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Virtual power plants are being added for real-time dispatch by the Electric Reliability Council of Texas (ERCOT) at such a rate that the grid operator is expanding an ongoing pilot program and plans to revise its protocols to include some of the lessons learned.

Market participants have released few operational details, but one, Bandera Electric Cooperative, has developed its own software and telemetry to offer a virtual power plant program to its 30,000 customers in the Texas hill country.

John Padalino, chief administrative officer at Bandera, told MAGNIFYI in an interview that “cost avoidance benefits on a per month per site basis came out pretty good last year in the first full season, and we want to be able to pass some of that on to our members.”

ERCOT told the Public Utilities Commission of Texas last month that the pilot project for aggregate distributed energy resources (ADER) has increased “in participation by roughly fourfold since June.” That grid operator intends to integrate some concepts from the pilot into market rules.Seven resources participated in the program as of February, with capabilities of 107.7 MW of energy, 35.4 MW for non-spinning reserve and 49.9 MW for contingency reserve service. Six other resources are being added, which would increase energy capability by 13.7 MW.

The program was launched in August 2023. Most of the resources in the pilot are in the Houston and North load zones. From September 2023 to January 2025, most ADER energy dispatch was between 6 a.m. and 9 p.m., while most non-spin ancillary services were used in a slightly narrower window.

ERCOT decided on March 2 to increase the participation limits in the ADER pilot. The registered capacity limit will increase from 200 MW to 500 MW, while the qualified scheduling entity limit will increase from 50% to 90%.

Virtual power plants are a promising load management tool in ERCOT, but activity of individual companies is hard to quantify. The program does not proscribe the type of resources that can participate, but most appear to be batteries dispatched by ERCOT’s security constrained economic dispatch (SCED) rules when the grid needs support.

Several companies have petitioned the state commission to consider refinements of ADER rules, but it is unclear if those companies will operate virtual power plants or simply participate in other competitive markets.

Tesla Electric has told owners of its PowerWall batteries that they will automatically become a part of a virtual power plant if they meet eligibility criteria. Members earn bill credits proportional to their participation in addition to Tesla’s monthly sellback credit.

Base Power has created a virtual power plant system by offering customers a home battery that is bundled into monthly energy service.

TXU Energy offers the owners of Enphase IQ batteries the opportunity to earn incentives by exporting stored battery power to the grid during periods of high demand.

Two other retail energy providers, when asked specific questions by MAGNIFYI about their participation in the ERCOT pilot program, declined to comment.

Padalino said that Bandera provides batteries at a low net cost to customers that wish to join in areas served by the coop’s fiberoptic network. As a tax-exempt non-profit entity, Bandera owns the batteries and under federal law takes cash in lieu of tax credits for renewable energy projects.

Half of the battery systems are connected to solar panels, a technology that Bandera is agnostic towards. “I think the best thing is batteries, because they are so much easier to operate than typical demand response devices,” Padalino said.

“It has caught the attention of our members. A consumer may want to know how they can have electricity if the grid goes down, and that is the bargain we are making,” he said. “When storm Fern came in, we charged them up and left them in neutral, and once we were through the icy part of the storm and saw the market spiking, we put them [the batteries] back in the market when it was still cold but out of the danger zone.”

Customers get no notice if the battery is being charged or discharged, but can see the status on a phone application. “We always leave enough in the battery so that they will make it through a few hours,” he said. “We never take it below 20%. If a storm pops up out of nowhere, they will be OK.”

A customer’s monthly credit will depend on battery consumption and Bandera’s use of the battery. The coop would like to be able to pay additional credits based on cost avoidance, but wants more data before making such a commitment.

Bandera sells energy from the virtual power plant mostly in the contingency reserve service and real time energy markets. Padalino expects the coop to benefit by consistently participating in different parts of ERCOT markets, backed by clear analysis and a good strategy.

He also outlined preparations that a market participant should make to join the ADER pilot program.

ERCOT needs meter identification of all premises that are registered and attached to substation-type resources. Communications need to be based on a high-speed, low-latency kind of program.

“Your telemetry has to meet the speed levels and be reliable,” he told MAGNIFYI. “ERCOT will tell you to charge and discharge at certain levels and follow the SCED signal with the same level of accuracy. It is the same requirement of any generator out there.”

Retail energy providers (REPs) face an issue that a cooperative like Bandera would not, he said, which is customer churn. REPs will need flexibility in their virtual power plants, so that if a customer churns out, the battery does not become a stranded asset.  Some residential battery makers in the past have voided warranties if a battery was moved.

REPs need a manufacturer to supply batteries with enough capacity to build their virtual power plants, Padalino said, with terms and conditions that fit their business model.

He suggested that REPs build their virtual power plant programs by developing a good relationship with a manufacturer and a base of installers. REPs may want to buy a system from a manufacturer that can offer “ADER in a box” which includes the battery, inverter, telemetry and software.

The Texas commission has a rulemaking that must be in place by 2027 to define and enforce firming reliability requirements in ERCOT. Firming is roughly defined as the ability of generators to operate during times of high risk or low reserves.

Battery developer and power trader Eolian asked the commission to add a definition of ADER in the firming rule. The commission declined in January to include ADERs, saying that their terms are not currently in the ERCOT protocols.

Other states are considering laws to allow the creation of virtual power plants.

A bill was introduced in New Mexico this year requiring electric public utilities to implemental virtual power plant programs, along with tariffs establishing performance requirements.

New Mexico is not a retail choice state, but House Bill 311 would allow third party aggregators to be created to operate the systems in competition with incumbent utilities.

House Bill 4210 pending in the Illinois legislature calls for a virtual power plant program tariff that allows customers with battery storage, non-battery storage and electric vehicle technologies to enroll the devices in a program through aggregators or directly with the utility.