Virtual power plants (VPPs) are a nascent technology that allows a power provider to optimize the operation of distributed energy resources (DERs) such as rooftop solar and small-scale battery storage in order to aggregate and operate them as a grid-scale energy source. VPPs offer an opportunity to correct institutional problems in DER ownership and financing that have made their deployment costly both to households and prevented DERs from providing additional value to the larger electricity system to the functioning of the broader electricity system. However, creating a new DER deployment strategy requires policy makers rethink their financing by using VPPs to turn DERs into public resources.
This report shows how green banks—mission-driven public lenders—can help enable such a shift using tools already present in the Inflation Reduction Act. We propose a model wherein a green bank uses funding sources from the Greenhouse Gas Reduction Fund (GGRF), Loan Programs Office (LPO), and elective pay tax credits to build and own a network of DERs on third-party-owned properties and facilitates the establishment of a public VPP to manage and monetize these resources. We demonstrate how this model of publicly owned DERs and VPPs brings direct and indirect benefits to all ratepayers, and low-to-moderate income (LMI) communities in particular.