EPRI and Kraken Advance Distributed Energy Interoperability Standards to Accelerate Large-Scale Deployment of Virtual Power Plants

Large virtual power plant (VPP) portfolios composed of distributed resources on the customer side are gaining key momentum in their development. Industry bodies and developers point to the lack of unified interoperability standards as one of the main bottlenecks constraining the scalable growth of VPPs.

According to a report released by the U.S. Department of Energy (DOE) in 2023, VPPs are expected to meet up to 160 gigawatts of the 200 gigawatts of U.S. peak demand by 2030, reducing power system costs by about $10 billion annually. However, the scalable growth of VPPs could be limited by the lack of common standards for the distributed energy resource (DER) components they aggregate.

Proponents argue that common standards would enable utilities or aggregators to "orchestrate" diverse DER resources such as rooftop solar, batteries, and electric vehicles across a wide range of power system services.

"Without interoperability standards, VPPs cannot achieve the scalability, affordability, and reliability needed at the speed and efficiency required to address the variability, load growth, and extreme weather events facing the power system," said Arshad Mansoor, CEO of the Electric Power Research Institute (EPRI), which is leading two standardization initiatives. "Now is the time to bring VPP stakeholders together," he added.

The DOE report notes that standardized interoperability helps simplify and scale the necessary adoption of DERs, as well as the need to integrate VPPs into utility planning and wholesale markets.

Lon Huber, Senior Vice President of Pricing and Customer Solutions at Duke Energy, said system operators "must be able to see the connected DER devices, send signals to the devices, and be confident that the devices have responded to the signals." To this end, "the entire VPP ecosystem should be standardized through a multi-stakeholder collaborative effort," he added.

However, the biggest unresolved questions advocates currently face are: what the standards should be, and what technologies are needed to optimize performance. EPRI, international software platform provider Kraken, and others are joining forces to confront and answer these questions.

Flexibility becomes crucial

Analysts agree that electrification of transportation, buildings, and industry will bring new electricity demand dynamics, including higher and more time-varying peak demand.

Ben Brown, CEO of Renew Home, which operates 3 GW of VPPs and plans to reach 50 GW by 2030, said VPPs can automatically make small adjustments to customer energy use, enabling them to consume electricity "when it is cheaper and cleaner." The "demand flexibility of thousands of homes" is an "important peak capacity resource" that helps "balance power system supply and demand," he added.

Jigar Shah, Director of the DOE Loan Programs Office, said in a recent interview that VPPs "are likely the only way to manage electrification at a reasonable cost and within the required timeline."

Chris Rauscher, Director of Grid Services and VPPs at Sunrun, agreed that with the massive growth in electricity load, VPP flexibility "is the only way to match supply and demand." Demand from electrification will grow, but VPPs "will continuously lower peaks" and "create incremental capacity" on the power system, he added.

According to a September report from the Rocky Mountain Institute, VPP flexibility has already enhanced resource adequacy in California and Arizona, alleviated pressure on transmission and distribution systems in New York, and reduced system costs for customers in Utah and Vermont.

But the report says that "fully realizing" VPP flexibility requires fully integrating VPPs into power system planning and operations. It adds that equipment standards ensuring more consistent, reliable dispatch and more accurate, timely dispatch signals are "critical" to VPP integration.

Kay Aikin, CEO of Introspective Systems, a distribution-level software solutions provider, said that through "systems that reward flexibility," the "potentially $10 trillion" cost of upgrading the U.S. distribution system to meet current electrification goals could also be avoided.

Aikin said leveraging flexible VPPs can enable "phased distribution system investment" as load grows. "Many utilities are beginning to see VPPs relieve system congestion, and their interest in flexibility is growing," she added.

EPRI and other advocates say a key step to achieving flexibility is DER interoperability standards.

Standards to address complexity

Industry stakeholders agree that aggregating customer-owned devices at the distribution system level introduces new complexity to power system and market operations.

Elizabeth Cook, Vice President of Technology Strategy at the Association of Edison Illuminating Companies, said many people, even those inside the power industry, do not realize how limited visibility is in today's traditional distribution systems. "Regulators and policymakers need to allow utilities to invest in foundational distribution system sensors and metering technologies," she added.

Cook continued that the communication technologies and software platforms currently used are "not dynamic enough" to capture the potential benefits of today's dynamic DER technologies. But obtaining the needed distribution system baseline information and modeling data requires a "systematic overhaul" of technology and operations.

To advance this overhaul and enable VPPs to provide system flexibility and reliability, EPRI and Kraken are launching their "Mercury" initiative to develop interoperability guidelines and practices for DERs, said Devrim Celal, Chief Marketing and Flexibility Officer at Kraken. Celal said the initiative will first form a VPP stakeholder leadership group.

Celal said that similar to the Bluetooth Special Interest Group, established in 1998 to develop wireless device standards, VPP stakeholders will identify DER communication protocols. He added that greater visibility and more precise control of component devices "will enable VPPs to better balance load, reduce system congestion, and interact with wholesale markets."

Efforts will then seek to bring a broader set of VPP stakeholders into EPRI's "Flexible Interoperable Technologies" (FLEXIT) initiative. EPRI says the initiative aims to go beyond the Mercury initiative by simplifying DER integration through "standardized service definitions and interfaces" and "developing future-proof implementation strategies."

EPRI's Mansoor added: "A diverse group of stakeholders, including utilities, DER manufacturers, VPP aggregators, researchers, and government agencies, will help develop a common VPP aggregation and technical framework for the interface between utilities and aggregators."

Mansoor said that because current VPP-utility interfaces are unique to each aggregator or utility, VPP integration requires expensive "custom software" and can take "months or years" to complete and implement. "In the worst case, the required investment exceeds the benefits." But he added that standardization and interoperability can change that.

"VPPs are now being built and used, but without standardization and interoperability, they will not achieve scalability, reliability, and affordability," Mansoor continued. "VPP flexibility will still have value as energy, capacity, and ancillary services, but manufacturers will not invest in products that support VPPs, and their value will not be fully integrated into markets," he said.

Key stakeholders agree.

Duke Energy's Huber said that with multiple technologies working together, VPP deployment "can scale to a significant size." Through "multi-stakeholder collaborative" standardization, the system visibility, control, and communication needed for VPP scaling can be achieved for "device discovery, device registration, device orchestration, and device data exchange," he said.

Another effort to simplify VPP deployment is amodel tariffdesigned by the law firm Keyes and Fox for Solar United Neighbors, aimed at "setting compensation at the full value of the service," said Beren Argetsinger, a partner at Keyes and Fox. He added that they have also designedmodel legislationto expand VPPs to new jurisdictions.

Sunrun's Rauscher said that for Sunrun, which primarily provides residential solar-plus-storage VPPs, further DER standardization is not necessary because its business already "operates at scale with reliability and predictability." But he added: "Utility program managers do need standardized software to automatically send notifications of peak load reduction needs to aggregators and customers."

Other stakeholders argue that more comprehensive standardized interoperability between utilities, aggregators, and DER technologies is needed to enable VPPs to capture the full value they can provide.

From standards to value

Aggregators and utilities say that as VPPs expand from residential solar and storage to a full range of smart customer-owned DER technologies with standardized interoperability—including EV chargers, smart thermostats, and home appliances—more value will be created.

Ryan Hledik, a principal at The Brattle Group, said that current VPP monetization is largely limited to "the portion of value that does not require advanced control and communication." But he added that "improved interoperability" through "simplified communication" could make managing "disparate technologies and software packages" economically viable.

Hledik and other VPP advocates say grid-edge distributed energy resource management systems (DERMS) can simplify communication.

Erika Diamond, Senior Vice President of Customer Solutions at DER aggregator EnergyHub, said a grid-edge DERMS is the middle layer between customer-owned devices and the dispatch of those devices in response to utility signals. She added that aggregator software can bring VPPs into operation in months and cost-effectively, while relieving utilities of the burden of handling grid-edge complexity.

Monika Jovic, Digital Grid Product Marketing Manager at Schneider Electric, said in a July webinar that grid-edge DERMS can use aggregated DERs to "replace traditional resources."

Different views on the need for DERMS among aggregators may depend on the DER composition of the VPP.

Sunrun's Rauscher said every utility wants to manage its distribution system resources differently. "Any utility in the U.S. can have a VPP program today" because aggregators have already made the necessary investments in independent software platforms, he added.

Rauscher continued that Sunrun can also manage DERs beyond solar and batteries and is integrating devices such as smart thermostats and heat pumps. But he added: "This comes at a cost," and long-term revenue certainty is insufficient to justify the cost of integrating with "every utility software platform."

Other VPP stakeholders say the Mercury and FlexIt initiatives aim to establish interoperability standards to expand the range of potential VPP resources while creating value for the services they provide.

"Solar and storage VPPs may operate without a DERMS, but a grid-edge DERMS can make any DER device a grid asset," Diamond said. "Utilities are adopting individual DER programs but do not know how to evaluate a program that can dispatch multiple different customer-owned DERs across the distribution system around the clock to meet system needs," she added.

Brattle's Hledik said the visibility provided by DERMS enables operators to use customer-owned DERs in specific locations and specific ways to meet specific needs with "surgical" capability. However, he said, "coordinating and simplifying" supply-demand balancing may not simplify the integration of VPP operations with many utility tariffs, programs, and diverse markets.

But EPRI's Mansoor said standardization and interoperability will enable utilities to scale VPP offerings affordably, allowing markets to value and respond to them. He added that this will lead to market rules that can integrate these offerings.

"Over the next decade, the power system may need a significant amount of flexible resources," EnergyHub's Diamond said. "This will require all available flexible resources," and the projected value of flexibility is likely to make VPPs "fully scalable and affordable," she added.

EPRI's Mansoor said the Mercury initiative will launch on December 5, with the FlexIT initiative following in early 2025, and as key power industry stakeholders join, their input will determine the direction of these initiatives.