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

Virtual power plants (VPPs), as aggregations of massive distributed energy resources on the user side, are gaining key momentum for large-scale development. The industry generally believes that the lack of unified interoperability standards is one of the main bottlenecks constraining their growth.

According to a report released by the U.S. Department of Energy (DOE) in 2023, by 2030, VPPs are expected to meet 160GW of the 200GW peak demand in the U.S. and reduce power system costs by $10 billion annually. However, developers and industry advocates point out that without common standards for aggregated distributed energy resource (DER) components, the growth potential of VPPs will be difficult to fully realize.

Supporters believe that common standards can enable utilities or aggregators to act like a "conductor," coordinating diverse DERs such as rooftop solar, storage batteries, and electric vehicles to provide a full range of power system services.

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

The DOE report notes that standardized interoperability can help simplify and expand the necessary application of DERs and facilitate the integration of 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 by a multi-stakeholder collaborative body," he added.

However, the major unresolved questions advocates currently face are: what should the standards 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 demand peaks.

"VPPs can automatically make small adjustments to users' energy usage, shifting it to times when electricity is cheaper and cleaner," said Ben Brown, CEO of Renew Home. The company operates 3GW of VPPs and plans to reach 50GW by 2030. "Demand flexibility across 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 on the required timeline."

Chris Rauscher, Director of Grid Services and VPP at Sunrun, also agrees that amid significant electricity load growth, VPP flexibility "is the only way to match supply and demand." Demand from electrification will grow, but VPPs "will continue to shave peaks" and "create incremental capacity" on the power system.

According to a report released by the Rocky Mountain Institute (RMI) in September, VPP flexibility has already enhanced resource adequacy in California and Arizona, alleviated pressure on New York's transmission and distribution system, and reduced system costs for customers in Utah and Vermont. But the report states that "fully realizing" VPP flexibility requires fully integrating it into power system planning and operations. The report adds that equipment standards ensuring more consistent, reliable dispatch and more accurate, timely dispatch signals are "critical" for VPP integration.

Kay Aikin, CEO of Introspective Systems, a distribution-level software solutions provider, said that through "systems that reward flexibility," the "potential $10 trillion" cost of upgrading the U.S. distribution system to meet current electrification goals could be avoided. Aikin said that utilizing flexible VPPs can enable "phased distribution system investments" 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 believe that a key step to achieving flexibility is developing DER interoperability standards.

Addressing complexity with standards

Industry stakeholders agree that aggregating user-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 (AEIC), 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, noting that the communication technologies and software platforms currently in use 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 will require a "systematic overhaul" of technology and operations.

To advance the 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. Devrim Celal, Chief Marketing and Flexibility Officer at Kraken, said the initiative will first form a leadership team of VPP stakeholders.

Celal said that, similar to the Bluetooth Special Interest Group established in 1998 to set 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."

Subsequently, a follow-up effort will bring a broader group of VPP stakeholders into EPRI's "Flexible Interoperability Technology" (FLEXIT) initiative. EPRI says the goal of this initiative is to go beyond Mercury by simplifying DER integration through "standardized service definitions and interfaces" and "developing future-oriented implementation strategies."

EPRI's Mansoor added: "A diverse group of stakeholders, including utilities, DER manufacturers, VPP aggregators, research institutions, and government agencies, will jointly develop a public-facing 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 said standardization and interoperability can change that.

"VPPs are now being built and used, but without standardization and interoperability, they will not be able to achieve scalability, reliability, and economics," 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 the market," he said.

Key stakeholders agree.

Duke Energy's Huber said that by working together across multiple technologies, VPP deployments "can scale to a significant size." Standardization achieved through "multi-stakeholder collaboration" will allow for the system visibility, control, and communication needed in VPPs to support "device discovery, device registration, device orchestration, and device data exchange."

Another effort aimed at simplifying VPP deployment is designed by the law firm Keyes and Fox for Solar United NeighborsModel Tariff, designed to "set compensation at the full value level of the service." Keyes and Fox partner Beren Argetsinger said they 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 it already "operates at scale with reliability and predictability." "However, utility program managers do need standardized software to automatically send notifications of peak load reduction needs to aggregators and customers," he added.

Other stakeholders argue that more comprehensive standardized interoperability 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 broader range of smart user-owned DER technologies, including EV chargers, smart thermostats, and home appliances, standardized interoperability will generate more value.

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

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

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

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

Aggregators' differing opinions on the need for DERMS 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 launch a VPP project today with residential solar and storage" because aggregators have already made the necessary investments instandalone software platforms, he added.

Rauscher continued, saying Sunrun can also manage DERs beyond solar and batteries and is integrating devices such as smart thermostats and heat pumps. But he added that "this requires cost," and long-term revenue certainty is not sufficient 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 DERMS, but 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 user-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 user-owned DERs with "surgical" precision to meet specific needs at specific locations in specific ways. But he said that "coordinating and simplifying" supply-demand balancing may not simplify the integration of VPP operations with numerous utility tariffs, programs, and diverse markets.

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

"Over the next decade, the power system may need a large amount of flexibility resources," said EnergyHub's Diamond. "It will require all available flexibility resources," and theprojected value of flexibilitywill likely make VPPs "fully scalable and economically viable," 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.