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1、Report/March 2025Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsInsights from the US Virgin Islands and guidance for implementation in the Caribbean and beyondrmi.org/2Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsAuthors and Acknowledgm

2、entsAuthorsZsaria DiazSidney JulesLillie OgdenAuthors listed alphabetically.All authors are from RMI unless otherwise noted.ContactZsaria Diaz,zdiazrmi.orgSidney Jules,sjulesrmi.orgLillie Ogden,logdenrmi.orgCopyrights and CitationSidney Jules,Lillie Ogden,and Zsaria Diaz,Reimagining the Electricity

3、Sector in Island Nations with Virtual Power Plants,RMI,2025,https:/rmi.org/insight/reimagining-the-electricity-sector-in-island-nations-with-virtual-power-plants/.RMI values collaboration and aims to accelerate the energy transition through sharing knowledge and insights.We therefore allow intereste

4、d parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images are from iS unless otherwise noted.Acknowledgments The authors would like to thank Virgin Islands Energy Office(VIEO)Director Kyle Fleming,VIEO E

5、nergy Policy Analyst Kieshawne Green,and RMI Islands Energy Program Director of Projects Christopher Burgess for their contributions to this report.About RMIRMI is an independent nonprofit,founded in 1982 as Rocky Mountain Institute,that transforms global energy systems through market-driven solutio

6、ns to align with a 1.5C future and secure a clean,prosperous,zero-carbon future for all.We work in the worlds most critical geographies and engage businesses,policymakers,communities,and NGOs to identify and scale energy system interventions that will cut climate pollution at least 50 percent by 203

7、0.RMI has offices in Basalt and Boulder,Colorado;New York City;Oakland,California;Washington,D.C.;Abuja,Nigeria;and Beijing.rmi.org/3Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsTable of ContentsExecutive Summary 4Virtual Power Plant(VPP)Background 5US Virgin Islands

8、(USVI)VPP Study 10USVI VPP study long-term(LT)analysis 16USVI VPP study short-term(ST)analysis 18Expanding VPPs across the Caribbean Region 22Shared energy challenges in the Caribbean 22Guidelines for VPP program design in the Caribbean 24Policy and regulation for VPPs in the Caribbean 26Key takeawa

9、ys for Caribbean islands 28Conclusion 29Endnotes 30rmi.org/4Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsExecutive SummaryCaribbean countries are universally renowned for their turquoise waters,pristine environment,and vibrant local culture.However,a common plight lu

10、rks in the background of most islands:a deep dependence on expensive,polluting fossil fuels for electricity generation.This reliance contributes to the unique vulnerability of island nations to volatile global fuel prices that can cripple local economies by driving up electricity prices.Furthermore,

11、the aging and fragile grid infrastructure in many Caribbean countries leads to numerous electricity outages each year.Most critically,the increasing threat of climate change and its associated extreme weather events are omnipresent across the region.Hurricanes pose a consistent risk to the infrastru

12、cture and livelihoods in island nations,as they are capable of devastating entire power systems and leaving communities without power for months.Yet,amid these challenges,a powerful solution is emerging in the form of distributed virtual power plants(VPPs).These innovative systems provide an opportu

13、nity to fundamentally transform Caribbean energy systems,empowering communities to take control of their energy future by shifting the power sector from a centralized system to a distributed system.This report delves into the transformative potential of VPPs in this unique context,zooming in on a de

14、tailed case study from the US Virgin Islands(USVI)to illustrate the tangible benefits and practical strategies for successful VPP implementation in the broader Caribbean context.The VPP Background section provides a foundational understanding of a distributed VPP,outlining its key components and fun

15、ctionalities.USVI VPP Study details an in-depth case study of a distributed VPP analysis in USVI,examining the impact of a VPP program on grid stability,cost savings,and energy resilience,and offering concrete evidence of the value of distributed VPPs.Finally,Expanding VPPs across the Caribbean Regi

16、on broadens the focus to the wider Caribbean region,extrapolating the insights and lessons learned from the USVI VPP case study to other island nations.Specifically,the applicability and replicability of distributed VPP programs in island nations is considered,given the unique characteristics of ele

17、ctricity systems across countries.The section gives tailored recommendations for successful VPP implementation across island nations,and more broadly in the Global South.This report spotlights how VPPs,by aggregating distributed energy resources like rooftop solar panels and battery energy storage s

18、ystems(BESS),can unlock a future where Caribbean nations will have greater energy resilience,lower electricity costs,a more flexible power supply,and a reduced reliance on volatile fossil fuel prices.In parallel,VPPs can accelerate the transition to cleaner,renewable energy sources,reducing greenhou

19、se gas emissions and contributing to the global fight against climate change.Join us as we uncover the potential that distributed VPPs offer to forge a new era of energy independence,resilience,and sustainability for island nations.rmi.org/5Reimagining the Electricity Sector in Island Nations with V

20、irtual Power PlantsVirtual Power Plant(VPP)BackgroundIn most countries,particularly island nations,the electricity system is powered by massive,centralized(often fossil fuel)power plants,delivering electricity to customers through an intricate transmission and distribution(T&D)system.Imagine if cons

21、iderable portions of the electricity network were complemented by networks of smaller,cleaner energy sources installed across homes,businesses,and industrial facilities,and communicating with a central operating system.This is the concept behind the virtual power plant(VPP),which is a network of int

22、erconnected,decentralized energy sources that can be actively managed and controlled as a single,unified entity by a VPP aggregator.Unlike traditional fossil fuel power plants that rely heavily on a large,centralized power grid infrastructure,VPPs leverage the collective power of smaller,decentraliz

23、ed assets such as:Renewable energy sources that could include solar panels,wind turbines,small-scale hydro plants,or even biofuel generators Energy storage systems such as battery energy storage systems(BESS),pumped hydro storage,and other energy storage technologies Flexible loads that encompass de

24、mand-side resources like smart thermostats,electric vehicle chargers,and industrial processes that can adjust their energy consumption based on grid needsBy aggregating these diverse distributed energy resources(DERs),VPPs can mirror the operational behavior of conventional power plants,providing a

25、range of services to the grid.Most notably,they provide electricity to the grid when available and called upon.VPPs can also provide capacity support by managing peak demand to reduce consumption during periods of high electricity demand on the grid.Furthermore,they can provide critical ancillary se

26、rvices,such as frequency regulation and voltage support,helping ensure grid reliability and resilience.VPPs can take various forms,and many VPP programs have already been implemented in several regions across the world(see Exhibit 1).rmi.org/6Reimagining the Electricity Sector in Island Nations with

27、 Virtual Power PlantsExhibit 1 Types of VPPs and real-life examplesRMI Graphic.Source:Next Kraftwerke,https:/www.next- Mountain Power,https:/ Inc.,https:/ DTE,https:/ small island nations facing unique energy challenges including limited land for large infrastructure,high dependence on imported foss

28、il fuel,and vulnerability to climate disasters distributed VPPs offer a particularly compelling solution.A successful distributed VPP incorporates many stakeholders and components,as diagrammed in Exhibit 2,to function effectively:1 Distributed energy resource(DER)assets and VPP participants:These f

29、orm the foundation of any distributed VPP.Participating households,businesses,or facilities with distributed solar or BESS allow their system to contribute a portion of their capacity to a VPP program.In island settings,where electricity grids suffer occasional reliability issues,VPPs can serve dual

30、 purposes:providing renewable energy generation and energy security for individual owners while also creating collective grid resilience in the VPP.DER assets such as solar photovoltaics(PVs)and BESS are actively controlled in the distributed VPP,available to a VPP aggregator that deploys the cumula

31、tive capacities or capabilities from hundreds or thousands of VPP assets to be dispatched for grid services.Participation in the VPP is typically incentivized through compensation offered to VPP participants that accounts for the energy value and grid stabilization benefits provided by VPP assets.Th

32、e services provided by VPP assets are critically important in isolated island grids where frequency and voltage fluctuations are common challenges.DefinitionAggregate commercial and utility-scale renewable assets across wide geographical areas,sometimes spanning multiple countries.Participate in who

33、lesale energy markets and facilitate renewable asset trading.Aggregate localized DERs such as roofop solar and residential/commercial batteries in a more localized geography.Rely on participant compensation schemes and utility partnerships.Aggregate flexible loads rather than generation assets.Inclu

34、de smart thermostats,EV batteries,and adjustable industrial processes to provide grid services and demand response.ExamplesGermanys Next Krafwerke connects 14,000+assets across Europe(12,700 MW capacity,7+countries).Voltalis(France)aggregates more than 1.5 million assets across 8 countries via its d

35、emand-response management platform.Vermonts Green Mountain Power aggregates home battery systems through its BYOD program.Similar implementations in islands include Hawaiian Electrics BYOD Tarif program and Puerto Ricos Sunrun and Sunnova VPPs,which provide support during emergency grid events.Arizo

36、na Public Services Cool Rewards program virtually controls 145 MW of load via smart thermostats.Portland General Electric in Oregon manages 52.9 MW in demand response programs across thermostats,EVs,and water heaters.In Michigan,DTE Energys Smart Charge program optimizes EV charging during of-peak p

37、eriods.Utility and multicountrylevel VPPsDistributed-level VPPsDemand-side management VPPs Types of VPPs and real-life examples ;Green Mountain Power,https:/ Inc.,https:/ DTE,https:/ the Electricity Sector in Island Nations with Virtual Power Plants2 Energy management system(EMS)and user interface:M

38、any DER assets are accompanied by devices that monitor generation and other key metrics,such as electricity consumption and battery charge status.These devices also provide intuitive interfaces that help DER owners understand the contribution of their assets to the grid or VPP program.Many successfu

39、l VPPs emphasize user control,allowing participants to select the extent of the contribution from their DER assets to a VPP program,and the level of control an aggregator has over these assets,during a specific time or up to a specific limit.This builds social acceptance through flexibility and tran

40、sparency in the process.In island communities,where energy literacy and community engagement are often high priorities,energy management systems that form part of the VPP serve as informative tools alongside their technical functions.3 Communication network:A reliable and secure communication networ

41、k for a VPP program is essential for real-time data exchange between the energy management system and participants,the aggregator,and the grid.This network enables the flow of information on key metrics such as electricity generation,consumption,battery charge status,and grid conditions.Ensuring the

42、 security of the data transmitted is crucial to protect against cyberattacks that could disrupt VPP operations or compromise user privacy.Resilient communication systems are therefore essential to a VPP,often combining multiple redundant channels such as cellular,mesh networks,and satellite backups.

43、4 VPP aggregator and aggregator platform:The VPP aggregator and its respective aggregator platform act as the central control system for the VPP.The aggregator platform collects data from individual energy management systems and users(via their user interfaces),analyzes grid conditions,and determine

44、s the optimal dispatch schedules(e.g.,BESS charging and discharging times)for VPP assets to enable them to provide grid services.For example,BESS could be programmed to charge during periods of low electricity demand and discharge during periods of high demand or grid congestion.Aggregators must exc

45、el at predictive capabilities,particularly regarding weather patterns and grid conditions that affect generation potential and grid stability needs.As such,artificial intelligence(AI)will play an increasingly pivotal role in VPP operations by enabling predictive analytics for renewable generation,op

46、timizing real-time grid balancing,and enhancing decision-making processes across distributed assets.AI algorithms can forecast weather patterns affecting solar generation,anticipate demand fluctuations,and orchestrate the complex interplay among thousands of individual DERs to maximize grid stabilit

47、y and economic value.The VPP aggregator also plays a crucial role in grid integration and the interaction between the VPP assets and the grid.The aggregator platform communicates with the grid operator to receive signals on grid conditions,such as frequency deviations and voltage fluctuations.The VP

48、P can then respond to these signals by enabling VPP assets to provide energy,capacity support,or ancillary services such as frequency regulation and voltage support.This coordination becomes especially valuable during extreme weather or grid outage events,when the VPP can help stabilize the grid dur

49、ing recovery operations and provide emergency power to critical infrastructure.5 Utilities and regulatory authorities:Electric utilities must play an active and critical role in any VPP program.Utilities in small island nations face unique operational challenges,including fuel supply logistics for e

50、lectricity generation,distribution system hosting capacity limits for DERs,and seasonal demand fluctuations in electricity demand.VPP integration therefore requires regulatory frameworks that recognize these constraints while incentivizing the deployment of DERs.rmi.org/8Reimagining the Electricity

51、Sector in Island Nations with Virtual Power PlantsSuccessful VPP programs typically include significant utility involvement and cooperation,together with reasonable compensation mechanisms that reflect the value of the core services provided by the VPP(e.g.,the avoided cost of fossil fuel),emergency

52、 response protocols that prioritize maintaining electricity supply for critical facilities during disasters,and community benefit requirements that ensure equitable participation across socioeconomic groups.Exhibit 2 Visual representation of a distributed VPP with the various components identifiedHo

53、useholdsHouseholdsUtility and power gridUtility and power gridUtility generatorsUtility generatorsHouseholdsHouseholdsCommercialCommercialIndustrialIndustrialCommunication infrastructure and cybersecurityCommunication infrastructure and cybersecurityTransmission and distribution(T&D)infrastructureTr

54、ansmission and distribution(T&D)infrastructureEnergy management system(EMS)and user interface with VPPEnergy management system(EMS)and user interface with VPPBattery energy storage systems(BESS)Battery energy storage systems(BESS)Roofop solar PV systemsRoofop solar PV systemsVPP aggregator and contr

55、ol systemVPP aggregator and control system Visual representation of a distributed VPP with the various components identifiedRMI Graphic.RMI Graphic.rmi.org/9Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsIn the Caribbean,distributed VPPs have transformative potential t

56、o address the regions unique energy challenges.Because they are heavily reliant on imported fossil fuels for electricity,many Caribbean countries have expensive electricity costs,averaging$0.34 per kilowatt-hour(kWh).1 Caribbean electricity grids are affected by occasional grid instability and high

57、vulnerability to extreme weather events,such as hurricanes.Driven by these challenges and coupled with the increasing economic viability of DERs,such as solar PV and BESS,electricity customers are already rapidly adopting distributed resources for cheaper,more reliable electricity.This surge in DERs

58、 presents a timely and promising opportunity to integrate them into VPPs,strengthening energy security,enhancing grid resilience,and accelerating the transition to cleaner energy.By leveraging existing and future DERs,VPPs can significantly reduce dependence on expensive and polluting fuel imports,c

59、reate a more robust and decentralized grid resilient to extreme weather events and other grid disruptions,and help reduce electricity-system costs.In the process,VPPs can stimulate local economies by generating jobs in renewable energy installation,maintenance,and technology sectors,and fostering ec

60、onomic activity through a more affordable,reliable,and sustainable electricity system.To illustrate the potential benefits and implementation considerations for VPPs in an island setting,a case study of a VPP analysis for the US Virgin Islands(USVI)is examined in the next section.In 2024,RMI collabo

61、rated with the Virgin Islands Energy Office(VIEO)to conduct an analysis assessing the potential of harnessing DERs across the US territory into a VPP.The next section details the specific benefits and lessons learned from implementing a distributed VPP in USVI,offering valuable insights applicable t

62、o the wider Caribbean region.rmi.org/10Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsUS Virgin Islands(USVI)VPP StudyThe US Virgin Islands,a Caribbean archipelago with three main islands St.Croix,St.Thomas,and St.John faces energy challenges commonplace across the Car

63、ibbean.The territory heavily relies on imported fossil fuels for electricity generation,resulting in high electricity costs averaging$0.41 per kWh for the 87,146 inhabitants.2 That is roughly 2.8 times higher than the US national average.3 The electricity grid across the territory has also been vuln

64、erable to numerous disruptions,particularly after it was severely damaged by Hurricane Irma and Hurricane Maria in 2017.4Despite these challenges,USVI has ambitious renewable energy goals,aiming for 30%renewable generation capacity by 2025,as mandated by Act 7075(The Virgin Islands Renewable and Alt

65、ernative Energy Act of 2009),5 and over 50%by 2027.6 VIEO is responsible for implementing energy policies,administering federal grants,and promoting renewable energy adoption through various incentive programs,and it is actively pursuing a 100%renewable energy study(VI-100)to guide this transition.T

66、he electricity sector in USVI is driven by several key stakeholders.The vertically integrated utility Water and Power Authority(WAPA)is responsible for the generation,transmission,and distribution of power on the three islands.The Virgin Islands Public Services Commission acts as the regulatory auth

67、ority,overseeing utility rates and service quality standards and approving major infrastructure investments.Independent power producers contribute additional generation capacity to the grid,while a growing number of DERs primarily rooftop solar and battery systems owned by residents and businesses a

68、re transforming the energy landscape.USVIs energy landscape has been profoundly shaped by a confluence of factors,including a heavy reliance on imported fossil fuels,a vulnerable grid infrastructure susceptible to natural disasters,and a strong desire for energy independence.Following the introducti

69、on of net metering in 2009 through Act 7075,early adoption of solar PV was encouraged,7 allowing residential and commercial customers to generate their own electricity and sell excess power back to the grid at the retail electricity rate.However,the initial programs 15 megawatt(MW)territory-wide cap

70、acity limit was quickly reached by mid-2017,signaling a need for a more comprehensive approach to DER integration.Before this approach could be implemented,Hurricanes Irma and Maria,two of the most devastating Category 5 hurricanes to hit the Caribbean,made landfall across USVI in September 2017.8 T

71、hese storms caused widespread damage to the territory,leaving some residents without power for up to five months,and requiring upward of$795 million of aid from the Federal Emergency Management Agency to support recovery efforts.9 The hurricanes damaged over 90%of WAPAs aboveground power lines and o

72、ver 20%of its generation capacity,10 underscoring the fragility of the centralized electricity system and emphasizing the need for resilient,locally generated energy solutions.The extended power outages,already-high electricity costs,and a general wariness of the grids reliability further fueled int

73、erest in DERs,particularly solar PV and battery storage.Residents and businesses seeking energy independence and a more reliable electricity supply,and incentivized by rebate programs for renewable energy systems,11 installed DERs in large numbers to provide backup power and to mitigate the impact o

74、f future grid disruptions.rmi.org/11Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsGiven the post-hurricane public interest in DER systems,USVI implemented a temporary net energy billing(NEB)program in late 2021.12 Although the NEB program introduced some modifications

75、 to the original net metering framework,such as a different compensation mechanism,a new grid access charge,and monthly credit reconciliation,it generally followed the net metering model by continuing to incentivize DER adoption.The NEB program,intended as a temporary solution to facilitate quick an

76、d orderly interconnection post-hurricane,has nonetheless spurred significant growth of DERs in USVI,driven by a growing awareness of the benefits of renewable energy and a desire for greater energy independence.The NEB program streamlined the permitting process,with VIEO playing a central role in ma

77、naging documentation and data flow between WAPA and the Department of Natural Planning and Resources,which oversees environmental permitting,building code compliance,and coastal zone management for energy infrastructure projects,including DERs within USVI.This streamlined process has facilitated a r

78、apid DER system rollout in the past few years.Between 2017 and 2024,distributed solar capacity increased at an average rate of 3.4 MW per year,and distributed battery storage capacity grew by 7.0 megawatt-hours(MWh)per year in USVI.In 2024,there were an estimated 2,928 electricity customers with ope

79、rational DER systems across St.Croix,St.Thomas,and St.John.The total distributed solar PV capacity across the territory is 30.5 MW,while the total distributed battery storage capacity is 52.5 MWh,as shown in Exhibit 3.In 2024,WAPAs installed generation capacity was 258 MW,serving a peak demand of ro

80、ughly 105 MW.Therefore,USVIs distributed solar capacity alone was 11.8%of utility-installed capacity and 29%of peak demand.This highlights the large contribution DERs can play in achieving USVIs 2030 renewable generation goal.Exhibit 3 Estimated DER customer count and distributed solar PV capacity (

81、MW)and BESS capacity(MWh)in USVI in 2024,by islandRMI Graphic.Source:RMI analysisSt.CroixSt.ThomasSt.JohnTotal:2,9289311,409588Number of Customerswith DER SystemsTotal:30.57.717.85PV Capacity(MW)Total:52.521.720.210.6BESS Capacity(MWh)Estimated DER customer count and distributed solar PV capacity (M

82、W)and BESS capacity(MWh)in USVI in 2024,by islandRMI Graphic.Source:RMI analysisrmi.org/12Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsAlthough the growth of DERs in USVI has been significant,realizing their full potential requires a more holistic approach to grid ma

83、nagement.Integrating increasing numbers of DERs into the current grid infrastructure,originally designed for a centralized system,presents several challenges.These include potential issues such as load defection,limited solar PV hosting capacity,grid congestion,and voltage fluctuations,which would c

84、ompound current grid challenges.However,these challenges also represent a significant opportunity.By developing an integrated and coordinated VPP program,it is possible to harness the territorys DERs to address these grid challenges and unlock a range of broader benefits.To explore this potential,RM

85、I worked closely with VIEO to conduct a comprehensive VPP study for USVI that assessed the technical feasibility,economic viability,and broader benefits of implementing a distributed VPP program.The analysis examined how varying levels of solar and battery energy storage penetration could be integra

86、ted into a VPP to support and reshape the USVI electricity system over a long-term horizon and on a day-to-day basis.The study evaluated several scenarios against a business-as-usual base case to achieve four main objectives:Quantify the long-term economic,environmental,and grid stability benefits o

87、f VPP deployment,including reduced generation costs,decreased fossil fuel reliance,improved frequency regulation,optimized line loading,and reduced emissions across the islands.Analyze day-to-day VPP operational impacts,including the ability to influence utility dispatch of fossil fuel generators,lo

88、wer overall fuel consumption,and provide critical grid services during outages caused by generator shutdowns and rotating blackouts.Identify optimal DER integration levels that maximize benefits while accounting for technical and regulatory constraints.This assessment examined how increasing DER ado

89、ption would affect VPP performance under low-,medium-,and high-penetration scenarios,with consideration of both penetration levels and the geographic distribution of participating DERs.Inform policy and planning decisions by providing actionable insights for policymakers,utility planners,and regulat

90、ors on the long-term benefits and costs of VPP implementation.These insights will guide future strategies for DER integration,VPP development,grid modernization,and energy resilience in USVI.This analysis not only addressed immediate grid management challenges but also evaluated the potential for VP

91、Ps to enhance resilience against natural disasters,improve energy security,and create more equitable distribution of energy benefits across the USVI population through lower electricity bills and increased clean energy access.The first crucial step for the USVI VPP study was a comprehensive DER land

92、scape assessment of existing distributed solar PV and BESS assets in USVI.Data on registered DERs in USVI was obtained from three main sources and cross-referenced to develop three final DER master lists for each island:The Net Energy Metering Master List contained capacity and location data for dis

93、tributed solar PV and wind energy systems up to 2017.A registry from VIEO provided a partial listing of customer solar PV and BESS installed and registered after 2020.Geospatial data from a 2022 USVI interconnection study contained capacity and location data for customer solar and wind systems.rmi.o

94、rg/13Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsThe coordinates of all DER systems were superimposed onto a map of USVIs distribution network to visualize the distribution feeders each DER was connected to throughout the territory.Exhibits 4 and 5 show that DERs ar

95、e almost evenly distributed across St.Thomas and St.Croix,with the former having a noticeably higher density than the latter.On St.John,seen in Exhibit 5,DERs are primarily situated in the populated areas on the west(Cruz Bay)and east(Coral Bay)of the island.Exhibit 4 Location of DERs on the island

96、of St.CroixRMI Graphic.Source:United States Census Bureau,https:/catalog.data.gov/dataset/tiger-line-shapefile-2019-state-united-states-virgin-islands-current-estate-state-based-shapefi;VIEO;RMI analysisFeeder02AFeeder03AFeeder04AFeeder05AFeeder06AFeeder08BFeeder09BFeeder10AFeeder10B2 20 0208 80 080

97、2 23 33 3233DER feeder locationsLocation of DERs on the island of St.CroixRMI Graphic.Source:United States Census Bureau,https:/catalog.data.gov/dataset/tiger-line-shapefile-2019-state-united-states-virgin-islands-current-estate-state-based-shapefi;VIEO;RMI analysisD DE ER RC Ca ap pa ac ci it ty yk

98、 kWWA AC CDERCapacitykWACThe color of the bubble represents the feeder the DER is located on,and the size of the bubble represents the DER solar capacity in kW.Exhibit 5 Location of DERs on the islands of St.Thomas and St.JohnThe color of the bubble represents the feeder the DER is located on,and th

99、e size of the bubble represents the DER solar capacity in kW.RMI Graphic.Source:United States Census Bureau,https:/catalog.data.gov/dataset/tiger-line-shapefile-2019-state-united-states-virgin-islands-current-estate-state-based-shapefi;VIEO;RMI analysisThe color of the bubble represents the feeder t

100、he DER is located on,and the size of the bubble represents the DER solar capacity in kW.Feeder05AFeeder06AFeeder06BFeeder07AFeeder07BFeeder07CFeeder07EFeeder08AFeeder08BFeeder09CFeeder09EFeeder10BD DE ER RC Ca ap pa ac ci it ty yk kWWA AC CDERCapacitykWAC1 10 0104 40 0401 10 00 0100DER feeder locati

101、ons Location of DERs on the islands of St.Thomas and St.JohnThe color of the bubble represents the feeder the DER is located on,and the size of the bubble represents the DER solar capacity in kW.RMI Graphic.Source:United States Census Bureau,https:/catalog.data.gov/dataset/tiger-line-shapefile-2019-

102、state-united-states-virgin-islands-current-estate-state-based-shapefi;VIEO;RMI analysisrmi.org/14Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsRandolph Harley Subtation:Feeders:5A,6A,7A,8A,9ARandolph Harley Subtation:Feeders:5A,6A,7A,8A,9ADonald Francois Substation:Fe

103、eders:6B,7B,8B,9B,10,YHDonald Francois Substation:Feeders:6B,7B,8B,9B,10,YHEast End Substation:Feeders:9DEast End Substation:Feeders:9DTutu Substation:Feeders:7C,9C,MallTutu Substation:Feeders:7C,9C,MallSt.John Substation:Feeders:7E,9ESt.John Substation:Feeders:7E,9ESt.JohnSt.JohnSt.ThomasSt.ThomasS

104、TT 25STT 15STT 23STT 26STT 27Wartsilla 1-7Donoe SolarWartsilla Battery5 kmN OpenStreetMapcontributorsMajor substations&feedersMajor T&D linesUtility BESSUtility SolarUtility GeneratorsSimplified grid topology on St.Thomas and St.JohnRMI Graphic.Source:US Virgin Islands,VIEOOnce DER systems were iden

105、tified,mapped,and clustered,a simplified model of the USVI grid was built out in PLEXOS,a powerful energy modeling software from Energy Exemplar.13 The USVI electricity grid is divided into two separate systems:the St.ThomasSt.John(STT-STJ)interconnected grid and the St.Croix(STX)grid,serving the so

106、uthernmost island of the territory.The key grid components of both systems were modeled and simplified in PLEXOS.The STT-STJ grid,shown in Exhibit 6,features four major substations on St.Thomas and one on St.John,which is interconnected to St.Thomas by an undersea transmission line.All utility-scale

107、 generation on the STT-STJ grid,including fossil fuel generators,a utility-scale solar PV system,and a BESS,connect to the Randolph Harley substation on St.Thomas.Fifteen smaller feeders distribute electricity across St.Thomas and St.John.The STX grid,shown in Exhibit 7,includes two major substation

108、s(Richmond and Midland)and 11 feeders.Utility-scale generation on STX includes four fossil fuel generators at the Richmond substation and a planned solar-plus-battery storage system at the Midland substation,expected to commence operation in 2026.Finally,the distributed solar and battery storage sys

109、tems across USVI were added to the PLEXOS model and connected to their respective feeders.Exhibit 6 Simplified grid topology on St.Thomas and St.JohnRMI Graphic.Source:US Virgin Islands,VIEOrmi.org/15Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsSTX 17STX 19STX 20Aggr

110、ekoSolar(2026)Battery(2026)Midland substation:Feeders:10A,8B,9B,10B,9DRichmond substation:Feeders:2A,3A,4A,5A,6A,6BSt.CroixSt.Croix5 kmNOpenStreetMapcontributorsMajor substations&feedersMajor T&D linesUtility BESSUtility SolarUtility GeneratorsRMI Graphic.Source:US Virgin Islands,VIEOSimplified grid

111、 topology for the St.Croix gridExhibit 7 Simplified grid topology on St.CroixRMI Graphic.Source:US Virgin Islands,VIEOAs part of the PLEXOS analysis,unique scenarios were created,each exploring a different potential future for VPPs in USVI with varying levels of DER penetration.The scenarios were bu

112、ilt as follows:A base case or business-as-usual scenario modeled a future in which no VPP efforts are undertaken and all DERs installed in USVI remain as individual,disconnected systems.Therefore,the effective capacity of the VPP is 0 MW of solar and 0 MWh of battery storage.A low DER penetration sc

113、enario involved interconnecting only the existing DER assets into a VPP,with no future build-out of new DER assets,which could result from unfavorable policy and regulation for DER development.A medium DER penetration scenario involved the build-out of new DER assets in addition to existing DER inst

114、allations in USVI.DER solar PV was allowed to expand to 50%of the remaining PV hosting capacity for each feeder,and DER battery storage was allowed to expand up to a rate of 0.6 MW/1.7 MWh per feeder.After the seven-year horizon,this resulted in a total DER solar capacity of 43.9 MW and a DER batter

115、y storage capacity of 32.4 MW/84.1 MWh.A high DER penetration scenario allowed greater DER build-out at a faster pace than in the medium DER penetration scenario.DER solar PV was allowed to expand to 100%of the remaining PV hosting capacity for each feeder,and DER battery storage was allowed to expa

116、nd twice as fast as the medium DER penetration,at 1.2 MW/3.2 MWh per feeder.After the seven-year horizon,this resulted in a total DER solar capacity of 56.5 MW and a DER battery storage capacity of 45 MW/115.5 MWh.A few sub-scenarios were also assessed,mainly exploring a VPP program on St.Croix only

117、,and another program for the islands of St.Thomas and St.John.Once the scenarios were developed,they were simulated in the PLEXOS model through a seven-year-horizon,long-term(LT)expansion plan and a short-term(ST)plan modeling the electricity system over periods varying from one to three weeks.The L

118、T and ST plans analyzed the performance and impact of the entire electricity system,particularly with the distributed solar and BESS operating as a VPP.The simulations produced a range of insights,including cost savings,fuel reductions,emissions reductions,and improvements in grid performance.The mo

119、st concentrated analysis focused on assessing VPP savings and program costs to understand the economic case for a VPP.rmi.org/16Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsUSVI VPP study long-term(LT)analysisThe modeled electricity-system savings from implementing a

120、 VPP were calculated by considering the total system costs for each VPP scenario compared with those in the base-case scenario.The difference between the total costs in a scenario and the base scenario was the savings that the VPP offers.The total cost was defined as the sum of all fixed and variabl

121、e costs for all generators(including batteries)and physical contracts in the region.i The VPP costs were calculated by quantifying the compensation costs according to the chosen VPP modality.The VPP modality selected for USVI was a battery compensation program,where 60%of each batterys energy capaci

122、ty was made available for a VPP program.Batteries enrolled in the VPP would provide energy services to the grid and be reimbursed at a rate of$0.20 per kWh,representing a cost for the VPP.ii The net benefits were then considered to be the difference between the total potential savings and potential

123、costs of the VPP.These key economic results are presented in Exhibit 8.i The fixed charges include fixed operation and maintenance costs($/kilowatt)for installed capacity,and the variable charges include variable operation and maintenance costs($/kWh)for generation and fuel costs($/kWh).Finally,othe

124、r generator costs that are included in the total costs consist of start-up and shutdown costs,emissions costs,and abatement costs.The physical contracts represented the external generation and costs to acquire this generation i.e.,any power purchase agreements currently in place.ii The VPPs cost mod

125、el currently sets participant compensation at$0.20 per kWh,aligning with the solar net billing rate.However,this rate is conservatively low,especially given the territorys retail electricity rates,which are closer to$0.40 per kWh.To effectively incentivize customer participation,the compensation rat

126、e should balance utility benefits with sufficient motivation for participants.By setting a competitive rate,the VPP can ensure robust customer engagement,which is essential to maximizing its operational and financial value.Exhibit 8 Key economic results(savings and costs)from the LT analysisRMI Grap

127、hic.Source:RMI analysisDescriptionBusiness as usual:Existing DERs are notaggregated into a VPP.Existing DERs areaggregated into a VPPbut there is no newbuild-out of distributedcapacity.DER solar PV allowedto expand to 50%ofremaining feedercapacity.DER solar PV allowedto expand to 100%ofremaining fee

128、dercapacity.2031 VPP DER PV Capacity031.543.956.52031 VPP DER BESS Capacity019.8/52.5(can match largest generator for 1.3 hours)32.4/84.1(can match largestgenerator for 2.1 hours)45.0/115.5(can match largestgenerator for 2.9 hours)Annual Savings$15.4M(9.5%reduction)$20.8M(12.8%reduction)$26.1M(16.1%

129、reduction)Annual Costs$2.3M$3.0M$3.6MOverall Annual Benefits$13.0M($260 per household on USVI)$17.8M($356 per household on USVI)$22.5M($450 per household on USVI)Base(2024/2025)Low DER ScenarioMedium DERScenarioHigh DER ScenarioKey economic results(savings and costs)from the LT analysisRMI Graphic.S

130、ource:RMI analysisMWMW/MWhW=total system cost reduction from base scenario=compensation to VPP participants for BESS provision at 20 cents/kWh=diference between savings and costsrmi.org/17Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsThe results from the LT analysis d

131、emonstrate that,across all levels of DER penetration in a distributed,battery-based VPP,the net benefits are substantial.The costs associated with compensating participating assets in the VPP are significantly outweighed by the financial and operational gains,as summarized by the following takeaways

132、:Cost savings:The low DER scenario delivered annual electricity-system savings of$15.4 million,representing a 9.5%reduction in total system costs.The high DER scenario produced annual savings of$26.1 million,or a 16.1%cost reduction.VPP program costs:The VPP costs,largely driven by compensation for

133、battery storage assets in the VPP compensated at$0.20 per kWh,ranged from$2.3 million to$3.6 million annually in the various scenarios.Overall benefits:The annual net benefits ranged from$13 million in the low DER scenario to$22.5 million in the high DER scenario.This translates to an annual benefit

134、 of$260 to$450 per household in USVI.This is in addition to other valuable benefits not assessed in this financial analysis,such as avoided costs associated with utility generator spinning reserves,which could add an additional$100,000 to$300,000 in annual savings.In addition to direct financial sav

135、ings in the LT,the VPP also provides critical nonfinancial benefits that contribute to a more resilient,efficient,and sustainable grid.These benefits,though not always captured in standard cost-benefit analyses,have far-reaching implications for the long-term reliability and stability of the power s

136、ystem,including:Enhanced grid reliability and resiliency:The distributed nature of VPPs,combined with the ability of DER assets to respond in real time,allows for more flexible grid operations.In the event of outages or extreme weather events,VPPs can help maintain critical power supply,making the g

137、rid more resilient to disruptions.Frequency and voltage regulation:Battery-based VPPs can provide essential grid services such as frequency regulation and voltage support,helping stabilize the grid and prevent blackouts or brownouts,especially during periods of peak demand or grid stress.Reduced lin

138、e loading and lower transmission and distribution(T&D)infrastructure costs:By generating power closer to where it is consumed,VPPs reduce the load on T&D infrastructure.This can lower the need for expensive upgrades or maintenance to existing grid infrastructure,further enhancing the financial case

139、for VPP integration.Discouraging load defection:A well-structured VPP can encourage customers to remain connected to the grid by offering compensation for their participation in grid services,reducing the incentive for load defection.This helps utilities maintain a stable customer base and ensures b

140、etter overall grid management.Environmental benefits:VPPs promote the integration of cleaner DERs such as solar and wind,contributing to decarbonization goals and reducing overall emissions.This environmental impact,though often difficult to quantify financially,aligns with broader sustainability ob

141、jectives and reduces the regions dependence on imported fossil fuels.Although the financial benefits of a distributed battery-based VPP such as reduced fuel costs,generation savings,and deferred infrastructure upgrades are significant,the nonfinancial advantages such as improved grid stability,relia

142、bility,and the potential for reduced emissions make VPPs an even more compelling solution in the long term.Together,these factors strengthen the VPPs overall value proposition and highlight the transformative potential of VPPs in modernizing the grid and enhancing energy security for USVI and other

143、countries and regions considering similar deployments.rmi.org/18Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsUSVI VPP study short-term(ST)analysisThe ST USVI VPP analysis explored the support a VPP program could provide if the utility experienced generator outages.On

144、 multiple occasions in recent years,WAPA has had to implement rotational blackouts across multiple feeders when dealing with generator outages,sometimes lasting for a period of weeks.14 These rotating blackouts are intended to distribute the impact of the generation shortfall across the customer bas

145、e and minimize unscheduled or abrupt interruptions.The ST analysis assessed whether the VPP could mitigate these rotational outages by dispatching interconnected DERs to support the grid when required.By optimizing the use of DER assets,a VPP aggregator could help reduce unserved energy and potentia

146、lly eliminate the need for rotational blackouts altogether,thereby enhancing grid stability and minimizing disruptions to electricity consumers.This analysis simulated the loss of the two most impactful generating units on each island for a period of nine days,rendering them unavailable for this des

147、ignated period.The most impactful generators were identified based on their contribution to system generation during high-demand periods,as observed in the long-term scenarios.This analysis,commonly referred to as an N minus 2 analysis,is a standard reliability test for understanding the grids abili

148、ty to maintain stability following the loss of multiple generators.The graph in Exhibit 9 illustrates the amount of unserved energy essentially,the energy demand that would not be satisfied,leading to rotating blackouts across the base case and the multiple VPP scenarios.The base case(light blue)sho

149、ws a large amount of unserved energy,which is significantly reduced by implementing a VPP in the high DER penetration scenario(dark blue).Exhibit 9 Unserved energy(GWh)in the base case versus multiple VPP scenariosMeasures high DER penetration case during a 14-day period in 2031,including nine days

150、of generator failuresRMI Graphic.Source:RMI analysis1/5/31 12:00 a.m.1/8/31 12:00 a.m.1/11/31 12:00 a.m.1/14/31 12:00 a.m.1/17/31 12:00 a.m.0.000.020.040.060.080.100.120.14 GWhBaseHigh DERUnserved energy over 2-week period is 0.19 GWh in high DER scenarioa 79%reduction.Unserved energy over 2-week pe

151、riod is 0.92 GWh in base scenario.Unserved energy(GWh)in the base case versus multiple VPP scenariosMeasures high DER penetration case during a 14-day period in 2031,including nine days of generator failuresRMI Graphic.Source:RMI analysisrmi.org/19Reimagining the Electricity Sector in Island Nations

152、 with Virtual Power PlantsIn the base case(i.e.,no VPP program),0.92 gigawatt-hours(GWh)of unserved energy was modeled during the generator outage period.By contrast,the high DER penetration scenario reduces unserved energy by 79%to only 0.19 GWh,showcasing the effectiveness of the VPP in maintainin

153、g grid reliability during major outages.This confirms the VPPs ability to reduce unserved energy and alleviate strained grid operations during generator shutdowns.From a cost perspective,the base case resulted in a 15%increase in total system costs to the utility during the generator outages,compare

154、d with normal operations in the base case without any generator losses.However,in the high DER penetration scenario,this increase is significantly lower,at just 5.7%.In essence,the VPPs ability to mobilize a fleet of DERs in real time can significantly reduce the extent,duration,and costs of outages

155、,allowing for a more resilient grid during critical periods of generator loss.The ST analysis also aimed to understand how the VPP can offset fossil fuel generation and optimize the dispatch order of generation resources on a day-to-day basis during normal grid operations(i.e.,without any generator

156、outages).The analysis provided insights on how the VPP could help reduce overall fossil fuel consumption,lower system costs,and enhance the efficiency of the grid during typical daily operations,demonstrating the potential for the VPP to play a key role in long-term energy transitions for USVI.It an

157、alyzed how the VPP could shift dispatch away from traditional fossil fuel generators during peak and off-peak periods,particularly by using solar and battery storage assets.Specifically,during daylight hours,the interconnected DERs in the VPP provided substantial generation to the grid,reducing the

158、need for fossil fuel generators and creating daily dips in fossil fuel generation.During the evening peak hours,the energy stored in the interconnected BESS was dispatched to manage peak loads,further offsetting the need for fossil fuelbased generation,enhancing grid flexibility,and creating the nig

159、htly dips in fossil fuel generation.These generation patterns can be seen for the VPP high DER penetration scenario in Exhibit 10 during a four-day period.Exhibit 10 DER generation in the VPP high DER penetration case Measures a four-day period in 2031 in the ST studyRMI Graphic.Source:RMI analysis0

160、1/5/31 12:00 a.m.01/7/31 12:00 a.m.0510152025High DER BESSHigh DER PVPeak solar corresponds to max fossil fuel ofsetBESS ramps up in the evening afer charging during the day to continue ofsetting fossil fuelMWhDER generation in the VPP high DER penetration case Measures a four-day period in 2031 in

161、the ST studyRMI Graphic.Source:RMI analysisrmi.org/20Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsThe DER generation seen in Exhibit 10 in the high DER penetration scenario was able to directly offset fossil fuel generation in the base case over that same four-day pe

162、riod,illustrated in Exhibit 11(see next page).The base case(blue line and shaded area)showed consistently higher fossil fuel generation compared with the high DER penetration scenario(pink line).Furthermore,the dark blue and yellow shaded areas highlight examples of how the DER assets,as part of the

163、 VPP,work to actively offset fossil fuel generation.In the high DER penetration scenario,fossil fuel generation reduced by 7.8%compared with the base case.The daily electricity system cost savings of around$424,000 associated with these operational improvements,a 12.3%reduction,are equally impressiv

164、e.These savings are driven by reduced fuel consumption,lower generator wear and tear,and the efficient utilization of renewable resources.This highlights the VPPs ability to displace fossil fuel generation,in nearly every instance,by effectively integrating renewable energy sources and battery stora

165、ge.Exhibit 11 Fossil fuel generation during normal operation Over a four-day period in 2031RMI Graphic.Source:RMI analysisThe comprehensive analysis of VPP implementation in USVI reveals significant potential benefits across multiple dimensions.The study demonstrates that a coordinated VPP approach

166、would deliver substantial financial returns,with net annual benefits ranging from$13 million in the low DER penetration scenario to$22.5 million in the high DER scenario.This translates to annual savings of$260$450 per household across the territory.01/5/31 12:00 a.m.01/7/31 12:00 a.m.0.000.020.040.

167、060.080.10 MWhBase CaseHigh DER CaseBase case sees an average of 2.31 GWh of fossil fuel generation per day High DER penetration case sees a reduced average of 2.13 GWh of fossil fuel generation per day (7.8%decrease from base case)DER solar ofsetting fossil fuel generationVPP DER BESS ofsetting fos

168、sil fuel generation at nightFossil fuel generation during normal operation Over a four-day period in 2031RMI Graphic.Source:RMI analysisrmi.org/21Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsBeyond the quantifiable financial advantages,the study highlights critical n

169、onfinancial benefits that strengthen the case for VPP implementation.The VPP framework would enhance grid stability and reliability while empowering consumers to participate actively in the energy system,helping discourage load defection.Additionally,the reduced reliance on fossil fuels would contri

170、bute to meaningful emissions reductions,aligning with broader sustainability goals.Particularly noteworthy is the VPPs contribution to grid resilience.By mobilizing a distributed fleet of energy resources in real time,the VPP can significantly mitigate the extent,duration,and costs of outages during

171、 critical periods of generator loss.This capability is especially valuable in the island context,where grid vulnerabilities can have outsize impacts on communities and economic activity.The analysis further demonstrates the VPPs operational effectiveness,showing its ability to displace fossil fuel g

172、eneration throughout daily operations by roughly 8%,reducing costs by more than 12%.Through intelligent coordination of renewable generation and BESS,the VPP optimizes resource utilization across the grid,reducing fuel consumption while maintaining reliable service.Although USVI presents a compellin

173、g case study for VPP implementation,the insights gained from this analysis have significant implications beyond its shores.The shared challenges of island energy systems from limited land availability to high imported fuel costs and climate vulnerability make these lessons particularly relevant acro

174、ss the wider Caribbean region,and internationally as well.As neighboring island nations pursue their own clean energy transitions,the technical approaches,regulatory frameworks,and community engagement strategies developed in USVI can serve as valuable blueprints,adaptable to the specific contexts a

175、nd needs of diverse Caribbean communities facing similar energy resilience imperatives.rmi.org/22Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsExpanding VPPs across the Caribbean RegionMany island nations in the Caribbean have lower levels of DER penetration than USVI

176、.However,uptake of DERs is proliferating across most countries for several reasons:rapidly declining costs of DER assets,high electricity prices,underperforming grid reliability,acute vulnerability to natural disasters and extreme weather events,and the desire for greater energy independence.These f

177、actors combine to create a compelling business case for residential,commercial,and industrial electricity customers in Caribbean island nations to invest in DER assets,with solar PV and BESS being the most popular.Recognizing the benefits of DERs,some Caribbean countries have already instituted poli

178、cy incentives that encourage electricity customers to purchase DERs and participate in utility-or regulator-managed DER programs that compensate them for electricity exported to the grid.Other countries are at an earlier stage,focusing on piloting DER programs without any consideration for aggregati

179、ng the power of these assets.The USVI VPP study demonstrates that implementing sensible regulations and policies to enable VPPs and harness DERs can lead to significant benefits for energy systems in small island nations.The lessons learned from the USVI study can be applied across all countries,reg

180、ardless of their DER penetration today.Island nations with a moderate amount of existing DER systems already have one key VPP element in place:the assets.They should consider the best ways to advance the other core elements of successful VPP programs as well as policy and regulatory framework revisi

181、ons to facilitate the implementation and operation of VPPs.Island nations with lower DER penetration can apply learnings from other jurisdictions to develop robust and strategic frameworks that facilitate the uptake of DERs while keeping innovative applications like VPPs in mind.Current trends indic

182、ate that DERs will play a significant role in the regional energy transition;therefore,decision makers can act proactively to leverage these DER assets in VPPs for the sustainability and modernization of their energy systems.The following insights highlight key takeaways that stakeholders can consid

183、er in their efforts to transform the energy landscape in their respective countries,particularly by developing and implementing VPP programs to provide optimal value to the grid and its electricity customers.Shared energy challenges in the CaribbeanThe challenges in USVIs electricity sector that can

184、 be addressed by VPPs are common in several other Caribbean countries.Most countries in the region depend heavily on imported fuel for energy and therefore deal with high fuel costs and volatility of the global market.These high fuel costs translate to high electricity costs,with many rate structure

185、s in the region incorporating a fuel surcharge that allows the electric utility to recoup a portion of the money spent on fuel.In fact,at an average rate of US$0.34 per kWh,15 Caribbean countries have some of the highest electricity costs in the world.By leveraging renewable energy generation,this n

186、eed for fuel can be reduced,lowering electricity costs and limiting exposure to fuel price volatility.The USVI study showed the potential for a reduction in system costs of 10%to 16%with the use of a VPP,and a savings rate of$250,000 per MWh of installed battery storage capacity.Exhibit 12 shows the

187、 estimated savings a utility can achieve for various levels of DER penetration.rmi.org/23Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsExhibit 12 Potential VPP savings at different levels of DER penetration connected to a VPPRMI Graphic.Source:RMI analysis100$25M200$5

188、0M300$75M400$100MDistributed BESSCapacity(MWh)Potential Annual SavingsRMI Graphic.Source:RMI analysisPotential VPP savings at different levels of DER penetrationconnected to a VPPThe ability of modern BESS to rapidly discharge power makes them particularly valuable for the provision of spinning rese

189、rve capacity,which is traditionally met by fossil fuel generators.These fossil fuel generators are kept running so they can quickly ramp up if needed when there is a sudden change in electricity demand or if another generator unexpectedly goes offline.This is an important factor for grid reliability

190、,as utilities must balance supply and demand at all times,while preventing outage events and load shedding that can occur as a result.Because of their isolated grids and limited options for external interconnection,best practice for island electricity grids is to have a spinning reserve capacity equ

191、al to the two largest generators(i.e.,N minus 2 policy),but this equates to large amounts of expensive fuel consumption.Instead,utilities often implement an N minus 1 policy(i.e.,spinning reserve capacity equal to the single largest generator)or choose to strategically manage their generation capaci

192、ty in order to keep costs down and load shed when needed.This has an impact on grid reliability,which in turn adversely affects home and business operations.With distributed BESS and,to some extent,solar as well aggregated into a VPP,the spinning reserve capacity that must be met by fossil fuel gene

193、rators can be reduced,cutting fuel and operation and maintenance costs for the utility and providing savings to electricity customers.As demonstrated in the USVI study,a VPP can help mitigate the incidence of outages and unserved load during emergency grid events,when traditional spinning reserve wo

194、uld usually be required.Including DERs in VPPs can also help address issues faced in the electricity sector of Caribbean countries as they deal with the effects of climate change.Hurricanes are increasing in frequency and intensity,with wind speeds trending upward.16 The hurricane season of 2024 als

195、o marked the ninth consecutive year of above-average activity.17 Additionally,heavy rainfall can cause landslides and flooding,which is exacerbated by gradual sea level rise due to climate change.These deleterious events pose a serious threat to electricity generation and transmission and distributi

196、on infrastructure.Strategic use of DERs in these circumstances can provide power to the most critical facilities,aiding recovery and preventing loss of life in the aftermath of these disasters.The effects of climate change are acutely felt in the Caribbean,with increasing ambient temperatures and pr

197、edominantly warmer-than-usual temperature anomalies from mid-2023 through 2024.18 This increasing heat has driven up peak electricity rmi.org/24Reimagining the Electricity Sector in Island Nations with Virtual Power Plantsdemand as utility customers increase their usage of cooling equipment like fan

198、s and air conditioning.Many regional electric utilities have reported record-high peak demands during these periods of extreme heat.19This unprecedented demand can strain aging grid infrastructure,prompting the need for costly upgrades.The support that VPPs can provide in demand-side management is t

199、herefore valuable in helping defer these upgrades and improve the quality of the power supply.In the Caribbean,DERs and renewable energy technologies,in general,have not traditionally been viewed as resources that can reliably support grid function.However,VPP programs,especially those incorporating

200、 battery storage,flip this narrative on its head.Strategic DER asset aggregation and management via a VPP can reduce fossil fuel consumption for electricity generation,lower electricity costs,and increase grid resilience.As Caribbean countries continue transitioning their energy systems,DERs will be

201、come more prevalent and will become a key resource for addressing these challenges.Guidelines for VPP program design in the CaribbeanVPP program design in island nations should adhere to the same core principles exemplified in other jurisdictions while also accounting for the unique characteristics

202、of each country.Because VPPs are in their relative infancy in the Caribbean,it is crucial to remain flexible and open to different approaches to ensure that the programs are effectively designed to meet their intended objectives.Due to their small scale,island nations can obtain new insights rapidly

203、,allowing for quicker revisions and improvements to programs.Furthermore,as with any new venture,stakeholder engagement is key and should be central to the program design process.Finally,each islands specific electricity-sector dynamics will introduce nuances based on its unique context,and these sh

204、ould be embraced to tailor solutions that are relevant and impactful.Some core principles for designing VPP programs in the Caribbean include:1 Maintain adaptability to the evolving landscape As highlighted in the National Renewable Energy Laboratorys 2024 Annual Technology Baseline,the costs of res

205、idential solar PV and BESS systems have been decreasing since 2022 and are projected to remain on a downward trend over the next 25 years.20 These costs are also declining considerably in the Caribbean,despite being buffered by cost premiums associated with lower volumes and shipping and handling co

206、sts.For example,in 2023 Grand Bahama Power Company signed a power purchase agreement at a rate of$0.09 per kWh for a 9.5 MW solar PV plant,21 lower than the regional 2020 average levelized cost of energyiii estimate of$0.11 per kWh.22Renewable energy technology prices are declining for residential a

207、nd commercial installations as well.Around 2015,residential solar PV installed costs in some Caribbean countries ranged from$2,000 to$2,500 per kW,whereas prices in 2025 range from$1,200 to$1,500 per kW.Residential battery storage prices have similarly seen a radical cost decline with costs of$1,600

208、 to$2,000 per kWh for BESS five years ago compared with$300 to$750 per kWh in 2025.23 As technology prices continue to decline,electricity customers increasingly will be motivated to procure DERs,not just to lower electricity costs,but also to enjoy reliable electricity during normal operations as w

209、ell as backup power during grid outages.iii The levelized cost of energy(LCOE)refers to the present value of the costs of an energy project distributed over the energy generated by the project over the project lifetime.rmi.org/25Reimagining the Electricity Sector in Island Nations with Virtual Power

210、 PlantsTo ensure optimal and equitable deployment and use of DERs,a robust policy and regulatory framework needs to be in place.Island nations can proactively develop this framework to help them navigate through early-stage challenges that may arise as more DERs are installed.This can include creati

211、ng new policies or updating existing ones to target the effective use of DERs in the electricity system,for example in VPP programs.New policies will need to consider the increasingly important role of AI,including the benefits and risks of increased AI applications to enhance VPP operations.As desc

212、ribed in VPP Background,AI algorithms can forecast weather patterns,anticipate changes in demand,and coordinate DERs enrolled in a VPP for optimal delivery of VPP services.Policies and regulations must therefore adapt to the changing landscape to capitalize on improving technological advancements wh

213、ile safeguarding the security and privacy of VPP participants and key operators,such as the VPP aggregator and electric utility.Without a progressive framework,decision makers run the risk of implementing inefficient programs that can discourage participation and lead to load defection a situation i

214、n which electricity customers fully or partially self-supply their premises(e.g.,by installing sufficient distributed generation),thereby limiting their electricity consumption needs from the grid.Load defection represents a missed opportunity to harness a valuable grid asset and can lead to inequit

215、able cost distribution across the utility customer base.2 Harness the unique environment of a small island nationAn adaptable approach to VPP program design is also supported by the small scale of island nations.Smaller populations,fewer stakeholders,and more localized electricity systems allow for

216、a narrower scope of observations,facilitating rapid feedback,which is valuable for VPP program improvement.Successes,deficiencies,new opportunities,and other learnings can be identified relatively quickly to further refine programs and propel the advancement of the technology.Hawaiian Electric is on

217、e example of an island utility that has made use of these characteristics to advance the use of DERs in its electricity mix.The electric utility has offered several customer renewable energy programs in the past,24 with programs such as Customer Grid-Supply Plus and Net Energy Metering Plus building

218、 off predecessor programs.Insights gained from previous programs helped the utility develop the two new long-term DER programs,one of which allows customers to provide grid services from their home battery systems,25 much like a VPP.Continuous optimization of VPP programs in Caribbean island nations

219、 can provide an opportunity for them to become leaders of this modern technology in the Global South,showcasing their innovative capacity and serving as models for other jurisdictions.3 Seek a customized VPP solution for each country or jurisdictionAlthough it is helpful to learn from the efforts of

220、 other regions,it is important to avoid wholesale duplication of DER and VPP programs.Although similar at the macro level,local electricity sector dynamics and needs can differ significantly across Caribbean countries.For example,some islands might place the greatest priority on improving or maintai

221、ning very high energy reliability to support their economies,while others might focus more on reducing their dependency on imported fuels.VPP programs should therefore be tailored to each islands local context,applying lessons learned from other regions while also leveraging the data and information

222、 available locally.For example,the optimal length of a contract term for a cost-effective VPP program capable of attracting wide participation depends on the energy economics of the jurisdiction in question.Similarly,prospective VPP participants may have varying preferences for enrollment,compensati

223、on,and modes of participation rmi.org/26Reimagining the Electricity Sector in Island Nations with Virtual Power Plantsin different jurisdictions.The priority needs and objectives that the VPP programs are intended to address in the near term and long term should be defined in the initial planning st

224、ages of the process and guide the rest of the VPP program design.Example objectives for VPP programs include reducing outages by using a VPP to provide power to the grid when needed and reducing fuel usage by displacing spinning reserve with aggregated battery storage capacity from a VPP.The priorit

225、ies and challenges in each countrys electricity sector will help inform the specific elements of VPP programs that can be adapted from other jurisdictions and the unique applications that should be employed.This is where a collaborative approach among key stakeholders is helpful to ensure that solut

226、ions implemented address the concerns of the electricity system.4 Ensure stakeholder collaboration for effective VPP program deploymentVPP program design and implementation require the collaborative efforts and alignment of multiple stakeholders to ensure effective deployment.Collaboration among the

227、 utility,regulator,electricity customers(particularly prospective VPP participants),and any third-party VPP aggregators or service providers is valuable in overcoming barriers in policy and regulatory frameworks,technical systems,and market structures.Issues such as administrative or technical capac

228、ity constraints can be highlighted in the planning stages,and preemptive solutions,such as training and partnerships with third parties,can be implemented.Additionally,awareness of gaps in customer understanding,as it relates to the technology or program,are crucial so that they can be addressed and

229、 VPP program participation can be encouraged.A collaborative approach is also useful in creating an enabling environment for VPPs and maintaining the momentum of VPP programs.For instance,the development of streamlined regulatory processes and attractive compensation schemes that meet customer needs

230、 can incentivize participation and reduce the risk of load defection.Similarly,clearly defined technological requirements from the utility and VPP aggregator can facilitate easy enrollment of participants and seamless integration with the utilitys dispatch platform while maintaining cybersecurity st

231、andards.Stakeholder collaboration is therefore essential for the early identification and addressing of potential obstacles as well as development of favorable VPP programs.Policy and regulation for VPPs in the CaribbeanThe USVI study reviewed VPP programs and policy frameworks in Hawaii,Puerto Rico

232、,Vermont,and Western Australia,identifying eight key best practices,shown in Exhibit 13,that could inform the development of VPP regulatory environments in the Caribbean.These practices emphasize the importance of DERs as a core element of VPPs and advocate for comprehensive,flexible systems that ca

233、n support grid stability while maximizing the potential of DERs.Although the best practices focus on VPPs,they also allow for the integration of other DER programs,promoting a holistic approach to optimizing the value of these resources.rmi.org/27Reimagining the Electricity Sector in Island Nations

234、with Virtual Power PlantsExhibit 13 Best practices and recommendations for VPP regulatory frameworksRMI Graphic.Source:RMI analysis1.Establish grid service needsHighlight the most critical grid service needs to be addressed by customer-sited DERs to inform program development.Knowing the grid servic

235、e needs that are required in the short and long term will help to ensure that any program developed is fit for purpose.2.Develop long-term DER plansInclude the need for long-term,strategic planning for DERs in regulatory framework.This planning can inform development of programs that leverage these

236、assets and benefit the utility and ratepayers.3.Establish an overarching demand response programRegulators and utilities should collaborate to develop an overarching demand response or DER program.An overarching program will provide flexibility for diferent types of subprograms or tarifs that can be

237、 used to carry out demand-side management activities.4.Develop competitive procurement processes for third-party providers or aggregatorsAdapt procurement framework to allow for contracting of independent third parties to provide programs or aggregate customer DERs for use in a VPP.Having the proper

238、 frameworks in place will allow for ease of participation and faster uptake of the program.5.Implement fair and sustainable compensation/incentives that reflect the value that DERs bring to utilitiesConsider compensation mechanisms based on quantifiable factors,such as the cost of avoided generation

239、.Consider use of up-front incentives to allow for equitable program participation.These mechanisms will encourage new and continued participation in programs.Premiums can also be applied to compensation for emergency grid events.6.Determine appropriate cost-recovery mechanismsCollaborate with the re

240、levant stakeholders to determine how costs incurred by the utility can be recovered.Suficient consultation can allow for development of solutions that are acceptable to all from the outset and hence minimize the risk of regulatory delays later in the program.7.Regularly evaluate efectiveness of dema

241、nd response/VPP programsConsider regular use of an analysis that weighs customer benefits against costs to ensure that programs are cost-efective for the utility and customers.Regularly assessing the cost-efectiveness of programs can allow for early detection of disparities or areas for improvement

242、within the program.8.Ensure cybersecurity and data protection protocols are in placeEstablish requirements for cybersecurity and data protection in a customer DER program and enforce these requirements on aggregators and program providers.These requirements will assuage the privacy and security conc

243、erns of all stakeholders involved in the program.Alternatively,in the early stages,programs can avoid the cybersecurity risk through scheduled dispatch operation when devices do not need to be managed in real time.Best PracticeRecommendationBest practices and recommendations for VPP regulatory frame

244、worksRMI Graphic.Source:RMI analysisrmi.org/28Reimagining the Electricity Sector in Island Nations with Virtual Power PlantsKey takeaways for Caribbean islands As demonstrated by the USVI study,VPPs can address the challenges shared by many Caribbean islands.VPPs,especially those using battery stora

245、ge,offer an effective solution to reduce fuel consumption,mitigate outages,lower electricity costs,and improve grid resilience during emergencies.The design of VPP programs in the Caribbean should draw on successful models from other regions while also remaining cognizant of the unique characteristi

246、cs of each island.Given the nascency of VPP development in the region,flexibility and openness are critical to refining VPP programs,using the rapid feedback available in these small island systems.Furthermore,each islands specific energy priorities should inform the design of solutions tailored to

247、their needs.Stakeholder engagement and collaboration are essential for the successful deployment of VPPs in the region.Best practices extracted from other jurisdictions can also provide useful insight into policy and regulatory strategies for creating an environment that enables the full potential o

248、f DERs,including VPPs,to be captured.Ultimately,VPPs represent a modern solution to optimally harness the DERs that will play a key role in the Caribbeans energy transition and can be a defining feature of the regions future energy system.rmi.org/29Reimagining the Electricity Sector in Island Nation

249、s with Virtual Power PlantsConclusionThe transformation of island energy systems from centralized,fossil fueldependent infrastructure to resilient,decentralized,distributed networks is not just an aspiration it is becoming a necessity.As demonstrated through the detailed analysis of the USVI case st

250、udy,VPPs offer a compelling pathway to achieve this transformation.VPPs can deliver substantial economic benefits while simultaneously enhancing grid stability,improving resilience,and accelerating the transition to renewable energy.The USVI analysis revealed that VPPs can generate annual net benefi

251、ts of up to$22.5 million for the territorys electricity system,translating to significant household savings while reducing daily fossil fuel generation by approximately 8%and cutting costs by more than 12%.Perhaps more importantly,VPPs provide critical nonmonetary benefits,including enhanced grid re

252、liability,improved resilience during extreme weather events,and increased empowerment of electricity customers all particularly valuable benefits in the island context.As island nations in the Caribbean continue to tackle the intersecting challenges of high electricity costs,grid vulnerability,and c

253、limate change impacts,the lessons learned from the USVI case study offer a valuable blueprint for regional energy transformation.Although all countries will need to adapt VPP program design and implementation to their unique context,the fundamental benefits remain consistent:reduced dependence on im

254、ported fossil fuels,enhanced grid stability,improved resilience to natural disasters,and accelerated progress toward clean energy goals.By embracing VPP technology and establishing supportive regulatory frameworks,island nations can unlock a more sustainable and resilient energy future.This transfor

255、mation will not only benefit electric utilities,individual electricity customers,and communities,but will also contribute to the broader goals of energy independence and climate resilience.The time for action is now,and VPPs stand ready to play a crucial role in this essential transition.rmi.org/30R

256、eimagining the Electricity Sector in Island Nations with Virtual Power PlantsEndnotes1 Caribbean Electric Utility Services Corporation Electricity Tariff Report,CARILEC,March 2023,https:/carilec.org/carilec-electric-tariff-report-march-2023/.2“Population of the United States Virgin Islands:2010 and

257、2020,”United States Census Bureau,October 28,2021,https:/www2.census.gov/programs-surveys/decennial/2020/data/island-areas/us-virgin-islands/population-and-housing-unit-counts/us-virgin-islands-phc-table01.pdf.3 Dan Olis and Laura Leddy,U.S.Virgin Islands Energy Baseline Report,National Renewable En

258、ergy Laboratory,May 2024,https:/www.nrel.gov/docs/fy24osti/88770.pdf;and“USVI Electric Rate,”Virgin Islands Water and Power Authority,accessed February 25,2025,https:/www.viwapa.vi/customer-service/rates/electric-rate.4 Joshua Barry,“U.S.Secretary of Energy Confronts Power Crisis in the Virgin Islan

259、ds,”St.Thomas Source,July 16,2024,https:/ Olis,U.S.Virgin Islands Energy Baseline Report,2024.6“Navigating Challenges:WAPA Faced Islandwide Outages Amidst Adverse Weather and Aging Infrastructure,”news release,Virgin Islands Water and Power Authority,May 7,2024,https:/www.viwapa.vi/news-information/

260、press-releases/press-release-details/2024/05/07/navigating-challenges-wapa-faced-islandwide-outages-amidst-adverse-weather-and-aging-infrastructure.7 Olis,U.S.Virgin Islands Energy Baseline Report,2024.8 Hurricanes Maria,Irma,and Harvey:September 28 Event Summary Report,U.S.Department of Energy,Sept

261、ember 28,2017,https:/www.energy.gov/sites/prod/files/2017/09/f37/Hurricanes%20Maria%2C%20Irma%20and%20Harvey%20Event%20Summary%20September%2028%2C%202017.pdf.9 2017 Hurricane Season:Federal Support for Electricity Grid Restoration in the U.S.Virgin Islands and Puerto Rico,United States Government Ac

262、countability Office,report to congressional requesters,April 2019,https:/www.gao.gov/assets/gao-19-296.pdf.10 USVI Hurricane Recovery and Resiliency Task Force Report,2018,https:/ For All,”Virgin Islands Energy Office,accessed February 25,2025,https:/energy.vi.gov/solar-for-all/;and“VIBES,”Virgin Is

263、lands Energy Office,accessed February 25,2025,https:/energy.vi.gov/vibes/.12“Net Energy Billing Program,”Virgin Islands Energy Office,November 2021,https:/energy.vi.gov/wp-content/uploads/2024/07/NEBProgramOverview.pdf.rmi.org/31Reimagining the Electricity Sector in Island Nations with Virtual Power

264、 Plants13“PLEXOS Energy Modeling Software,”accessed February 25,2025,https:/ Suzanne Carlson,“Protesters Demand Accountability from WAPA after Several Days of Rolling Blackouts,”Virgin Islands Daily News,June 12,2024,https:/ Outage Viewer,”Virgin Islands Water and Power Authority,accessed March 1,20

265、25,http:/outageviewer.viwapa.vi:7575/.15 Caribbean Electric Utility Services Corporation Electricity Tariff Report,2023.16 Sian Bareket,“A New Era of Hurricane Severity:What the Data Tells Us,”Earth.Org,accessed February 25,2025,https:/earth.org/data_visualization/hurricane-beryl-and-a-new-era-of-cy

266、clone-severity/.17“Devastating Atlantic Hurricane Season Comes to an End,”World Meteorological Organization,November 29,2024,https:/wmo.int/media/news/devastating-atlantic-hurricane-season-comes-end.18“Mean Temperature Anomalies November 2024,”Caribbean Regional Climate Centre,February 17,2025,https

267、:/rcc.cimh.edu.bb/mean-temperature-anomalies-november-2024/.19 Michael Klein,“CUC:Hot Weather Brings Record Electricity Demand,”Cayman Compass,November 5,2019,https:/ Usage Spikes as Heat Soars,”Trinidad Express Newspapers,August 31,2023,https:/ Records Highest Ever Consumer Electricity Demand,”Kaie

268、teur News,September 30,2023,https:/ Sets New Demand Record for Electricity Usage amid Heat JPS,”Loop News,accessed February 25,2025,https:/ Annual Technology Baseline,”National Renewable Energy Laboratory,2024,https:/atb.nrel.gov/electricity/2024/data.21 Neil Hartnell,“GB Power Secures Best Solar Ra

269、te in Caribbean,”CARILEC,March 29,2023,https:/carilec.org/gb-power-secures-best-solar-rate-in-caribbean/.22 Malaika Masson,David Ehrhardt,and Veronica Lizzio,“Sustainable Energy Paths for the Caribbean,”Inter-American Development Bank,2020,https:/publications.iadb.org/en/publications/english/viewer/

270、Sustainable_Energy_Paths_for_the_Caribbean.pdf.23 RMI data and internal analysis24“Previous Renewable Programs,”Hawaiian Electric,accessed February 25,2025,http:/ Your Own Device,”Hawaiian Electric,accessed February 25,2025,http:/ the Electricity Sector in Island Nations with Virtual Power PlantsSid

271、ney Jules,Lillie Ogden,and Zsaria Diaz,Reimagining the Electricity Sector in Island Nations with Virtual Power Plants,RMI,2025,https:/rmi.org/insight/reimagining-the-electricity-sector-in-island-nations-with-virtual-power-plants/.RMI values collaboration and aims to accelerate the energy transition

272、through sharing knowledge and insights.We therefore allow interested parties to reference,share,and cite our work through the Creative Commons CC BY-SA 4.0 license.https:/creativecommons.org/licenses/by-sa/4.0/.All images used are from iS unless otherwise noted.RMI Innovation Center22830 Two Rivers RoadBasalt,CO 81621www rmi org March 2025 RMI.All rights reserved.Rocky Mountain Institute and RMI are registered trademarks.