Google agreed in June to fund a 100-MW Voltus virtual power plant in PJM

Google agreed in June to fund a 100-MW virtual power plant in PJM Interconnection, Utility Dive reported Oct. 19. Voltus will operate the three-year program and carry Google's capacity obligation in the regional market.

The arrangement pays residential, commercial and industrial PJM customers to participate, so the capacity Google is buying comes from demand reduction spread across the market rather than from a plant it owns. Voltus chief executive Dana Guernsey compared such "bring your own new capacity" contracts to the power purchase agreements that she said revolutionized utility-scale solar and wind development.

Jon Wellinghoff, Voltus's chief regulatory officer and a former chair of the Federal Energy Regulatory Commission, described the contract as "a turning point — allowing markets to treat distributed capacity like any other capacity resource." He said large loads such as data centers are now contracting with distributed capacity providers for utility-scale bring-your-own-new-capacity.

Demand for capacity in PJM exceeds supply even at record-high prices, Mary Yang, an energy lawyer and chief operating officer at consulting firm 804 Advisory, told Utility Dive. Interconnection queues at PJM and other regional grids run years long while regulators weigh market reforms, the report said.

PJM set a record peak load of 168.2 GW on July 2, per the report. That makes 100 MW about 0.06% of that day's peak demand, a comparison of contracted capacity against one day's peak, not a like-for-like measure. Industry experts quoted by Utility Dive describe distributed capacity as faster and easier to integrate than traditional capacity resources. The contract tests whether a large load can meet a capacity obligation by contracting for demand rather than building generation.

Pier LaFarge, chief executive of Sparkfund, told Utility Dive the system still needs investment in transmission, centralized generation and storage to meet load growth and cut the cost of electricity. Sparkfund is working with Xcel Minnesota on the utility's Capacity*Connect distributed capacity pilot. He also said it needs operational flexibility from large loads, especially data centers. Lon Huber, Xcel's senior vice president for integrated system planning and chief planning officer, said distributed capacity done right can unlock beneficial load growth, raising grid utilization and putting downward pressure on rates.

Large loads are increasingly priced on explicit capacity commitments rather than queue position, a shift Utility Dive has traced. LaFarge said distributed capacity as a category of resource to meet system needs has arrived.