Google Nest spinout picks Texas for 1GW virtual power plant

Texas may be the country’s oil and gas heartland, but it’s also the nation’s most dynamic market for clean energy. That’s made the state an epicenter for utility-scale wind, solar, and battery development — and, potentially, for ​“virtual power plants” that can turn homes and businesses into grid resources.

That’s what Renew Home and NRG Energy are banking on. Last week the companies announced their intention to create a 1-gigawatt virtual power plant in Texas by 2035 — the biggest in the country. The idea is to deploy and enlist hundreds of thousands of smart thermostats to shift when people use power to cool and heat buildings across Texas, and layer in other customer-owned assets like solar panels, batteries, and electric vehicles over time.

“We plan to offer other devices, including EV chargers and batteries and other smart appliances,” said Ben Brown, CEO of Renew Home. But ​“smart thermostats are the quickest path to scale to provide immediate value to customers.”

Renew Home was formed last year by the merger of Google Nest’s smart-thermostat energy-shifting service Nest Renew and Ohmconnect, a California-based startup with hundreds of thousands of residential demand-response customers. The company launched this spring with claims of 3 gigawatts of load flexibility — the amount by which it can reduce electricity use for several hours at a time — around the U.S., and wants to expand that more than tenfold by 2030.

Through Google Nest, Renew Home has a long-standing relationship with more than 50 utilities across the country. One of those partners is NRG, a power plant owner that also provides retail energy services through business units like Reliant Energy, which started offering its customers Nest thermostats in 2012.

“There’s a pretty large existing user base of Nest and other thermostats that Renew manages today — upwards of near a million households” in Texas, Brown said.

Under the new program, set to launch in spring of 2025, Renew Home and NRG are hoping to dramatically expand that user base by offering no-cost installations of Nest and Vivint smart thermostats. To get a free thermostat, customers must choose from a variety of rate plans and incentives that allow the companies to shift their power use.

These plans can shave down customer utility bills — and help the grid weather moments of extreme stress. During heatwaves or cold snaps, Renew Home can automatically adjust thermostat settings to pre-cool or pre-heat homes before demand for grid electricity reaches its peak, and then dial down power use when demand surges. Remote-control ​“smart plug” switches can also temporarily turn off refrigerators, clothes dryers, and other major household loads.

All told, these interventions can reduce a typical home’s electricity use by a kilowatt or so for several hours. Multiply that by millions of homes, and that adds up to gigawatts of grid capacity. These techniques have been used successfully across the U.S., but experts say they remain seriously underutilized as a cost-effective way to boost the grid.

Renew Home estimates that 8.5 million Texas homes could yield 8.5 gigawatts of ​“load-shift potential” for the Electricity Reliability Council of Texas (ERCOT), which manages the power grid covering most of the state.

ERCOT experienced a major grid failure during Winter Storm Uri in 2021, and has set records for air conditioning-driven peak loads during summer heatwaves over the past several years. Growing demand for power from homes, businesses, and data centers is only set to increase pressure on the grid.

The boom in utility-scale solar power and battery installations in ERCOT has helped forestall supply shortfalls in recent years. But grid experts have long complained that Texas policymakers and regulators haven’t done enough to help households improve energy efficiency and earn money for helping the grid during those times as well.

VPPs as a solution to a changing grid 

Texas isn’t the only state facing the pressures of growing electricity use and a rapidly changing power generation mix. Demand for electricity from data centers, factories, electric vehicles, heat pumps, and other sources is pushing up load forecasts for utilities across the country.

Much of that new demand will be served by renewable energy. The falling cost of solar and wind power and lithium-ion batteries have made them the most economically attractive forms of power across most of the country. This will remain true even under a Trump administration that is likely to be far less friendly to clean energy than the Biden administration has been.

As more clean energy has come online, utilities and regulators are trying to figure out how to balance the fluctuations in energy supplied by sun and wind with the rising peaks of electricity demand. Large battery installations offer one option. Fossil gas power plants are another. But virtual power plants could do the job at a significantly lower cost than either of these large-scale utility investments.

The U.S. already has a good deal of load flexibility. The Federal Energy Regulatory Commission reported 32 gigawatts of customer peak load-reduction capacity as of last year, most of it through a combination of long-standing utility demand-response programs and customers working with private-sector companies to earn money from reducing power use in wholesale energy markets.

Big companies serving residential and small commercial customers include EnergyHub, which claims about 2 gigawatts of flexible capacity from about 1.4 million customer devices across 70 utilities in 30 states, and Uplight, which claims nearly 5 gigawatts of flexible capacity under management for dozens of utilities across 25 states.

But there’s a lot more potential for customers to flex their power to help the grid, particularly as people buy more EVs and add more electric heating and appliances. The U.S. Department of Energy estimates that hundreds of billions of dollars of consumer spending on EVs, rooftop solar, batteries, smart thermostats, and water heaters could add up to 80 to 160 gigawatts of VPP capacity across the country by 2030. That would be enough to meet 10 to 20 percent of U.S. peak grid needs and save utility customers roughly $10 billion in annual costs.

State-by-state analysis forecasting the growth of customer-owned energy resources also finds that they could significantly ease utility costs.

In California, VPPs could provide more than 15 percent of the state’s peak grid demand by 2035, saving consumers about $550 million per year, according to consultancy Brattle Group — although VPP providers say the state is not on track to realize this potential. And New York state recently saw an improvement to its 10-year grid reliability forecast, once it calculated the capacity for big customers to reduce electricity use during times of peak grid demand.

What makes Texas different 

The Lone Star State’s competitive energy market, where retail electricity providers have a great deal of freedom to compete for customers, opens up opportunities that don’t exist in the regions where customers are largely locked into their local utility’s service.

That means Texas customers don’t have to wait for their default utility to offer a VPP program or for state regulators to order it to do so. Plus, retail electricity providers in Texas make or lose money depending on how well they can match their ever-shifting contracts and spot-purchases of power on volatile wholesale electricity markets with their commitments to provide customers that power at fixed or flexible rates.

That creates opportunities for electricity retailers to use thermostats, appliances, and other customer devices far more often than just during grid emergencies, Brown said. Renew Home and NRG are envisioning a ​“365 days a year VPP product, helping customers save energy throughout the year,” with the ability to send signals to customers across the state or in particular pockets of the grid where congestion and demand are causing prices to spike.

This would both reduce customers’ electricity bills and turn a profit for NRG and Renew Home. The company is already tracking the performance of its smart thermostat-enabled customers around the country, with a map marked in different colors to indicate how much power reduction they can deliver. ​“This is all real data, real time,” Brown said.

Renew Home’s Google roots have helped the company build out its capacity to map home-by-home load reductions across the country, Brown said — and Google’s cloud computing arm has a role to play in the Texas VPP as well. Last week’s announcement noted that NRG plans to ​“embark on a broad multi-year technology transformation with Google Cloud” to tap its data and analytics to better predict how weather conditions and wind and solar generation patterns drive electricity pricing patterns.

“Renew Home is managing the customer side, the dispatch side,” Brown said. ​“Google Cloud is partnering with NRG on more of the market and supply side, and their broader operations.”

Doug Lewin, president of Texas-based energy consultancy Stoic Energy, said partnerships like these could outpace the smaller VPP pilot projects being run by Texas utilities and ERCOT. He pointed to the Aggregated Distributed Energy Resource (ADER) Pilot Project launched last year by ERCOT, which has a goal of reaching 80 megawatts of flexible capacity in the next three years — less than one-tenth of what Renew home and NRG are going after.

Renew Home has ​“serious chops in aggregated demand response,” Lewin wrote in a subscriber-only blog post, and NRG’s ​“massive share” of one-third or more of the customers in the competitive areas of ERCOT across all its retail electricity brands ​“adds up to several million customers.”

“Texas is a prime place for VPP development, giving customers a chance to reduce their bills significantly, while contributing to grid reliability,” Lewin added. VPPs could be a much more cost-effective solution than Texas’s legislatively mandated plan to direct $5 billion in state-backed low-interest loans to finance new fossil gas-fired power plants — a program that Gov. Greg Abbott, a Republican, wants to double to $10 billion in next year’s legislative session.

Brown noted that VPPs can be ​“stood up at a tenth of the cost of a natural gas power plant,” as measured on their cost-effectiveness in managing peak electricity demands that determine how much extra generation capacity a grid needs. And unlike new gas plants, smart thermostats give customers ​“more control over reducing their energy bills.”