Tesla, Sunrun, Renew Home team up on massive 16GW virtual power plant

The leading U.S. providers of rooftop solar, home batteries, and grid-responsive smart thermostats have combined forces to create what could be the country’s biggest virtual power plant — or, more precisely, a lot of VPPs in data center hot spots.

On Wednesday, Sunrun, Tesla, and Renew Home announced an agreement to ​“deliver more than 16 gigawatts of flexible energy capacity” to tech giants and utilities around the United States. Those gigawatts will be produced by hundreds of thousands of home battery systems managed by Sunrun and Tesla, as well as more than 8 million smart thermostats and devices managed by Renew Home.

These batteries and smart thermostats are already installed in homes and businesses across the country, Paul Dickson, Sunrun’s president and chief revenue officer, told Canary Media. Some are enrolled in utility or grid programs that call on batteries to discharge, or thermostats to turn down energy use, during the handful of hours per year when grid demand is at its peak, he said.

But he noted, ​“Most of the constructs for these distributed power plants are tapping into the resources a fraction of the time they could be realized.” This new partnership is meant to ​“further legitimize these devices as core dispatchable, capable resources.”

Wednesday’s announcement is just the latest — and biggest — proposal for solving the country’s rising energy costs and grid congestion challenges through the power of distributed energy.

The aggregated energy-injecting and load-shifting capacity of batteries, smart thermostats, electric vehicle chargers, and remote-controllable appliances such as water heaters could add 80 gigawatts to 160 gigawatts by 2030, or roughly three to five times what’s now available across the country, according to analysis from the U.S. Department of Energy. VPP deployment at that scale could save U.S. utility customers about $10 billion in annual grid costs, the DOE estimated.

To make that happen, VPP companies need to coordinate with — and convince — utilities, regional grid operators, and state and federal regulators that distributed energy resources can do the work of traditional power plants. That’s easier said than done. The grid has been designed to deliver electricity from central power plants, not to rely on thousands of customer-owned devices turning on and off in unison to keep supply and demand in balance.

But traditional ways of managing the grid are falling short in the face of booming demand from the massive data centers that tech giants like Amazon, Google, Meta, Microsoft, and Oracle are building to fulfill their artificial intelligence ambitions. Some states are already seeing big spikes in energy costs due to data center growth. Across the country, lawmakers and regulators are demanding that developers of these facilities find ways to finance their own energy resources to avoid pushing more costs onto everyday consumers.

That’s putting pressure on tech giants to pursue novel approaches, from shifting when they use power, in order to avoid stressing the grid during times of peak demand, to investing in VPPs that can do the same work.

Home batteries and thermostats obviously can’t power data centers around the clock, Dickson said. But they can ​“solve elegantly for your peak-capacity needs, which is the bottleneck for data centers getting connected,” he said. ​“We want to provide for getting more data centers online in a way that doesn’t strain the grid or cause costs for customers to rise.”

Sunrun, Tesla, and Renew Home have a lot of existing customers to work with. Sunrun and Tesla already operate hundreds of megawatts of battery-based VPP capacity, including large-scale aggregations in California, New England, Texas, and Puerto Rico. And Renew Home — a spinoff of Google Nest’s smart-thermostat energy-shifting service Nest Renew and California startup OhmConnect — has partnered with major energy retailer NRG Energy to aggregate a gigawatt of flexible capacity in Texas, and is working with utilities in Arizona and other states.

Lots of companies are promising similar solutions. Voltus, a major U.S. demand-response and VPP aggregator, launched its ​“bring-your-own-capacity plan” last year, targeting tech giants struggling to interconnect to overburdened power grids. Earlier this month, Voltus and Google announced plans to develop 100 megawatts of this distributed capacity as part of the tech giant’s broader efforts to finance new energy resources for its expanding data center footprint.

Data centers want to ​“lock in that capacity, which is important to them,” Voltus’ CEO Dana Guernsey told Canary Media in early June. ​“They’re giving us the right signals to build, which we can take to our customers to save them money. And it’s not putting the cost on the ratepayers.”

The more data centers are willing to pay for VPP capacity, the more companies can offer customers to participate in them, Dickson said. Sunrun and Renew Home have paid out nearly $70 million to customers participating in existing grid-services programs, he added.

Low-income households could particularly stand to benefit if these programs prioritize these customers, according to a recent study by consultancy Brattle Group for the Natural Resources Defense Council. It found that if programs directed energy efficiency and VPP investments from data centers to lower-income customers in four cities — Atlanta; Memphis, Tennessee; Kansas City, Missouri; and Columbus, Ohio — participating households could save from $50 to more than $1,000 per year on their utility bills.

It’s not yet clear how Sunrun, Tesla, and Renew Home might deliver additional savings to customers at large. The companies didn’t disclose which existing or in-development VPP programs or data center opportunities they’re jointly pursuing.

But they are staking claims in key markets, including northern Virginia’s ​“Data Center Alley,” where massive data center expansions are pushing the grid to its limit, driving lawmakers and regulators to explore policies to limit cost and environmental impacts. Sunrun, Tesla, and Renew Home claimed they collectively have ​“more than 300 megawatts of capacity readily available for immediate deployment” in the region, which they expect will grow to at least 500 megawatts by 2030.

Sunrun, Tesla, and Renew Home also intend to provide VPP capacity to PJM Interconnection, the country’s biggest energy market, where power costs are spiking because of new data centers and PJM’s inability to bring new generation resources online. Specifically, the companies plan to commit capacity to PJM’s upcoming reliability backstop procurement, which is being designed to encourage data center developers to pay for new resources to match their grid impacts.

Renew Home has a lot of smart thermostat–equipped customers in the 13 states and Washington, D.C., region who are served by PJM but aren’t yet enlisted in VPP programs, CEO Ben Brown told Canary Media. ​“We have over a gigawatt of capacity in the ground, installed, flexing every day, providing savings for customers every day,” he said.

Last year, Renew Home ran tests of the potential grid relief those thermostats could provide, and found that customers were able to reduce summertime peak demand by about 380 megawatts over three consecutive afternoons, he said. That represented a little less than half its available ​“fleet” of customers, he added.

Dickson highlighted other parts of the country where the three companies have capacity to spare. According to the partners’ calculations, they can collectively relieve grid stresses for roughly two hours at a time by about 4.7 gigawatts in California, about 1.7 gigawatts in Texas, and about 1 gigawatt across Illinois and Ohio.

The number of home batteries and smart thermostats available for future service could expand if data centers are willing to pay more for these services, Dickson said. ​“Unlike a traditional power plant, this number grows every single day.”