How ‘virtual’ power plants could help Minnesota charge toward a clean energy future
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In Dakota County, south of the Twin Cities, about 44,000 farm and homeowners have signed up for a program that allows their local electric cooperative to control their air conditioners — a seemingly small act that can have an outsized impact on the energy distribution system.
The impact is apparent on sweltering summer days.
“We, in essence, press a button that sends a signal out to a device, and that device cycles the air conditioner so it continues power to the air conditioner for 15 minutes, and then interrupts it for 15 minutes,” explained Ryan Hentges, president and CEO of Dakota Electric Association.
The co-op continues that process for several hours, to save electricity while still keeping homes cool.
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A single customer doing that on their own might save a bit of money on their electric bill, but it wouldn’t provide much benefit to the utility.
However, when thousands of AC units are linked together? That can reduce the utility’s load by up to 25 megawatts.
“That has a similar characteristic as firing a natural gas generation peaking plant,” said Hentges.
This is an example of a “virtual power plant.” By linking together thousands of air conditioning units, Dakota Electric can reduce electric usage during periods of peak demand to such an extent it essentially prevents the need to build a traditional fossil fuel-fired power plant.
“Small actions aggregated together can have big impacts,” said Hentges.
Rural cooperatives around Minnesota have employed similar programs for decades for electric heating. Historically they’ve done it to save money, and to maintain reliability when demand for electricity is peaking.
“It’s mostly about keeping the lights on, to be honest,” said John Reinhart, manager of the distributed energy resource portfolio at Great River Energy, which provides electricity to Dakota Electric and 26 other cooperatives around the region.
But more recently, experts also see virtual power plants as playing an important role in the shift from fossil fuels to a carbon-free energy system.
The U.S. Department of Energy recently awarded more than $30 million to eight electric co-ops in Minnesota to build additional renewable energy capacity and invest in virtual power plants.
“I think [virtual power plants are] the most interesting and impactful thing going on right now.” said Gabe Chan, professor at the University of Minnesota’s Humphrey School of Public Affairs.
Chan argues that virtual power plants have to play a critical role moving forward as demand for electricity soars. That's happening for a couple reasons.
First, to address climate change, areas such as transportation and home heating, which traditionally have been powered by fossil fuels, are increasingly shifting toward electricity, in the form of electric vehicles and heat pumps.
And secondly, growing technologies including artificial intelligence require an enormous amount of electric power.
To meet that demand, utilities are building new solar and wind farms, along with new transmission lines to move electricity from where it’s produced to where it’s consumed. But that process is cumbersome and expensive.
“If we want to move to decarbonize our end uses with more electricity and add in these big new electric loads for data centers and manufacturing, we have to find some other complementary solution that doesn’t involve big power plants and transmission lines, because we just need more than they can provide in time,” said Chan.
These so-called “non wires alternatives” can also save money. Dakota Electric gives customers a $13 monthly incentive in exchange for taking part in the air conditioning load demand program.
In exchange, the cooperative saves around $15 million annually in the wholesale power it purchases from Great River Energy, said Jon Beyer, vice president of energy and member services at Dakota Electric.
Dakota and other cooperatives around the state together have nearly 400,000 air conditioners, water heaters, heat pumps and other devices enrolled in “virtual power plants” that equal around 200 megawatts of capacity for Great River Energy, said Reinhart.
That means significant money is also saved that otherwise would need to be used to build natural gas plants, or wind or solar farms, along with the poles and wires needed to transport the electricity.
“It’s expensive to upgrade a distribution grid or transmission system. Building this out is a solution that in certain circumstances, can be much cheaper,” said Mike Schowalter, director of regional transmission organization advocacy with fresh energy.
“And so not only are you enabling more flexibility within the distribution system, but you’re then going to have lower capital costs, which then, in turn, means lower rates,” he said.
Virtual power plants can stitch together air conditioners and water heaters and smart thermostats to manage electricity demand.
But more recently, they can also connect rooftop solar panels and home battery systems together using sophisticated software that can send power out onto the grid.
That’s not happening yet in Minnesota, although Xcel Energy has proposed building a network of linked solar installations and battery storage at strategic points around its service area.
There are several examples in other states, including in Vermont where customers earn discounts on Tesla home battery systems in exchange for sharing stored electricity with their utility.
Reinhart with Great River Energy said he’s keen on exploring a similar program with customers who install their own home battery systems.
“It’s iron already in the ground. And if it can be used to support the grid and help us achieve our goals for [carbon-free by] 2040 and for a sustainable future, then we want to try to aggregate these distributed devices to provide a meaningful impact.”
Schowalter said virtual power plants are still in their early days in Minnesota. But he sees a future where our homes, and our electric vehicles, plugged into bi-directional chargers, are all interconnected, talking to one another, with power flowing in two directions to where it’s needed.
“And you probably won’t even notice it on your charging level, it would be so small, because it’s working with a thousand other cars in your neighborhood,” said Schowalter. “But at the same time, maybe you helped the grid ride through a disturbance that would have caused a power outage in the past.”