The world of energy is changing, and while the “four Ds” of a decentralized, decarbonized, digitized, and democratized electricity grid bring significant benefits, they are also accompanied by increasing complexity in terms of data demand and volatility risk. One critical part of the puzzle is to leverage virtual power plants (VPPs) as a cornerstone in the transition to a cleaner, smarter energy grid. The concept is simple: by aggregating distributed energy resources (DERs) such as electric vehicles (EVs), batteries and solar panels, VPPs can balance electricity demand and supply in real time – without the need for costly infrastructure upgrades.
The potential offered by VPPs is undeniable. According to the US Department of Energy, deploying 80-160 GW of VPP capacity by 2030 could serve 10-20% of peak load while reducing overall grid costs.
Despite growing interest from regulators, utilities, and technology providers, the VPP conversation often underestimates the most important stakeholder–the end customer. Only by identifying and removing the barriers to customer participation can companies and customers unlock the technology’s full value.
Why do we need to accelerate the VPP conversation?
Adoption of renewable energy has soared globally. While California leads the way in the US, with solar power making energy cheap and plentiful during the day, the trend is now nationwide with renewables now representing north of 20% of electricity generation. However, this abundance creates an important challenge: demand doesn’t always match supply.
In California specifically, the state has seen days where renewables generation hit 100% of the state’s electricity and also continues to see instances where solar energy production exceeds demand, especially during midday hours. As a result, the California Independent System Operator (CAISO) has to curtail upwards of 2.5 million megawatt-hours of solar and wind generation, with solar accounting for 90%+ of that – a curtailment representing enough energy to power approximately 518,000 homes for a year.
To address the imbalance in supply and demand (also known as the ‘’duck curve’’) and reduce the need for curtailment, battery storage capacity in the US has grown dramatically, with California also leading this expansion.
Source: CAISO
Storage solutions are one piece of the puzzle. By orchestrating and optimizing when DERs consume or supply energy, virtual power plants help flatten the curve created by mismatched supply and demand. EVs, for instance, can charge during times of excess solar energy and discharge to the grid during evening peaks.
Making this happen to create reliable and scalable VPPs requires more than just deploying and connecting batteries, EVs, and more – it requires integrated systems, new optimization software, and yes, engaged and motivated customers.
Customer-centricity is the missing piece
While much of the VPP discussion revolves around technology, the real fuel of a successful VPP is high customer engagement. End consumers must not only enroll in VPP programs but also actively participate in them. To get the most out of the mobile battery in an EV, a driver needs to be willing to plug them in when not in use, even if they don’t actively need a charge.
Our global experience at Kaluza shows that engaging customers effectively requires more than technology – it depends on removing friction, addressing adoption barriers head-on and making participation intuitive. Here’s how this can be done:
- Show them the money– Customers need to be incentivized, with direct benefits and a clear understanding of how much they can save on their electric bills. By comparing projected electricity costs with and without participation, and by ensuring estimates are as accurate as possible, VPP operators enable customers to clearly understand how participation will cut their monthly costs. Innovative programs such as OVO’s Charge Anytime in the UK recruit customers by explaining how they can charge their EVs at a lower cost than traditional rates.
- Show the time saved with automated scheduling – Dynamic rates are an important tool of the toolkit, but customers shouldn’t be expected to memorize a rate card or constantly change their charging schedules. VPPs that make the experience of tapping into the cheapest and cleanest times to charge a car or a stationary storage system effortless are most likely to have customers who are happy to stay enrolled and contributing to the VPP. Programs like CaliCharge provide this support to customers for free and let customers tap into rates as low as $.04/kWh in exchange for letting Kaluza optimize when their car charges.
- Meet the customer where they are to reduce friction – Customers don’t want to download yet another app. The most effective VPPs integrate seamlessly into apps that customers already use – especially those from the manufacturers of their EVs or their utilities.
How to make things simple for customers and utilities
Sometimes a utility may want to show their customers how participation will reduce their energy bill but can’t based on their legacy tech architecture running DER operations and customer billing on separate tech platforms. Using a single, unified platform avoids calculation discrepancies and customer complaints–as well as potentially reducing costs.
Expanding adoption through inclusion – Climate change and rising energy prices affect low-income communities disproportionately. The cost-saving benefits of VPP participation can be out of reach for those who can’t afford upfront investment. Utilities and governments can broaden access to VPPs by offering free EV chargers to low-income households, making access more inclusive and affordable. This is already being done in California, where customers in need are being offered free chargers as part of a program funded by the California Energy Commission.
The role of standardization and utility planning
In addition to improving and communicating the customer experience, as the US Department of Energy points out, the success of VPPs also hinges on at least two other imperatives: standardization and deeper integration into utility planning and incentives.
A cornerstone of VPP scalability is the standardization of technologies like Vehicle-to-Everything (V2X). V2X standards let utilities and DER manufacturers collaborate to enable bidirectional energy flow, allowing EVs to return power to the grid during peak demand or outages. Right now, the bulk of customers interested in bidirectional charging are lost on how long or how expensive an interconnection will be, and that delays the ability of the utility, the grid, and the planet to benefit from these assets.
Highlighting the importance of standardizing technologies that enable bidirectional charging, the above chart illustrates how EVs in California could add an additional 15GW+ to the grid during peak hours by 2035, if left unmanaged. This peak demand can be brought down significantly by vehicle-to-grid (V2G) technology, reducing the strain on the Californian grid.
Organizations like the Vehicle Grid Integration Council are leading efforts to establish best practices and promote standards that make grid integration seamless. This work is essential to ensuring VPPs are both reliable and scalable. Utilities need these frameworks to modernise grid infrastructure and facilitate smoother communication between DERs and centralised energy systems.
The integration of VPPs into utility planning processes and incentive structures is another critical step. Utilities must adopt technologies like Distributed Energy Resource Management Systems (DERMS) and rate engines to recruit customers into VPPs and to coordinate decentralised energy assets effectively. However, long-standing roadblocks to adopting the latest cloud technology hinder progress.
Today, challengers to traditional utility software providers offer cloud-based solutions that can accelerate VPP adoption. To capitalize on these innovations, utilities and regulators must remove operational barriers and financial incentives that have favored a few large technology vendors. For instance, aligning financial incentives with grid flexibility, emissions reduction, and cost reduction can encourage technology adoption that provides broader options in utility IT strategy.
Achieving the commercial lift off of VPPs requires a multi-faceted approach. Standardization ensures technical compatibility while integration into utility planning aligns the industry for scalable adoption. By addressing these imperatives, VPPs can unlock a future of cleaner, more resilient energy systems.
What technology powers VPPs?
Running a VPP at scale requires a powerful, integrated platform that goes beyond DER aggregation. Many current approaches fall short by relying on disjointed systems for DER management, billing, and customer engagement.
With data intelligence at its core and the ability to integrate its Distributed Energy Resource Management System (DERMS) and comprehensive rate engine with existing utility customer information and billing systems, Kaluza gives customers the agility they need to quickly deploy and scale a VPP. Decisions on whether to move other systems to the cloud can come later, without needing to overhaul their existing technology stacks. Kaluza powers VPPs with an end-to-end solution that combines:
- Energy optimization – Powered by real-time data, the platform ensures that DERs respond to network needs instantly, delivering reliable energy to the grid and customers. Local optimization helps utilities manage timelines for grid expansion.
- Seamless user experience – By partnering up with EV manufacturers like Volvo and embedding VPP functionality into their existing apps, the platform makes the experience seamless for customers, removing barriers to VPP participation.
- Vehicle-to-everything (V2X) readiness – The Kaluza platform supports bidirectional charging, allowing EVs to supply energy back to homes and the grid seamlessly.
- Energy commerce – With tools like consolidated billing and flexible rate calculation, we enable utilities like OVO Energy Australia to offer tailored propositions with clear savings for end customers. The result is more VPP registrations, faster launches of new propositions, and higher overall customer satisfaction.
And we do all of that with the CIS roots that ground us in making sure that utilities can build upon their top priorities of keeping the lights on and the bills paid.
Taking VPPs one step further
As the race to deploy VPPs accelerates, utilities are in a prime position to offer highly effective VPP programs. It’s clear that the current conversation around adoption isn’t enough. Utilities need more than basic aggregation tools – they need a platform that addresses the full spectrum of challenges, from customer engagement to grid integration.
By consolidating the DERMS and rate calculations onto a single platform, utilities can avoid calculation errors and overhead costs associated with managing rates in multiple places. Additionally, the right proposition management tools can calculate all types of rates as well as supporting non-energy billing and fulfilment for a fully integrated experience.
The ability to consolidate all rates, credits and billing information also gives utilities access to the data they need to run their operations today, and to inform grid improvements in the future. Having all of this data in a single platform, enables utilities to leverage those insights to create more tailored propositions and drive customer lifetime value.
At Kaluza, we’ve proven that we have what it takes to make VPPs work at scale. By introducing seamless DERMS, integrated billing, and customer-centric design, we can help utilities unlock the true potential of VPPs.
It’s time for the conversation to evolve. Let’s talk about how we can take VPPs one step further.
