New Jersey’s proposed virtual power plant (VPP) framework should expand beyond conventional resources such as smart thermostats, water heaters, electric vehicles, solar and batteries by incorporating sustainable microgrids,  DCO Energy, a microgrid provider, argues in comments filed with the New Jersey Board of Public Utilities.

The state’s Board of Public Utilities (BPU) wants to establish a VPP program because the state is grappling with supply challenges in the PJM regional electricity market and PJM capacity auction price increases that are raising ratepayers’ costs.

A VPP is a software-controlled aggregation of devices and resources, including home batteries, rooftop solar panels, electric vehicle (EV) chargers, and smart thermostats that function like traditional, physical resources.

With the U.S. peak demand estimated to reach 900 GW by 2030, VPPs could potentially serve up to 20% of peak load, reducing reliance on traditional generation and transmission projects. Against this backdrop, VPPs are experiencing a business-model shakeout, with emerging business models including utility-led programs, third-party aggregators, EV managed charging and building portfolio aggregation, each with unique control, ownership and compensation mechanisms.

New Jersey is working to create its own model. In January,  Gov. Mikie Sherrill issued Executive Order No. 2, which established a statewide energy emergency and directed the BPU to develop a VPP program within 180 days. BPU staff issued a straw proposal that creates a framework for aggregating behind-the-meter distributed energy resources into a “coordinated, utility-grade supply of grid services,” according to the proposal.

CHP, solar and storage microgrids should be eligible VPP resources 

Microgrids consisting of combined heat and power (CHP), solar, battery storage, and advanced controls should be recognized as eligible VPP resources when they can provide measurable, dispatchable demand reduction or other distribution-grid services, DCO Energy, a microgrid provider, said in its comments.

DCO said the straw proposal contains the policy foundation for including microgrids that could provide resiliency and sustainability.

The straw proposal defines distributed energy resources (DER) as including electric generators and prime movers and defines distribution services to include capacity, voltage support, peak shaving and infrastructure deferral, the company said. 

​The proposal also says that a VPP may include both behind-the-meter and front-of-the-meter resources interconnected to the distribution system.

​Straw proposal excluded valuable customer-sited resources?

​“The Straw also recognizes that long-term VPPs can serve as non-wires alternatives, relieve localized constraints, and serve load with local generation,” the filing by DCO Energy reads. “Yet the proposed Interim Program’s examples and implementation pathways focus primarily on thermostats, water heaters, electric-vehicle charging, solar and storage. Unless corrected, that implementation gap could exclude a valuable class of controllable, customer-sited resources.”

Microgrids should be included because they can provide several grid services simultaneously, the company said. A CHP-based microgrid can lower a facility’s grid consumption by using on-site generation, particularly during peak periods.

This can relieve congestion and constraints on distribution circuits and potentially defer or avoid investments in substations, feeders and other infrastructure. Microgrids can also provide resilience to critical facilities by islanding, allowing facilities to continue operating during grid outages, DCO Energy argued.

The BPU should create a demonstration program and a VPP or sustainable-microgrid tariff that provides:

●      An upfront incentive based on estimated peak-load reduction, expressed in dollars per kW

●      An annual capacity or availability payment based on calculated or verified peak-load reduction, and

●      Performance payments for dispatched services, DCO Energy said.

Compensating microgrids for demonstrated benefits

Microgrids should be compensated in a way that reflects demonstrated, non-duplicative benefits, including lower wholesale and hourly energy costs, deferred or avoided distribution-system investment, localized grid support and reliability and resilience benefits, according to the company’s comments.

“DCO supports technology neutrality, but neutrality must be operational rather than merely definitional,” the company said.  “The program should name CHP systems, controllable customer-sited  generation and microgrids among potentially eligible resources.”

​According to DCO’s estimates, about 100 sites in New Jersey could be developed into 2 MW-10 MW sustainable microgrids.

 “The Board should establish and oversee a stakeholder working group to validate this opportunity set and develop recommendations for the Interim Program and long-term tariff,” the company said.  The working group should include BPU staff, distributed energy resources (DER) and microgrid developers, technology providers, large customers and other stakeholders.

The company pointed to the Middlesex College Sustainable Microgrid, recently approved by the Board in BPU Docket No. EO26040125, as an example of a microgrid that could be included in the VPP program.

The Middlesex project includes CHP generation, useful heat recovery, chilled-water production, on-site solar, advanced load-management controls, and could in the future include battery storage and electric-vehicle charging. Its design aims to serve campus and adjacent public facility loads through a coordinated local electrical and thermal network.

​College microgrid can provide multiple value streams

“This type of project can create multiple, separately measurable value streams,” DCO said.  They include peak load reduction and additional capacity by meeting demand with c[1] [2] ontrollable onsite generation. It will also provide localized congestion relief when it is connected in a location where lower grid draw provides distribution value.

​It’s also a non-wires alternative that can defer or reduce the scope of a traditional substation, feeder, or other distribution upgrade, DCO Energy said.

DCO Energy concluded that New Jersey’s VPP should do more than aggregate existing flexible loads.

“It should create a practical pathway for distributed resources that can add effective capacity, relieve local constraints, defer infrastructure, improve resilience and integrate future solar, storage, and flexible load,” the company said in its filing.  “Qualified CHP microgrids can provide those values when properly located, controlled, measured and compensated.”