Demand response is like a peak power plant. Energy efficiency is load following. Virtual power plants include both.

Effectively integrating distributed assets into the energy supply mix requires understanding how they are analogous to traditional supply. 

Historically, electrical generation has been dominated by centralized power plants, each tailored to meet specific demands within a structured system. These energy sources are neatly categorized based on their availability and output.

Baseload plants, often coal or nuclear, form the backbone of this system, consistently providing a continuous supply of power to meet the foundational demand. Typically using combined-cycle gas technology, load-following plants adjust their generation to accommodate the daily fluctuations in electricity demand. The vast majority of the energy on the grid comes from a combination of baseload and load-following resources.

Peaking plants, typically simple-cycle gas or diesel-fired, are fired up during emergencies to meet peak demand events. While peak plants are critical when needed, they are expensive to operate and only comprise a small percentage of the grid’s total generation.

This trio — baseload, peaking, and load-following — created a system that was efficient, reliable, and seemingly well-suited for the era. However, this model becomes less adequate as we move into a more dynamic and complex energy landscape. 

Today, the resource mix has evolved from large power plants to include significant penetration of intermittent renewables and increasing numbers of distributed energy resources in front of and behind meters. Solar panels and wind turbines can generate substantial amounts of electricity at ever-more competitive prices,  but their output is not constant, leading to both surplus and shortfall periods.  Meanwhile, demand is increasing dramatically with more and more electrification of buildings and transportation. 

The rapid proliferation of a dizzying array of behind-the-meter resources makes the challenge even more complicated. These distributed power plants are sometimes called "virtual power plants," even though their impact on the grid is very real.  

To adapt to and leverage these changes, utilities must develop a new, more holistic, encompassing conceptual framework for understanding modern grid resources. 

Everything New Is Old: Distributed Power Plants as Analogous to Traditional Generation

The easiest way to understand how distributed energy resources work is by analogy to traditional resources. While the parallels are not always exact, for the most part, distributed resources have largely similar impacts on the grid as their traditional counterparts. 

We can group these distributed and traditional resources by how they behave and serve the grid's needs. Instead of baseload, load-following, and peaking, these categories are steady, variable, and flexible. 

Steady Resources

Definition: Deliver a consistent energy output or demand reduction.

• Centralized generation: Nuclear power plants and geothermal plants.
• Distributed parallel: Demand-side resources such as insulation provide shaped load requirements to be met at low marginal cost like baseload power plants.

Variable Resources

Definition: Whose influence or output varies based on conditions but is often predictable.

• Generation: Solar panels that generate power mainly during sunny hours.
• Distributed parallel: HVAC improvements, which save more energy during seasonal extremes—hot summers or cold winters.

Flexible Resources

Definition: Can be rapidly adjusted based on immediate needs.

• Centralized generation: Grid-scale battery storage that can store excess power and release when required or gas turbines that can quickly be ramped to respond to emergencies.
• Distributed parallel: Demand response measures that adjust consumer energy use in near real-time — like a smart thermostat responding to grid signals to reduce cooling during peak demand hours or batteries that can be discharged during emergencies.

Recognizing the parallels between demand-side resources and their traditional supply-side counterparts helps us build a new grid framework that mirrors current realities and engages every grid customer as a participant in achieving an affordable decarbonized energy grid.

As we chart the course of the future grid, such an inclusive perspective will be instrumental in ensuring resilience, efficiency, and sustainability by enabling demand to follow supply and virtual power plants to be integrated into the grid on a level playing field with traditional resources.

Integrating a Diverse Landscape of Distributed Energy Resources Into the Grid

Distributed power plants hold immense potential for helping to solve electric utilities’ most vexing problems. Behind-the-meter resources can effectively reduce, shift, and shape loads to address grid challenges at a much lower cost than building or expanding traditional generation infrastructure.  Behind-the-meter resources are also the only generation source that has the potential to benefit customers directly through more comfortable, higher-performing buildings and reduced energy bills. 

The question for utilities, however, is how to effectively integrate these technologies into their current resource mix as firm and reliable resources that can work together. In our next post, we’ll discuss how a more expansive concept of “virtual power plants” that uses price signals rather than direct control can help utilities integrate a much wider range of behind-the-meter solutions into their energy resource mix. 

In the following post, we’ll talk about how new advanced measurement and verification breaks down the silos that currently separate distributed energy resources from one another and allow utilities to treat distributed power plants as resources that are as firm and reliable as traditional generation.

‍