Texas hedges electricity prices with virtual power plant

Blake Richetta, CEO of the US division of German battery energy storage company Sonnen, says it was “fourth time’s the charm” when he was developing a new virtual power plant (VPP) market design.  

Now, through a partnership with energy technology company Energywell and registered electric provider (REP) Abundance Energy, that design has come to life.  

The trio announced today the launch of a new behind-the-meter VPP aimed at lowering electricity costs and reinforcing the Texas grid. Sonnen will provide the batteries to Abundance Energy customers; the modules will be optimized by Energywell.  

“During the other three campaigns, we had all these bumpers,” Richetta told ESS News, noting that guardrails were put in place to decrease risk. Ultimately, he explained, taking the harder route ended up working. “We decided to go about it a different way that wouldn’t have as many restrictions and that let us go a lot more aggressively to exponentially increase the opportunity.”

“The VPP serves as part two of Sonnen’s collaboration with Solrite to launch a virtual power plant power purchase agreement in Texas earlier this year that provided customers with solar and [energy] storage at no upfront cost thanks to Solrite’s financing model,” Thomas Mandry, abundance energy’s CEO, explained to ESS News. He added, “A new wave of customers can now access that program and benefit from low fixed energy rates.”

“If you study a lot of REPs, you’ll find a bunch of gimmicks that are out there,” he said, citing policies like “free nights” or “free weekends.” Though those claims sound great on the surface, going into the details reveals a different story. “They really aren’t good. We’re going to offer a low fixed rate all of the time, and that’s going to help Texas customers quite a bit as it’s a long-term fixed rate.”  

“The neat thing about this,” he added, “is that it’s also a long-term hedge against the rising electricity prices here in Texas.”  

Richetta also noted that the combined solar-and-storage systems will also financially benefit those outside of the VPP.  

“We’re about optimizing the grid, not defecting from it,” he said. Richetta explained that the more solar and batteries go entirely off grid, the higher the cost of maintaining the grid system to everyone who is still connected. “This kind of VPP hardens the grid, prevents outages from happening in the first place and keeps rates low, whereas solar by itself contributes to rates going up.” 

“What makes Texas the leading opportunity in the US is the volatility that exists in the market,” added Michael Fallquist, Energywell’s CEO, in a conversation with ESS News, noting that the combination of skyrocketing load growth and intermittent energy sources have augmented ERCOT’s [the Electric Reliability Council of Texas grid] instability.

Crucially, Richetta noted semi-deregulated wholesale markets like the California Independent System Operator or the New York Independent System Operator could be next.  

“If a VPP can be so successful in a deregulated market so fast, does that mean that if another market were to deregulate, they could do the same thing?” he asked. “The answer is yes — there’s no reason to say that if California decided to deregulate fully, they couldn’t turn this on.”