompson said. “If you have a bunch of DERs that are aggregated and participating in an energy market, trading energy or providing capacity, it’s easy to call that a VPP. But if you have just a few EVs and batteries behind a transformer on the distribution grid, it might not make sense to call that a VPP.”

As utilities and technology providers continue to develop the concept, the definition of a VPP is likely to evolve. Today, the industry views VPPs as a means to aggregate resources, optimize energy usage, and balance supply and demand without having to build new power plants. In the future, the language and definitions around VPPs will likely become more precise as the use cases expand and technology evolves.

Managed Charging: Simple but Powerful

One key strategy for leveraging the flexibility of DERs is managed EV charging. By managing when and how EVs charge, utilities can shift demand to times when renewable energy is abundant or to reduce strain on the grid. This approach not only helps balance the grid but also provides economic benefits to EV owners.

Frader-Thompson emphasized the importance of keeping managed charging simple for consumers. “If I pull my EV into my driveway for the first time and something pops up saying, ‘Do you want to sign up for managed charging? You’ll get paid this much or you’ll save on your charging,’ that’s basically all I need to know,” he explained. “The pitch is simple: ‘We’re going to change the time you charge, but we promise your car will be ready by morning.’”

This simplicity is key to consumer engagement. While many consumers are becoming more energy literate—particularly those with solar panels, batteries, or EVs—the utilities still should present these programs in a straightforward manner to increase understanding and promote participation. Most people don’t need to understand the intricacies of the energy market or the grid; they just need to know how managed charging might benefit them.

Grid DERMS vs. Edge DERMS: The Backbone of Flexibility

Behind the scenes of managed charging and VPPs lie Distributed Energy Resource Management System (DERMS) platforms. DERMS allow utilities to monitor and control DERs, ensuring that they are dispatched in a way that meets grid needs.

However, as Frader-Thompson explained, there are two types of DERMS: grid DERMS and edge DERMS. A grid DERMS is the system utilities use to monitor the physical state of the grid, tracking the performance of transformers, feeders, and other infrastructure. An edge DERMS, on the other hand, focuses on the control of behind the meter resources at the “edge” of the grid—things like EVs, batteries, and smart thermostats.

“These two systems need to work together,” Frader-Thompson said. “The grid DERMS knows everything about the state of the grid and can identify where there are problems, while the edge DERMS takes that information and dispatches the DERs to solve those problems.”

These systems are in the early stages of integration, but the future of grid flexibility will depend on how well they can communicate and work together. As utilities continue experimenting with integrating grid and edge DERMS, we expect to see more mature and streamlined integration enabling large scale implementation of VPPs in the coming years.

The Future of Distribution-Level Optimization

One of the most exciting developments in the world of VPPs and DERs is the shift toward distribution-level optimization. Traditionally, grid management has focused on bulk generation and system-wide metrics. With increased deployment of DERs, there is a growing opportunity to optimize at the distribution level—managing specific feeders, transformers, and local grid assets.

SEPA recently released a report “The State of Managed Charging in 2024: The Next Iteration – Distribution Level Optimization,” in collaboration with EnergyHub, WeaveGrid, and Toyota North America, that explored distribution-level optimization for EV managed charging. As Frader-Thompson pointed out, utilities are just starting to explore the full potential of distribution-level flexibility. “We’re doing both bulk and distribution-level optimization today,” he said, “but we’re probably only getting credit for the bulk system optimization.”

The challenge lies in quantifying the value of distribution-level flexibility. Utilities have decades of experience with bulk system metrics, but they are still figuring out how to measure and monetize the benefits of localized grid optimization. “Most utilities don’t have a number that tells them what it’s worth today,” Frader-Thompson explained. “Once they get more comfortable with the idea, they’ll be able to put some numbers to it, but it’s going to take a lot of work.”

The Path Forward: Simplicity and Scalability

Simplicity and scalability will be key to success as utilities continue to explore the potential of VPPs, managed charging, and DERMS. By keeping programs simple for consumers, utilities can drive participation and continued engagement. At the same time, developing scalable solutions for integrating DERs into grid operations will be critical to unlocking the full value of these resources as resources to support an efficient, reliable, and resilient energy system.

Frader-Thompson summed it up well: “It’s about being smart and efficient with where we’re deploying these resources. Let’s put them where they need to be and keep it simple for the customer.”

The future of the grid is flexible, and with the right tools and strategies, utilities will be better able to meet the challenges of a renewable energy world, delivering increased value to consumers and the grid. Virtual power plants and managed charging are just the beginning of this journey toward a cleaner, more resilient energy future.

If you enjoyed this blog and want to learn more, you can check out some great additional resources below:

• White Paper: The future of flexibility — Unlocking the full value of VPPs for a changing grid
• Report: State of Managed Charging in 2024
• Podcast: Live Recording at RE+ 24