Standing in front of the derelict house on 2nd Street in North Richmond, California, it was hard to imagine that it could be the future site of a landmark clean energy project. The building‘s rotting white facade seemed to sink into the mud courtyard with no real foundation. Pieces of it crumbled to the ground. As we walked to the back, Jim Becker, my tour guide, pointed to a plastic tube sticking out of the wall.
“Here, the sewage just washed up on the dirt,” he said. “It just shot all the poop in the garden.”
But Becker was thrilled. He showed me this house as a sort of “before” picture. Soon workers will strip the building down to its studs and reconstruct the walls and roof. Then it will receive a full range of clean energy offerings: energy-efficient lighting, an electric vehicle charger, an electric stove, electric heat pumps for heating and air conditioning, an internet-connected “smart thermostat”. Solar panels will line the roof, and a backup battery will allow future occupants to keep the lights on and the fridge running during a power outage.
When the retrofit is complete, the home will not be publicly listed on the Bay Area’s grueling real estate market. Instead, it will be shown to a select group of Richmond locals, mostly low- and middle-income families looking to buy their first home.
Becker is the CEO of a nonprofit organization called RCF Connects, formerly known as the Richmond Community Foundation. The renovations are the continuation of a successful program Becker has been conducting for years to revitalize communities in and around Richmond by restoring abandoned homes and facilitating first-time homeownership among the city’s black and brown residents. But now, in collaboration with new partners and a grant from the California Energy Commission, RCF is trying something different.
When a buyer moves into the 2nd Street home, they not only rejoice in low energy bills and access to electricity during a power outage—they also help relieve California’s congested electric grid and can even make money doing it. Because the house becomes part of a new “virtual power plant”.
Virtual Power Plants or VPPs are an innovative way to bring more flexibility and stability to the power grid as it is increasingly threatened by fires, heat waves and rising demand.
Traditional power plants, such as a natural gas power plant, burn fuel to generate electricity. A single plant can generate a fixed amount of electricity – say 10 megawatts – whenever it is needed by consumers.
A VPP, on the other hand, can consist of hundreds of devices spread across any number of locations that collectively can provide the same 10 megawatts. But the VPP could provide this resource not only by generating electricity, but also by shipping energy stored in a battery or by reducing demand.
For example, a VPP could include solar panels on the roofs of a number of residential and commercial buildings that feed electricity into the grid. It could also include the ability to lower the thermostat in those buildings by a few degrees for a few hours, or control what time of day residents charge their electric vehicles or heat water.
Many customers already receive credits on their electricity bill for the energy generated by their solar panels or for participating in so-called “demand response” programs that reward changes in behavior. A VPP bundles these services together and sells them as a package.
“It’s not a power plant in the way we’ve seen it in the past,” said Andy Bennett, CEO of mPrest, the company that develops the software to manage Richmond’s virtual power plant. “But you created the same virtual capacity on the network.”
This capacity can be sold on the electricity market like any other power source.
And in return for tolerating temperature adjustments or allowing the VPP operator to draw power from their home battery systems, residents can see a more stable grid, lower bills and a share of the sale proceeds.
With fully electric homes, they also help reduce greenhouse gas emissions and local air pollution. Neighborhoods in North Richmond rank in the 80th to 89th percentile in the state for pollution exposure — mostly because they’re adjacent to a sprawling Chevron oil refinery, the largest on the west coast. One-fifth of the population in North Richmond, a small unincorporated area surrounded by the city of Richmond, falls below the federal poverty line, according to 2019 census data, compared to one-seventh in Richmond itself.
RCF has completed 20 renovations since it began its Richmond rot control program in 2015. In some cases, the previous owners of these houses died without making any plans to transfer ownership to an heir. Others fell victim to the subprime mortgage crisis. The vacant lots that dot the city become targets for illegal dumping and occupancy, costing the city thousands of dollars per home annually. The sides too reduce the value of neighboring properties and eat away at the social fabric of the townships.
“We had to develop a strategy to deal with that,” Becker said, “and also try to prevent gentrification.”
The strategy involves using a financial instrument called a Social Impact Bond to purchase land and finance the renovation work. RCF worked with the city to persuade a local bank to invest in a specified number of projects over a specified number of years.
To prevent gentrification, RCF is giving priority access to homes to participants in a financial advisory service and first-time home buyer program it also runs. The nonprofit also has a down payment assistance program for black first-time homebuyers, offering up to $20,000, and helps participants obtain other grants available through the California Housing Finance Agency and other outside organizations.
Mitzi Perez was a 2018 beneficiary of the RCF programs and is now a member of the nonprofit organization’s board of directors. Perez was born and raised in Richmond. Her parents immigrated from Mexico at a young age, and she was the first in her family to go to college. She’s not the first in her family to buy a home — her parents, a dental assistant and construction worker, owned the home she grew up in. But after college, she became a teacher, imagining that she would probably rent her salary for years. RCF enabled Perez and her husband to secure their future in Richmond much sooner, no less than around the corner from their birthplace.
“Richmond was always my home and I couldn’t imagine leaving it,” she told Grist. “I really want people who grew up like myself to have their own home here and feel like they can continue their legacy in their community.”
Perez’s home has some of the bells and whistles that the 2nd Street home will get, like energy-efficient appliances, electric heat pumps, and even solar panels. But in 2018, RCF didn’t have the money to do much more. Only now, with a $3 million grant from the California Energy Commission for the VPP, can it install the entire suite of features that will be introduced on 2nd Street.
Not all of the money will go to RCF’s renovation projects — Becker said the group plans to do about 10 retrofits of “zombie properties” in Richmond for the VPP. It will also work with several other local partners, including MCE, a non-profit organization that powers Richmond residents, to enroll approximately 100 more homes and 20 commercial buildings in the VPP over the next two to three years. Some of the additional homes may also receive battery systems, while others will receive smart thermostats or WiFi-connected sensors on other devices that will allow MCE to manage their energy needs.
As soon as all components of the virtual power plant are in place, the software developed by mPrest can estimate what these components can feed back into the grid in a given 24-hour period. Then MCE can sell this capacity on the electricity market.
Vicken Kasarjian, MCE’s Chief Operating Officer, emphasized that what the participants would do is voluntary. The new homeowners will be able to negotiate agreements with MCE that determine how much control they want to give up over their various devices and choices, and even then have the ability to override the system.
“The intention is not to control our customers,” Kasarjian said. “The intention is a change in behavior that makes sense for the environment and the wallet.”
But the hope is that customers will want to participate because they’ll be compensated for doing so and because the proceeds from the VPP could help offset mortgage payments and other homeownership costs. Sometimes they also help MCE avoid paying a premium for electricity when demand is high, which also reduces energy bills for their neighbors.
Perez said she is excited about the VPP project but has not yet been approached about attending in person. While the extra money sounds great, she said she’s more interested in how it could help raise awareness about energy use.
Exactly how much participants will be compensated and whether they will be paid in energy bill credits or direct checks is still being worked out. RCF plans to work with Richmond residents to design the program and measure interest at an upcoming community event, Perez said. Kasarjian stressed that this project has many more moving parts than any other VPP to date.
Standing in front of the house on 2nd Street, Becker could point in just about any direction to another boarded-up, run-down house. RCF was in the process of acquiring them all.
“There’s some cost savings that way, but there’s also an opportunity to make a significant change in the neighborhood, right?” he said. “If we don’t do that, the conditions in the neighborhood will never change.”