At present, there is no firm definition of a Virtual Power Plant (VPP).

In European countries such as Denmark, a VPP can refer to the ability of commercial consumers to purchase capacity at the wholesale level via an auction from small-scale base load fossil and biomass facilities for short periods of time.

In the U.S., a VPP typically refers to the ability to aggregate power production from a cluster of grid-connected distributed generation (DG) sources via smart grid technology by a centralized controller, typically a utility, and then harmonize this generation with load profiles of individual customers.

What both of these perspectives share is this: VPPs rely upon software systems to remotely dispatch generation resources. In the U.S., VPPs not only deal with the supply side, but also help manage demand through demand response and other load shifting approaches, in real time.

In short, VPPs represent an “Internet of Energy,” tapping existing grid networks to tailor electricity supply and demand services for a customer, maximizing value for both end-user and distribution utility through software innovations.

Are VPPs a part of the smart grid? With its emphasis on smart meters, real-time pricing and demand response, the smart grid is a necessary prerequisite for VPPs. But VPPs are in essence, attempts to create a mini-independent system operator on the customer side of the meter. VPPs are a natural evolution of the smart grid and are highly synergistic with the various components that are hallmarks of the smart grid.

Is a VPP synonymous with “microgrid?”

In the Pike Research report entitled Microgrids: Islanded Power Grids and Distributed Generation for Community, Commercial and Institutional Applications, the following definition was provided for a microgrid:

An integrated energy system consisting of distributed energy resources and multiple electrical loads operating as a single, autonomous grid either in parallel to or “islanded” from the existing utility power grid.

While projects such as Duke Power’s MacAlpine project in south Charlotte, North Carolina – in which 100 households participated in a VPP pilot project powered largely by a 50 kW solar photovoltaic array — can be considered both a microgrid and a VPP, in Pike Research’s view, there are some key distinguishing features behind both of these emerging concepts, and MacApline is the exception rather than the rule.

VPPs and microgrids share some critical features – such as the ability to aggregate DG (and storage) at the distribution level — but are distinct in the following ways:

• Microgrids can be grid-tied or off-grid (VPPs are always grid-tied)
• Microgrids can “island” themselves from the larger utility grid (VPP’s do not offer this contingency)
• Microgrids typically require some level of storage (whereas VPPs may or may not feature storage)
• Microgrids are dependent upon hardware innovations such as inverters (whereas VPPs are software dependent)
• Microgrids typically only tap resources at the retail distribution level (whereas VPPs can also create a bridge to wholesale markets)
• Microgrids still face regulatory hurdles (whereas VPPs can, more often than not, be implemented under current regulatory structures and tariffs)

The highest profile VPP in Europe to date is called “FENIX,” which is a rather odd abbreviation for “Flexible Electricity Network to Integrate the eXpected ‘energy revolution.’” With heavyweight companies such as EDF Energy Networks, Iberdrola SA, Gamesa and Siemens all involved, FENIX was more focused on integrating wholesale power supplies from wind farms and industrial co-generation (as well as distributed Combined Heat & Power plants) than on harmonizing distributed renewables such as solar PV or fuel cells with the load profiles of individual retail customers.

Two projects in Colorado can also be classified as VPPs: the FortZED project in Fort Collins and Xcel Energy’s SmartGridCity pilot in Boulder, the latter being the better example since the goal of the project is to allow a central control dispatcher to treat a portfolio of distributed generation resources as if they were a single large power plant, maximizing efficiency through load shifting and demand response.

California once jump-started the world’s Concentrated Solar Power (CSP) and the rest of renewable energy industry in the ‘80s, but today, the state has earned the reputation of being the most difficult state to site, permit, and construct any type of renewable energy project in the country. Since the Mojave Desert in southeastern California ranks second only to Africa’s Sahara desert in terms of the premium solar resources necessary to support Concentrated Solar Power (CSP) technologies, efforts to streamline government approvals in California carry major impacts on the global markets for parabolic trough, power tower, and Stirling engine CSP technologies.

Consider this startling fact: the cost of mitigating impacts on endangered desert tortoise populations in San Bernardino County (another hot spot for CSP and other renewables) can reach $1 million — per tortoise!

Unfortunately, power plant siting challenges could become more – rather than less – cumbersome with the recent introduction of desert protection legislation by Senator Diane Feinstein (D-California). The proposed legislation would place more than a million acres of public land in the Mojave Desert off limits to CSP and other renewable energy resource development.

The good news is that one new CSP project – the 392 MW Ivanpah Solar Electric Generating System developed by BrightSource Energy – gained approval from the California Energy Commission (CEC) on March 17th. This CSP project – which deploys a new 459-foot tall “power towers” technology – would be the first new large scale solar thermal projects built in California in nearly two decades. The CEC environmental impact review took two-and-a-half years, a relatively short time considering that a few projects in the state have been involved in the permitting process for close to a decade. (Part of the urgency on behalf of this particular facility was a $1.37 billion loan guarantee from the federal Department of Energy that will expire if construction does not begin before the end of 2010.)

There are a few other signs of progress in the state’s efforts to have its investor-owned utilities to meet its targets of 20% renewable energy supply by 2010 and 33% by 2020. State regulators finally signed off on the construction of new transmission lines that can tap California’s world-class wind resource area in Kern County’s Tehachapi Mountains, which has the potential to add more than 5,000 MW of new wind power capacity to the state’s supply portfolio. Terra-Gen Power LLC, a wind power developer, also recently broke ground on a new wind farm in this last gigantic remaining wind resource area in California on private lands featuring 100 1.5 MW General Electric turbines. Ultimately, the project is to be built out to 800 MW.

In order to help break the permitting logjam for California’s renewable energy industry in southern California, Governor Schwarzenegger is hosting a series of meetings and events in the California desert this week. On March 24th, a conference entitled “Siting and Permitting Large-Scale Projects in the California Desert and Beyond,” is being held at UC Riverside.

For more information, visit the Governor’s Renewable Energy Policy Conference website at: http://gov.ca.gov/home/energy-conference

When AB 117, which created the “Community Choice Aggregation” (CCA), was passed in the California Legislature in 2002, the program was touted as a way to allow local governments to choose the environmental cleanliness of their power supply portfolios, but leave the business of delivering and billing for electricity to the incumbent distribution utility.

At the time, the distribution utilities couldn’t object because under utility restructuring laws passed in 1996, they were not going to be generating power anymore. In fact, PG&E publicly supported the CCA law and the efforts of Marin County to switch over to greater renewable energy content. But much has changed in the interim.

On February 2nd, the Marin Energy Authority (MEA), a new joint powers agency, approved a five-year contract with a subsidiary of Shell Oil to launch a program dubbed “Marin Clean Energy.” Among the benefits touted by MCE’s promoters for program participants are the following:

• Instantly boost renewable energy content from 12 to 25 percent, without any rate increases
• Shift ratepayer income derived from local citizens to local benefit instead of being distributed throughout the vast PG&E service territory
• All exit fees and transfer costs are picked up by MEA
• Ratepayer revenues create Marin County’s first enterprise district, allowing its local energy assistance programs to have a sustainable source of funding
• Allows Marin County to develop its own net metering policy to compensate excess power generated by roof-top solar and small wind systems

According to Marin County staff, the MCE program is the single biggest step the local government can take to meet California’s AB 32 greenhouse gas emission targets, and is the easiest and most cost effective way to respond to the global climate change threat.

MCE almost did not move forward due to concerns about loan guarantees. In a highly unusual move, four local wealthy citizens put up their own wealth as collateral to move the project forward when PG&E threatened to take the Marin Municipal Water District to court if it backed up any loan guarantee with MCE. PG&E has also allegedly refused to transmit electricity over its distribution lines to Marin County residents opting to purchase power through the MCE program.

The selection of Shell, an oil company with a checkered past on human rights and other CSR issues, has raised more than a few eyebrows. Can one really go local and global at the same time?

Some green energy advocates, particularly fans of solar PV technologies thriving under the current suite of state and federal subsidies, have been leery of the CCA model, since it is focused more on lowering the cost of wholesale renewable power than promoting local clean distributed generation. At least that is the case for MCE and its partner Shell during the first five years of operation. The track record of Shell Oil on the human rights of indigenous peoples living in communities in the developing world where oil or natural gas is extracted also emerged as an issue. While originally a pioneer on solar energy among oil companies, the firm, along with other major oil companies such as Chevron and ExxonMobil, has recently shifted to an emphasis on biofuels.

Today, political opposition to Marin Clean Energy is growing within Marin County itself. For example, Michael Smith, Marin County Treasurer, recently came out against the program and 11 former mayors of Mill Valley, a city that elected to join MCE, also signed a joint letter criticizing the plan.

Skeptics wonder whether these recent efforts within Marin County to oppose a program that is now already in place may be a result of PG&E’s aggressive advertising and PR plan to scuttle the program, a lobbying effort that could entail as much as $35 million to pass Proposition 16 on the upcoming June ballot. Prop. 16 requires two-thirds of voters to approve the financing of any new power plants to be developed by any city or county agency.

Prop. 16 would not only handcuff any CCA – such as the MCE — but also limit the abilities of existing municipal utilities and all other California local governments to finance renewable energy facilities that PG&E has itself repeatedly failed to bring on-line, despite a state RPS requiring 20% of its electricity to come from renewable energy in 2010. At present, PG&E obtains less than 13% of its electricity from renewable sources.

PG&E claims Prop. 16 simply gives the public a voice and choice. It was originally entitled the “Taxpayer Right to Vote Act,” a clever way to market this ballot measure in these times of lingering fears about our pocketbooks. That Orwellian title caught the attention of Attorney General Jerry Brown, who renamed the measure the “New Two-Thirds Requirement for Local Public Electricity Providers Act.”

The changing political dynamics in Washington, DC due to Democrats’ loss of a Senate seat in Massachusetts means that “cap and trade” climate legislation is given little chance of passing this year. The only hope for passing a bill in 2010 that would cut carbon emissions may be what most pundits have long thought as the least politically viable approach: a tax on carbon.

But if that’s going to happen, a strange bedfellows alliance will have to coalesce in short order, bringing together extremes on the left and right. The key players will be large oil companies such as ExxonMobil, which has long been viewed as the chief climate change skeptic, but which has also been publicly pushing a carbon tax under recent shifts in upper management. Radical environmental groups and leading economists also prefer this approach.

While the general media like to portray the issue of regulating carbon as a simple business versus environment dynamic, as always, the politics surrounding corporate policy includes many shades of grey. In fact, the business case for addressing global warming is apparently so compelling to some in the private sector that 80 U.S. corporate leaders — including CEOs from companies such as eBay, Virgin America and Pacific Gas & Electric — signed a joint letter in late January urging President Obama and Congress to pass comprehensive climate and energy legislation this year. The prime message in the letter is that unless the U.S. sets clear carbon reduction targets, it will fall behind in the current global race to develop new carbon-free renewable technologies.

But most of those companies hold little sway among conservatives in Congress. ExxonMobil and other energy companies not invested in coal do carry weight in Washington, DC. If they place a high priority on passing climate legislation in the form of a carbon tax, they could bring with them the prized 60th Senate vote environmentalists need to avoid a filibuster against climate legislation.

The Environmental Protection Agency (EPA) will soon be issuing its rules governing greenhouse gas emissions, including carbon. Once these rules are released, coal companies might be willing to come to the table and negotiate a better deal in Congress, and interest in climate legislation may increase, but action delayed until 2011, hampering the growth of renewable resources in the U.S. in the short term.

Over 400 groups comprising a loose coalition of environmental justice, low-income and faith-based organizations known as “Climate Reality Check” prefer the Cantwell-Collins “cap-and-dividend” approach, which seems to be gaining the most momentum in Congress right now, with companies such as the FPL Group, Calpine Iberdrola SA, Berkshire Hathaway and Chevron Corp. all registering to lobby on the bill.

“The architecture is far better,” said Daphne Wysham, a policy expert with Climate Justice Now!, an environmental justice coalition. “There are also no offsets, which are impossible to verify. But I think the dividend approach makes the Cantwell bill politically palatable. For example, ARRP has already endorsed it,” she said. Her main problem is that the targets are still too not aggressive enough, as they are similar to those in the House/Senate cap and trade bills. “But with Cantwell, maybe we can at least get the architecture right, and then ratchet up the targets over time. With the other two omnibus House and Senate cap and trade bills, polluters can get away with doing nothing until 2030 by using offsets and engaging in ‘paper reductions’ that are not real.”

Elaine Kamarck, with the Kennedy School at Harvard University, and co-chair of the U.S. Climate Task Force, thinks a separation of the most popular energy provisions– such as efficiency and renewable energy standards – have the best chance of passing on their own, absent a carbon cap. She thinks the political viability of a carbon tax and other approaches beyond cap and trade has actually increased over time, but that it is too early whether to determine whether anything solid will come out of Congress this year.

“If a consensus emerges that cap and trade is just not going anywhere – and that seems to be just sinking in – then they will go back to the drawing board and examine other options,” she said. “You have to realize that cap and trade was initially being pushed before the economy fell apart. Markets were God and Wall Street was still filled with heroes. In that kind of political environment, cap and trade had some ‘umph’ behind it. Now, Goldman Sachs and the rest of Wall Street are in the same category of bad guys as big polluters.”

It remains to be seen whether corporate support for climate regulations, including lobbying by the renewable energy sector, will be sufficient to pass significant legislation in Congress in 2010, but shifting priorities among a growing number of key players may signal a deepening split, with mainstream environmentalists, utilities, and coal companies on one side, and grassroots environmentalists, social justice groups, and non-coal energy companies such as ExxonMobil on the other.

The best hope for the renewable energy sector may be to separate the federal Renewable Portfolio Standard, among the most popular of features of the current omnibus federal cap and trade bills. At least in that regard, a clear market would be created for solar, wind, geothermal and biomass projects. The downside to that approach is that Congress may then never get around to regulating carbon, which would hamper international efforts to create a sustainable market for renewables, since the rest of the world is still looking to the U.S. for leadership on the global climate change front.