As a flurry of power-hungry data centers come online, instead of adding more generation facilities, a coalition of home energy companies plans to manage energy demand and existing supply more efficiently through the constellation of devices hooked to the grid.
During peak energy demand periods, that means sipping from home batteries to boost supply and tweaking the thermostat to trim energy use.
The network of these home energy appliances working in concert is called a virtual power plant, because these electronics can collectively free up sizeable capacity on the grid as if they were a single power plant.
It’s a classic case of working smarter, not harder.
In late June, SunRun, Tesla and Renew Home announced a partnership to set up virtual power plants across the country, leaning on the existing fleet of millions of batteries and smart thermostats already on active duty.
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While virtual power plants are not new, this recent effort differs from previous initiatives in its scale, as well as the customer group it’s meant for: data centers.
“We're the three largest players in residential virtual power plants, and we're coming together,” said Chip Silverman, Sunrun’s director of grid services.
This national program is now open for business and looking for data center patrons.
The network of these home energy appliances working in concert is called a virtual power plant, because these electronics can collectively free up sizeable capacity on the grid as if they were a single power plant.
'A win-win-win for everybody'
Dozens to hundreds of virtual power plants are in operation around the country, and in the span of a year, they’ve been called into action more than a thousand times.
In the summer, Arizona Public Service’s smart thermostat program can carve out 160 megawatts on the grid, enough to power 25,000 households. Similarly, Salt River Project calls up 67,000 thermostats and home batteries to shed energy demand during times of grid strain.
This decentralized energy management strategy has averted blackouts in a pinch, especially during a heat wave when air conditioning units ramp up. But so far, virtual power plants have only had a regional footprint, deployed in times of emergency when extreme weather spikes energy use.
There's a growing call to tap virtual power plants as a long-term tool for managing the grid rather than a last-ditch fallback to save it. A recent report by the electrification research group, Rewiring America, proposed scaling up virtual power plants to accommodate the throng of hyperscalers scrambling for power.
Now that reality is just around the corner. The new wave of virtual power plants led by home battery companies Tesla and, as well as Google-led smart thermostat platform Renew Home, will free up 16 gigawatts of power on the grid, all without having to add a new device.
“We can harness what's already out there today,” Silverman said.
According to the calculations, Arizona has 572 megawatts of potential capacity from its 360,000 climate-control devices and residential batteries already installed.
Mobilizing virtual power plants is one of the fastest solutions to conjure capacity on the grid. Building new physical power plants from scratch takes years and is an expensive undertaking. When utilities invest in new infrastructure, they usually raise rates to cover the costs, to the chagrin of existing customers.
To leapfrog ahead of utilities’ long interconnection queues, many data centers are opting to build their own backyard generation. Overwhelmingly, their power source of choice is fossil fuels, which has sparked backlash over the pollution it would bring to local neighborhoods.
By contrast, virtual power plants can be executed within months.
While data centers are the intended beneficiaries, homeowners who supply the grid extra power by cutting back on their own use also stand to benefit from their flexibility. In theory, reducing demand during peak times helps families save on their utility bill, because that’s when energy rates are also the highest.
For example, homeowners charge their residential batteries from solar panels or the grid during slump periods, then use that stored power in the peak hours of the day, without needing to jostle with data centers and other grid users for energy.
Households are also compensated for participating. According to Tesla, battery owners receive cash sums up to $400 per year. Sunrun, which offers subscription plans for its batteries for individuals who can’t afford the upfront purchase costs, said its customers can save up to several hundred dollars off their lease fees. The exact amount depends on the utility and how much power they’ll let Sunrun draw.
The automated adjustments to power consumption should be too small for households to notice, Sunrun said.
“This could be a win-win-win for everybody,” Silverman said.
Even before the data center-driven program, virtual power plants have been well received. Participation is voluntary, but past data has given Silverman confidence that most homeowners will not withdraw and throw off the power availability that energy companies can guarantee their data center clients.
“What we find is that the majority of customers are very excited to participate because of the financial rewards that they receive,” he said.
One of Sunrun's largest markets runs in Puerto Rico, whose energy infrastructure has been battered by natural disasters in recent years. Twin hurricanes in 2017 racked up $100-billion-worth of damages to the grid and caused one of the longest blackouts in U.S. history, with some residents cut off from electricity for over a year.
Participants have told Silverman that they welcome the rewards from enrolling in Sunrun’s virtual power plant program. For some households, it spells the difference between affording groceries and going into debt simply to keep the lights on.
Virtual power plants meet the real world
Sunrun and its partners plan to organize virtual power plants in corridors of rapid data center growth. One of these places is Virginia, the world’s largest concentration of data centers, whose crowd of facilities handle 70% of global internet traffic daily. Arizona, which ranks sixth in the country for the highest facility count, also numbers among the potential target markets.
Notably, Sunrun pulled out of Arizona last year — it no longer offers new leases for batteries, though it still services existing customers. Silverman hasn’t ruled out returning to Arizona if data center growth here explodes.
In the future, to expand the virtual power plant footprint, Sunrun said it would use the money from serving data centers to subsidize deploying new batteries and smart thermostats.
Momentum for adding distributed energy resources to accommodate data centers is ticking up elsewhere. According to Canary Media, in early July New Jersey signed into law the Data Center Fair Share Act, which incentivizes data centers to bankroll home efficiency upgrades to get priority in the utilities’ interconnection queue. Other states such as California and Colorado are reportedly considering similar legislation.
Virtual power plants alone can’t address the full scale of data centers’ energy needs, since it only shuffles energy around — albeit more efficiently — not add new sources. Data centers on American soil use more energy combined than any other country in the world, including China. And that appetite for power is projected to balloon two times the current levels in the next two years.
Nevertheless, supporters say, virtual power plants can be an important part of meeting that rising energy demand, one that doesn’t require extra investment that raises costs for everybody. Silverman thinks distributed energy solutions need to be developed in parallel with generation buildout.
“People need to understand that they can be part of the solution here,” he added. “They are not a captive audience for these data centers.”
