Office parks, college campuses or neighborhoods can serve as stand-alone power generation, distribution and storage systems. They're called virtual power plants, or microgrids.

But while they can work on their own, how can they make money faster?

Viridity Energy is working on the answer. The one-year-old startup makes software it calls its VPower System, which controls localized power generation and storage in what it calls a virtual power plant.

But it also seeks to optimize selling that power and storage capacity back to the grid – a key to adding value to the proposition, said CEO Audrey Zibelman.

Why? It can expand the options for revenue beyond the 100 hours a year or so that applies to the demand response market, which allows utilities to pay customers to turn down power when it's facing peak demand on its grid.

Expanding to selling power into so-called ancillary services markets could expand a virtual power plant's money-making opportunities to about 2,000 hours a year or so, Zibelman said Thursday, Nov. 19 at the GreenBeat conference in San Mateo, Calif.

"Having more hours in the market, being more integrated into the real market," not only helps increase revenue to pay back the costs of the renewable generation, storage, and smart grid systems involved, she said. It can also play a role in lowering the prices those entities pay for power, she said.

That's because the prices that commercial and industrial customers pay for power at peak times can change, depending on the prices market players offer to utilities and grid operators, she explained.

And if virtual power plants can offer enough megawatts of power – or "negawatts" of power reductions – to those markets at prices lower than those being bid by traditional ancillary services power providers, that should lower the prices that all customers pay at the end of the day, she said.

"You don't get paid what you bid – you get paid the clearing price," she explained.

Zibelman knows energy markets, having last served as COO of mid-Atlantic grid operator PJM. What's still unclear, she said, is just how much cheaper, virtual power plant capacity might have to enter the market to drive down overall bidding prices. 

And, of course, to get there, virtual power plant or microgrid systems must be approved to sell into power markets, just like peaking gas power plants or other established generation sources do. That's Viridity's goal in several projects it's involved in, she said.

In Philadelphia's Drexel University, Viridity is working with Siemens and utility PECO to build a virtual power plant set to go live in the first quarter of next year, she said. It's also working with the state of New Mexico on its Green Grid Initiative, a broad ranging project meant to give the state a more efficient way to manage power on a broader scale.

Viridity has also been named partner in two utility projects seeking millions from the Department of Energy's smart grid demonstration grant program – the smaller, pool for more experimental projects that's yet to announce recipients of the majority of the $615 million it has available (see DOE's $3.4B Smart Grid Grant Program: The Winners).

One project is with San Diego Gas & Electric, which is seeking $100 million for a project involving a host of IT giants and startups seeking to build a microgrid at the University of California at San Diego campus (see Balance Energy Wants to Build Microgrids, Starting With San Diego).

Another is with New York utility Consolidated Edison, which is seeking $46 million in smart grid demonstration grants. Viridity will work with the New York City Economic Development Corp. to optimize a network that includes building automation systems and solar power at the Brooklyn Army Terminal and other city-owned properties (see GreenBiz).

Viridity is also working with a handful of private clients interested in having their own virtual power plants, Zibelman said, though she wouldn't name those partners.

By year's end, Viridity hopes to have 100 to 200 megawatts of virtual power plant capacity online, Zibelman said.

Similar goals are shared by a host of projects, both from utilities and from their customers, supported by a host of established companies and startups.

Duke Energy has hired Integral Analytics to manage a virtual power plant project underway in Charlotte, N.C., for example. GridPoint is working on integrating solar power, storage and smart grid systems for the Sacramento Municipal Utility District and Commonwealth Edison in Chicago (see Integral Analytics: Orchestrating Duke's 'Virtual Power Plant' and GridPoint Gets Into Solar Integration With SMUD, ComEd).

Fort Collins, Colo. has hometown company Spirae helping on its FortZED project, and the Galvin Electric Electricity Initiative is working with the Illinois Institute of Technology on what it calls a "perfect power prototype" project in Chicago. Both projects have received DOE funding (see DOE Hands Out $47M for Smart Grid Demos).

Microgrids already make up about 455 megawatts of power for commercial and industrial entities, though most of that power is fossil fuel-generated for onsite power needs, while universities and other institutions have about 322 megawatts of microgrid capacity (see Microgrids: $2.1B Market by 2015).

Whether or not the incumbent power generation entities will be supportive of new virtual power plants selling power back to electricity markets, and potentially dropping the prices they can command, is an open question, however.

"For every innovation, you have folks who are invested in the status quo," Zibelman said. "Generators see this as a revenue erosion."

Photo of an office park via Flickr/Creative Commons.