California dwarfs all other VPP markets in North America

California dwarfs all virtual power plant (VPP) markets in North America, housing 24% of projects in the region, according to Wood Mackenzie’s ‘North America VPP market: H1 2023’ report.

“VPPs continue to receive growing attention from the energy industry. Our new market study unveiled California as the clear leader, containing more VPPs than the three follow-up US states combined,” said Ben Hertz-Shargel, Global Head of Grid Edge at Wood Mackenzie. 

According to Wood Mackenzie’s latest report, half of all VPP projects that incorporate electric vehicles (EVs) are located in California, and 41% of those that incorporate behind-the-meter batteries.

Wood Mackenzie findings show that VPPs are highly market dependent. The top four states by VPP deployment, California, New York, Texas, and Massachusetts, are located within an organized power market, but also offer aggregator-friendly standard offer programs for distributed energy resource (DER) capacity.

The landscape of VPP operators is highly concentrated, with seven having over 1 gigawatt (GW) of disclosed capacity under management. The top four, CPower, Enel, AutoGrid, and Voltus, have portfolios greater than 4,000 megawatt (MW) in North America, which would place each within the top ten largest independent power producers in the US.

"The demand side of electricity has always taken a backseat to the supply side. We are seeing that change, a trend that will accelerate given transmission constraints, generator interconnection delays, and regulator recognition that demand response is an essential tool to prevent grid failure,” Hertz-Shargel said.

According to the report, EVs have not reached the level of penetration in VPPs that behind-the-meter batteries have. Nearly all participation today involves charging curtailment, with vehicle-to-grid functionality remaining at the pilot phase.

The analysis found that among the 50% of VPPs that incorporate EVs outside of California, very few are market integrated, with 68% participating in utility residential demand response or managed charging programs.

“Considerable first-mover advantage therefore remains to bring EV flexible capacity to utilities and wholesale markets. This is particularly true for public EV charging stations and commercial and municipal fleet depots, many of which will be deployed with collocated storage and will be capable of providing advanced grid services,” Hertz-Shargel concluded.

ENDS

A simplified definition of VPP: aggregations of distributed energy resources (DERs) that provide grid services to utilities and wholesale markets.  Industry definitions of VPP vary considerably, however, and Wood Mackenzie’s definition incorporates criteria involving location, orchestration, and other project attributes.

In a new market study, Wood Mackenzie has analyzed a database of over 500 VPP projects to answer those questions, including ‘how to precisely define VPPs’ as well as to identify what key opportunities exist. This report analyzes the state of the VPP market today in the US and Canada and includes topics such as geographic, technological, and customer trends; drivers; monetization pathways and the commercial landscape of providers.