Managing peak demand and grid flexibility: The role of renewable energy, VPPs and vehicle-to-grid technology

The power sector in the US is undergoing a significant transformation, driven by ambitious decarbonisation goals and substantial investments in renewable energy and grid modernisation. This shift is leading to increased adoption of utility-scale renewables, including solar, wind and battery storage, along with the proliferation of behind-the-meter distributed energy resources (DERs) such as rooftop solar and residential energy storage, writes Sadiq Saeed, chief product officer at PTR.

Additionally, flexible loads like electric vehicles, heat pumps and smart HVAC systems are becoming more common. While utility-scale renewables pose interconnection challenges, electric utilities are considering behind-the-meter DERs and flexible loads as potential grid flexibility assets to tackle grid congestion through demand response programs and virtual power plants.

Shift towards clean energy sources

The Biden Administration has rolled out ambitious clean energy targets aiming to achieve 100% clean electricity by 2035 and reduce greenhouse gas emissions by 50% by 2030 and 100% by 2050. As a result, the US power sector is witnessing a steady decline in reliance on coal and an increasing shift towards renewable energy sources such as wind, solar, and hydroelectric power.

According to DOE, it is estimated that 162GW to 183GW of conventional generation will retire between 2023 and 2030. If retiring assets were operating at full capacity, this would imply a supply gap of 221 to 242 GW. However, the majority of recent and expected retirements are aging coal power plants, with some oil and natural gas plants retiring as well; retiring assets will likely be operating below full capacity.

Moreover, the US power grid is required to triple the renewable installed capacity, reaching 2,950 GW by 2035, including utility-scale solar, onshore wind, offshore wind, hydropower, nuclear, and other clean energy resources. Around 80% of the clean energy will be coming from onshore wind, offshore wind, and solar by 2035.

Moreover, the US is experiencing unprecedented growth in DER adoption across households and businesses, which dramatically increases the potential capacity that VPPs can aggregate. This DER adoption growth occurs across DERs that generate, demand, and store electricity.

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Increasing peak demand

US electricity consumption remained relatively stable over the past two decades leading up to 2021 due to energy-saving measures offsetting demand increases.

However, the evolving dynamics in the power sector, such as rising industrial loads from economic growth, unprecedented development in data centres, growing adoption of electric vehicles (EVs) and their associated charging infrastructure, and increasing urbanisation, are expected to drive peak demand up by approximately 8% by 2030, from 743GW to 802GW. The peak demand could go up to 1TW by 2050.

Challenges associated with changing power sector dynamics in the US

The US power grid is subjected to a great challenge to meet the increasing future demand in line with the 100% clean electricity target; the US will be losing nearly 183GW of the base load electricity generation from the existing conventional power plants in addition to the increasing peak demand of nearly 59GW by 2030.

However the US power grid has rolled out 80% clean energy targets by 2030, but the major challenge to meeting this target is the congestion of the US’s existing transmission network. Currently, the renewables interconnection queue stands at around 2.6TW. To meet the interconnection queue and 100% clean energy targets, the US power grid needs to expand its transmission capacity by 1.3TW annually (2.5% annual growth rate).

This presents a significant challenge to capital expenditure. Although, in the US, 20 new high-capacity transmission projects have entered the construction phase, which will add approximately 20GW of transmission capacity by 2030, it will still be insufficient as the interconnection queue is anticipated to increase as well over the years.

To address grid congestion and meet the increasing load demand, grid flexibility services such as distributed energy resource management systems (DERMS), virtual power plants (VPPs), and demand response programs are essential. With the retirement of conventional power plants and rising peak load demand, the US will require approximately 242GW of grid flexibility services.

This need reflects the growing adoption of behind-the-meter distributed energy resources (DERs). According to PTR, around 324GW of new grid flexibility capacity will be added to the US power grid by 2030. This capacity is constituted by DERMS and VPP (including demand response).

Increasing Deployment of Virtual Power Plants (VPPs)

Among these services, VPPs are gaining prominence in the US market. US electric utilities are incorporating components such as demand response, smart EV charging, and vehicle-to-grid solutions into their VPPs. According to PTR, installed VPP capacity in the US is currently 60GW, with expectations to increase to 300GW by 2030. This capacity growth is anticipated to come from behind-the-meter DERs, including EV storage, solar rooftops, residential storage, non-residential DERs, and flexible loads like smart thermostats.

VPPs offer several benefits: they enhance resource adequacy at a lower cost compared to traditional methods, improve resilience, reduce greenhouse gas emissions and air pollution, alleviate transmission and distribution congestion, and empower communities. For example, a VPP comprising residential smart thermostats, smart water heaters, EV chargers, and behind-the-meter batteries could provide peaking capacity at 40 to 60% lower net cost than alternatives like utility-scale batteries or natural gas peak plants. Instead of relying on natural gas peak plants and extensive transmission and distribution lines, utilities can utilise VPPs to balance demand locally and support the grid with DERs.

According to DOE, deploying VPPs could save approximately $10 billion annually in grid costs required on the transmission and distribution infrastructure and redirect spending back to electricity consumers. PTR estimates that achieving nearly 300GW of VPP capacity will require an investment of $4.5 billion from the utility sector. At this scale, VPPs could contribute 10-20% of peak demand, varying based on factors such as DER availability and the mix of utility-scale renewable generation.

The Evolving Role of Heat Pumps, Thermostats, HVAC

Technologies such as heat pumps, smart thermostats, and advanced HVAC systems are playing an increasingly important role in the energy landscape. These technologies not only improve energy efficiency but also provide demand response capabilities that can be integrated into VPPs. For instance, smart thermostats can be adjusted remotely to reduce energy consumption during peak demand periods, contributing to grid stability.

According to the DOE, residential solar and fuel-based generators will contribute a significant capacity of around 20 to 35GW to grid flexibility services by 2030. Stationary batteries will contribute 7 to 24GWh, while smart thermostats, smart water heaters and non-residential DERs will provide 5-6GW of flexibility services by 2030.

Electric Vehicles as a key resource for VPP solutions

According to PTR, the adoption of electric vehicles in the US, including commercial and passenger vehicles, is anticipated to increase to 31.5 million by 2030 up from 4.6 million in 2022. Moreover, the increasing adoption of EVs in the US will also increase the installation of EV charging infrastructure, reaching an installed base of 22 million by 2030.

Where the rapid adoption of electric vehicles and their charging infrastructure is resulting in increasing peak demand, this adoption could also be taken as an opportunity to increase the grid flexibility resources through enrolling the electric vehicles‘ battery as the storage capacity to support the grid during critical over demand scenarios through enrolling in VPP programs.  Among all the behind-the-meter grid flexibility assets, the growth of EVs and EV charging infrastructure makes it the most promising grid flexibility asset in the coming years. Technological advancements in the EV charging infrastructure, such as bidirectional power flow capability (V2G), will further increase the utility of EVs as key assets to VPP solutions.

V2G Developments and Changing Dynamics of EV Charging Infrastructure

EV battery storage capacity could support grid operations, especially during peak demand or grid emergencies, with vehicle-to-grid (V2G) technology enabling a bidirectional flow of electricity. V2G enables EVs to discharge electricity back to the grid, effectively turning them into mobile energy storage units. The adoption of V2G technology could revolutionize the relationship between EVs and the grid. According to DOE, each year from 2025 to 2030, the grid is expected to add 20-90GW of demand from EV charging infrastructure and 300-540GWh of storage capacity from EV batteries. 

According to PTR, the V2G adoption in the US is anticipated to grow many folds, reaching an installed base of nearly 94 thousand chargers by 2030, up from 800 chargers in 2023. As V2G adoption increases, the cumulative storage capacity of the EVs could be harnessed to provide significant grid services and is anticipated to surpass the estimated EV storage flexibility by 2030.

Key states like California and Texas are leading the charge in promoting V2G integration through supportive regulations and pilot projects. These states have implemented policies that incentivize the use of V2G technology, recognizing its potential to improve grid reliability and reduce the need for additional peaking power plants. According to PTR, California and Texas will contribute to more than 75% of the total V2G in the US by 2030.

California

California is a leader in promoting vehicle-to-grid (V2G) technology through a combination of supportive regulations and innovative pilot projects. The California Public Utilities Commission (CPUC) has been exploring ways to integrate V2G into demand response programs, allowing EV batteries to provide grid support during peak demand periods. For instance, the CPUC has supported projects that leverage V2G to enhance grid reliability and reduce the need for additional peaking power plants.

The California Energy Commission (CEC) has played a significant role by funding V2G research and demonstration projects. This support is crucial for showcasing the technology’s benefits and scalability. California’s ambitious clean energy goals, outlined in Senate Bill 100, mandate that the state achieve 100% clean electricity by 2045, which aligns with the integration of technologies like V2G.

In addition, California’s Zero Emission Vehicle (ZEV) goals aim for 5 million ZEVs on the road by 2030, further driving the adoption of V2G technology. The state also supports EV charging infrastructure expansion, including incentives for V2G-capable chargers, to facilitate the growth of V2G technology.

Texas

Texas is also making strides in V2G integration through its regulatory framework and grid modernization efforts. The Texas Public Utility Commission (PUC) has backed various pilot programs aimed at assessing V2G’s impact on grid stability and efficiency. Key pilot projects include Aggregate Distributed Energy Resource (ADER) Pilot Project in Houston and Dallas areas and Oncor Electric Delivery VPP.

Additionally, the Electric Reliability Council of Texas (ERCOT), which manages the state’s grid, is exploring how V2G technology can assist in integrating renewable energy sources and managing grid fluctuations. Texas’s commitment to renewable energy and grid modernization includes considering V2G as a valuable tool for enhancing grid reliability and efficiency.

As more states observe the benefits realised in California and Texas, supportive regulations and pilot projects are expected to proliferate, creating a more favourable environment for V2G technology deployment.

The US energy landscape is rapidly evolving, driven by a transition towards renewable energy and the need for enhanced grid flexibility. Virtual Power Plants (VPPs) are emerging as a key solution to manage the growing share of renewable energy, and technologies like V2G are set to play a crucial role in this transformation. By enabling EVs to act as mobile energy storage units, V2G technology can support grid operations and enhance the effectiveness of VPPs.

With supportive regulations and continued investment, V2G is poised to become a critical asset in the future energy landscape of the US California and Texas are leading in V2G adoption, setting a model for others.

About the author
Saqib Saeed is a highly accomplished market research professional and a data storyteller in the international energy industry. With over a decade of experience in the field, he currently serves as the Chief Product Officer at PTR Inc. His expertise lies in the power grid and e-mobility equipment sectors.