Why Electric Vehicles, Battery Storage, And Demand Response Add Value To Energy Markets

The city of Boulder, Colorado, is trying out a vehicle-to-building technology, which takes electricity from electric vehicles (EVs) and feeds that into buildings. It is partnering with Fermata Energy to reduce the city’s building energy costs with an innovative pilot at its recreation center.

What makes this test so significant is its broader implications. The same concept is in use now, which takes power from those EVs and sends it to the grid — something that any distributed energy resource can do. That includes solar panels, battery storage, and localized microgrids. Indeed, the ability to aggregate those assets and channel the collective energy is known as a “virtual power plant.” Utilities could create such a plan of action if the electric grid gets knocked out during a hurricane, wildfire, or earthquake.

“We look forward to testing this new technology and seeing the data to understand the potential of projects like this,” said Matt Lehrman, Boulder’s Energy Strategy Advisor. “If we can reduce our peak demand and save money through this project, it might unlock new use cases for expanding the city’s electric vehicle fleet. Not only can electric vehicles help meet our climate goals and reduce air pollution, but they might also be a strategy to reduce operating costs and enhance resilience.”

As for Boulder, it has at least 21 EVs. As the program expands, more of them could be used as vehicles — pardon the pun — to send energy to the grid or buildings. The technology is “bidirectional:” fleet cars charge at night when the power demand is at its lowest, and discharge during the day when electricity demand peaks. The goal is to cut the city’s electricity bills. And it works for companies and consumers too. Boulder residents use on average 16 kilowatt-hours a day. A 2020 Nissan LEAF battery has 62 kilowatt-hours of storage, meaning that it could power a small business for four days.

Virtual power plants involve the orchestration of millions of dispersed assets to manage the supply of electricity. Those locally distributed assets are spread out, forming thousands of subsystems at roughly 5 kilowatts each.

Aggregators can monitor and manage those distributed energy resources through software programs, enabling them to be sent to the grid. In other words, industrial and commercial businesses may be able to curtail their demand at certain times — to reduce the stress on the network. They have created a valuable asset to bid into energy markets by shifting their energy use.

Global Shift Underway

For example, demand response aggregators sign up a lot of businesses that are willing to cut their usage during peak times. This package is then bundled and sold into regional wholesale energy markets. Indeed, the Federal Energy Regulatory Commission issued Order 2222 in September 2020, ensuring that distributed asset owners are paid market rates. ISO New England and the PJM Interconnection — independent system operators — rely on them.

“We can take any flexible asset anywhere at any time and bid it into wholesale markets,” says Greg Geller. He leads the regulatory efforts for Enel X and spoke with this reporter for a White Paper. “We have the know-how and the expertise to monetize that flexibility. And we have contracts with utilities to ensure that they get this power. We are the interface between customers and utilities, and we do that for regions with independent system operators or regional transmission organizations.”

Take Consolidated EdisonED
, which is experiencing a lot of electricity growth in its territory and had faced a choice: building out its wires would cost hundreds of millions of dollars. But installing distributed energy resources in strategic places made more economic sense. It put a 5 MW battery storage project in a parking lot that is dispatched during peak hours and that is managed by Enel X.

Everything from electric vehicles to energy storage to demand response can participate in a virtual power plant. Those virtual plants can potentially change the energy horizon by harnessing locally-produced power and redistributing it to where it is most needed — all facilitated by cloud-based software with a full panoramic view.

Guidehouse Insights says that the global shift from centralized to distributed assets is underway. In 2020, centralized generation totaled more than 200,000 MW, while decentralized generation came in at slightly less than 200,000 MW. The decentralized generation edged ahead of the centralized generation in capacity additions a year later. The differences are expected to get even more pronounced: by 2030, decentralized generation will total more than 500,000 MW of capacity while centralized generation will total about 280,000 MW.

“More distributed energy is coming online this year than central generation,” says Peter Asmus, now a director for AutoGrid but the author of the Guidehouse study for the White Paper. “We will need more Virtual Power Plants — things can orchestrate those assets. It is viable, and it is happening.”

Distributed energy resources add value to businesses. But they also give communities some resilience. They can be monitored, aggregated, and sold into electricity markets — resources that can prevent widespread outages during extreme weather events. It’s an intelligent strategy and why Boulder and ConEd are deploying those assets.