Inside Clean Energy: This Virtual Power Plant Is Trying to Tackle a Housing Crisis and an Energy Crisis All at Once

Vicken Kasarjian is giddy as he describes a project that aims to address two of Richmond, California’s greatest problems: a lack of affordable housing and unreliable electricity.

Kasarjian is the chief operating officer of MCE, a nonprofit electricity provider that serves parts of four Bay Area counties. MCE’s plan is to retrofit about 100 houses and 20 businesses with rooftop solar, batteries and smart appliances, and then sell excess electricity from the solar and batteries into the grid.

“It is so interesting, enlightening and fun to do this,” he said.

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He’s talking about a “virtual power plant,” which is when a company uses software to coordinate a series of energy systems—usually batteries—to export power to the grid at the same time. The result is a power plant that can participate in the state power market, selling its electricity at times of high demand and high prices.

There are dozens of virtual power plants in development across the country, with thousands of households and businesses involved. What’s different about the MCE project is it has a housing component, with plans to renovate abandoned properties and then sell them at subsidized prices to first-time homebuyers with qualifying incomes.

Richmond, with a population of about 110,000, has suffered for decades from air pollution from a giant Chevron oil refinery. The city has low incomes for the region, but high housing prices due to a lack of supply and proximity to some of the most affluent parts of the country, like Berkeley, which is 10 miles away.

“A virtual power plant is decentralized, decarbonized and democratized,” said Alexandra McGee, MCE’s manager of strategic initiatives.

The “decentralized” part is pretty self-explanatory, as is “decarbonized,” considering that the electricity is coming from solar and batteries. But how is this “democratized”?

She said the process is democratic because MCE’s board is made up of local elected officials from the communities served, and because the project would make residents more active participants in the energy system. MCE would come up with a system to compensate people for the electricity that gets exported.

MCE is working with several partner organizations, including ZNE Alliance, a nonprofit that is serving as project developer.

MCE’s mission extends beyond providing electricity, which is why a project that combines electricity and housing is “really a sweet spot” for the organization, McGee said. MCE serves some of the richest and poorest parts of the region, with about 575,000 customers in Contra Costa, Marin, Napa and Solano counties.

The initial phase of the project, with about 120 customers, will take about three years to get up and running, with $3 million in funding from the California Energy Commission, plus money from other sources. The long lead time is because the MCE and its partners want to account for the potential for delays in acquiring and renovating the properties.

“This is a first-of-its kind project that will combine clean energy technologies with tangible community benefits through integration with the California grid,” said David Hochschild, chair of the California Energy Commission, in a statement.

The virtual power plant will have a capacity of about 1.25 megawatts. For perspective, the peak electricity demand in MCE territory is about 1,200 megawatts, so the immediate effects on the grid will be small.

But the planners of the MCE project view this as a test of the idea of combining housing policy and energy policy, because the housing will provide a place for people to live at the same time that its advanced energy features will be helping to reduce local emissions, and the virtual power plant will be providing stability for the grid. If successful, the partners could then expand the project to a much larger scale.

How large? Kasarjian spoke of having a virtual power plant that includes MCE’s entire service territory, with hundreds of megawatts. The housing part of the plan also would expand, based on available funding.

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In other virtual power plant news, Tesla said last month that it is working with the utility PG&E to allow customers to sell electricity from Tesla Powerwall battery systems into the grid. Customers who sign up would be paid $2 per kilowatt-hour, which is a huge premium compared to the retail price of electricity, creating a big incentive to participate. PG&E is the utility that delivers electricity in most of central and northern California.

The program would be in effect at the time of day when electricity demand peaks, in the afternoon and evening. Software would determine if the customer’s battery has enough power to be able to export.

Tesla is describing this as “the largest distributed battery in the world,” with the potential to include all of the roughly 50,000 Powerwalls in PG&E’s territory.

Considering the high interest in virtual power plants from power companies, I suspect we’ll be seeing a lot of projects that are, briefly, the largest in the world before something bigger comes along.

Other stories about the energy transition to take note of this week:

The Supreme Court’s EPA Ruling Could Result in More Expensive and Restricted Carbon Regulation: The Supreme Court has throttled the federal government’s power to act on the climate crisis. But the decision left many things unclear, which means it could take more lawsuits and possibly years to determine how much leeway the Environmental Protection Agency still has to regulate greenhouse gases from power plants, as my colleague Marianne Lavelle reports. The court’s 6-3 decision was decried by environmental advocates, but they also noted that the court could have attacked federal authority even more than it did. One potential outcome is that the government may be more likely to rely on carbon capture technology, which is expensive and largely unproven, to address emissions from power plants. By limiting federal regulatory authority, the ruling may mean that states and local governments will have an increasingly important role to play in climate and clean energy policy, as Maggie Astor reports for The New York Times.

California Gives New Life to Gas Plants in Emergency Overhaul: California Gov. Gavin Newsom has signed a measure that would delay closing natural gas plants and expedite building new power plants to try to avoid blackouts over the next five years. The bill was opposed by environmental advocates who said it will harm the state’s clean energy goals and public health, as Anne C. Mulkern reports for E&E News. “There’s simply no excuse for having to keep running … the oldest gas plants on our system,” V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies, told E&E. “They’re heavily polluting, they’re very inefficient and they don’t run very well, and yet we’re giving them new life.”

An Upheaval in Utility Regulation Emerges Nationally as Hawaii Proves a Performance-Based Approach: In most states, regulators design utility rates to cover the costs of service plus a profit. Hawaii bucked this approach in 2020 with a new system, known in regulatory jargon as “performance-based ratemaking,” which ties utility profits to new sets of goals, like improving reliability and cutting emissions. Now, at least 13 other states are exploring similar changes, marking the potential for a major shift in utility regulation, as Herman Trabish reports for Utility Dive. The switch to performance-based rates could help to accelerate the transition to clean energy because of the way that cost-based rates may encourage companies to continue to operate old and inefficient power plants.

Chinese Automaker BYD Overtakes Tesla in Global EV Sales: BYD, a Chinese automaker backed by Warren Buffett’s Berkshire Hathaway, sold 641,000 electric vehicles in the first six months of the year. That was triple the company’s sales in the prior-year period, and enough to overtake Tesla’s sales of 564,000 vehicles to lead in global sales, as Edward White, Gloria Li and Song Jung-a report for Financial Times. Tesla has said its sales were hurt by difficulties obtaining parts. The rise of BYD is the latest of many indications that China is becoming the world’s leading auto market and that Chinese companies are well-positioned to be the leaders there.

Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to [email protected].

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