GridWorks Consulting

VCharge Pennsylvania Case

 Introduction

Between 2012 and 2017, VCharge, a small Rhode Island startup, retrofitted and controlled over 700 electric thermal storage heaters in about 200 homes in Northeast Pennsylvania.

Using software that they developed, they optimized the operation of these devices to improve the performance of customers’ heating systems while buying energy at low Locational Marginal Prices and providing Frequency Regulation to PJM, the regional grid operator.

VCharge installed the retrofits for free, and offered customers a 25% rebate on their electric heating bill. The retrofit hardware and labor cost around $1,000 per home, and VCharge earned on average $400 per year per home after paying the rebate.

This short case study explains the Distributed Energy Resources (DERs) that were controlled by VCharge, the technology used for such control, and the business model behind the DER Aggregation.

Electric Thermal Storage Heat

Electric Thermal Storage (ETS) heaters are electric devices that store thermal energy. Developed in the 1940s in Europe, they are essentially stacks of ceramic bricks with electric heating elements, in an insulated box with a thermostatically controlled fan.

The device is able to charge – that is heat up the bricks – and then store that energy until it is needed. The charging of the devices was traditionally controlled either by a timer, or by a control signal sent out by the utility. Discharging (the release of heat) was controlled by the thermostat.

In the VCharge DER Aggregation, energy output was still controlled entirely by the customer’s thermostat. However, the energy input (the turning on of the elements) was controlled remotely for each individual heater by VCharge’s control platform.

VCharge Control Platform

The VCharge platform consisted of a dedicated software agent per heater that was responsible for planning and executing a charging program. This agent used a location-specific weather forecast to predict the hourly energy required from each heater for the coming 48 hours. It also had an electricity price forecast and a Frequency Regulation price forecast for the same planning horizon. (Frequency Regulation is an Ancillary Service in which a grid resource can get paid for second-to-second adjustments to help balance the grid. The VCharge DER Aggregation participated in the PJM Fast Frequency Response market.) Based on these three inputs, and using Dynamic Optimization techniques (Dijkstra’s Algorithm), the agent derived an optimal charging plan for its heater. Using this plan,the agent then generated a “willingness to pay” or bid price for energy for its heater. This bid accurately reflected both the customer’s heating needs and the agent’s expectations for energy prices over the coming 48 hours.

Each software agent sent its bid to the VCharge Market Aggregation Engine, which in turn decided how much energy to buy for the aggregation. It did this by sorting the bids from highest to lowest and, acting as a price-taker, chose to turn on every heater with a willingness to pay higher than the current price of electricity.

The effect of this process was that the VCharge aggregation bought energy at the lowest possible price, subject to the constraint that the end-user’s heater met its energy output requirement, as determined by the customer’s thermostat. (Obviously, if the customer changed their thermostat setting, then it might not be physically possible for the heater to meet this requirement right away. However, the system would then buy energy as quickly as possible to meet the customers’ needs.) This allowed VCharge to buy energy at a price that was at least 25% below the average wholesale price of electricity in PJM.

As mentioned above, the heaters also provided Frequency Regulation to PJM. This was done by turning a constantly changing subset of heaters on or off to meet the aggregate power setpoint transmitted each 2 seconds by PJM. The graph below shows how this was done while still buying the desired amount of energy in each hour.

The VCharge Business Model

The business model employed by VCharge in Pennsylvania from 2012 through 2017 had the following components:

1. VCharge retrofitted customers’ ETS heaters with its own control and metering hardware. The equipment cost about $1,000 per house, and was offered to customers at no charge.

2. The company became a retail energy supplier in PPL territory, the local distribution utility. This enabled VCharge to buy energy for its customers at the time-varying wholesale price. (PPL was the first utility in PJM to install interval (“Smart”) meters and to settle residential load on actual hourly metered use)

3. VCharge sold electricity to its customers at the PPL “Price to Compare” (the Standard Offer price) with a 25% discount on the heating portion of their electricity bill. (VCharge equipment had highly accurate energy meters that allowed it to know how much energy the heating system had used during the billing period.)

4. VCharge sold Regulation Services to PJM during every hour that it was buying energy. Its decision about whether to buy energy and supply Regulation was the result of  co-optimization by the software agent and the Aggregation Engine. The report below is a monthly statement from PJM Settlement showing VCharge revenue from Frequency Regulation during the month of April 2015.

This set of activities yielded VCharge an average of $400 per home per year after the customers’ rebates, split roughly 50-50 between savings on energy purchases and providing Regulation services. Thus the business model provided a 2.5 year payback period on the equipment installation.

The company estimated that it could achieve break-even at somewhere between 500 and 1000 homes (5 to 10 MW of aggregated load).

Aftermath

In around 2014, as fracking activity in the US mushroomed and the country’s commitment to decarbonization and electrification showed no signs of firming, the company recognized that expanding the use of resistive electric heat in the US was going to be tough. However, none of these factors existed in Europe. The company therefore chose to focus instead on the UK and Germany, each of which had over 5M homes with retrofittable Electric Thermal Storage heat. In July of 2015, VCharge signed a contract with National Grid UK to retrofit ETS heaters and provide an innovative Frequency Response product. (Frequency Regulation is referred to as Frequency Response in the UK.) In December of 2016, VCharge was sold to OVO Energy, the leading UK independent energy supplier.