Imagine having an abundance of cheap, advanced energy resources at your fingertips, but instead proposing to build another natural gas plant. This is what Nevada utility NV Energy is proposing in its 2024 Integrated Resource Plan (IRP).
Adding new gas instead of maximizing virtual power plant (VPP) capacity is a mistake Nevada cannot afford to make. By improving the virtual power plant proposals in its latest IRP, NV Energy can reduce the need for new natural gas in the state and join VPP leaders across the nation.
The 2024 NV Energy IRP
Every three years, NV Energy puts forth an IRP to identify the most optimal and cost-effective energy resources to meet growing energy needs.
NV Energy’s proposal to expand its residential and commercial demand response programs in the current 2024 IRP shows promising potential. Some of NV Energy’s proposals align with the DOE’s definition of a virtual power plant. However, Advanced Energy United wants to see Nevada scale up its VPP ambitions even faster to help avoid the need for new gas.
Well-structured VPP programs would allow Nevada residents who own distributed energy resources (DERs, such as rooftop solar and battery owners, smart water heaters, smart thermostats, etc.) to receive compensation from the utility for helping to lower system peaks and providing services to Nevada’s grid. The potential of the proposed demand response program in its latest IRP makes NV Energy’s proposal to build an additional 411MW of new gas at the North Valmy Generating Station even more puzzling and disappointing.
In a new report by Advanced Energy United, Moving the Needle on DERs and VPPs in Nevada, we delve deeper into VPP best practices that should be incorporated into the 2024 NV Energy IRP. The report contains an analysis of how NV Energy can leverage DERs and VPPs to reduce or shift peak demand while promoting reliability and affordability for Nevadans. The report includes case studies from utilities in California, Utah, and New York that are taking advantage of new customer-sited energy technologies and are integrating VPPs and DERs into resource planning.
There are 30-60 GW of VPPs active in the U.S. today. Adopting best practices from utilities’ VPP programs in other states can help NV Energy go even further than what’s proposed in its 2024 IRP.
Implementing best practices is critical to maximizing the benefits of DERs and VPPs in Nevada resource planning.
VPPs are a powerful new tool for electric utilities, allowing the utility to access and manage distributed energy resources (“DERs”) – customer-sited energy technologies such as smart thermostats, battery storage, EV charging, smart water heaters, and others.
NV Energy should focus on ensuring its VPPs are multi-technology, ensuring programs are accessible for third-party equipment and service providers, and rewarding customers with adequate compensation for making their DERs available for utility access. VPPs can provide the same kind of reliability and enhanced economic value compared with centralized power plants – but only if they are designed to take full advantage of the thousands of DERs that Nevada homeowners and business owners are installing each year.
Best practice #1: Launch multi-technology VPPs
As proposed in the 2024 IRP, NV Energy’s VPP program does not clearly incorporate all viable DERs across residential and commercial segments. While the IRP references a range of DERs including storage, water heaters, pool pumps, thermostats, and more, it is key that the utility revisits vague language in the 2024 IRP and commits to fully leveraging these DERs at every opportunity. By doing so, NV Energy would show its commitment to fully leveraging the power of new customer-sited technology, which is undergoing rapid expansion according to NV Energy’s own forecasts.
Best Practice #2: Partner with private VPP and DER companies
Partnering with third-party VPP and DER technology companies presents an opportunity to reduce implementation costs. NV Energy must create opportunities to collaborate with third-party VPP companies to ensure DERs deliver benefits to the grid. Private sector partners can bring valuable expertise and resources to the table, drawing on customer engagement expertise, experience in other markets, and integrations with other DER technology providers. Utility ownership of DERs is not a prerequisite for successful VPPs, and NV Energy would benefit by fully embracing a bring-your-own-device approach to demand flexibility for all DER types.
Best Practice #3: Reward customers generously and predictably
VPPs attract participants by paying home and business owners for the performance of their devices (i.e. via a $/kW payment for peak shaving). In some other states, annual payments for customers can top $1500. By offering robust participation payments that compensate consumers fairly, NV Energy can attract more participants and enhance energy affordability and reliability for Nevadans. Legislators also have a role to play here: VPP programs can attract more participants if Nevadans have access to rebates that can accelerate DER adoption.
If NV Energy adopts these best practices, including supporting DER deployment and integrating VPPs into resource planning, it will allow the state to meet energy demand more affordably and help the state achieve its energy goals, including the state’s goal of achieving net-zero energy by 2050. Advanced Energy United is urging the Nevada Public Utilities Commission to prioritize VPPs as a key piece of the toolkit as Nevada phases out gas, and we are engaging with Nevada policymakers on the importance of customer-sited resources for advancing Nevada’s energy future.
