Why Virtual Power Plants—and Why Now

Or: How the Grid Learned to Stop Worrying and Love Coordination 

Electricity demand in the United States is growing quickly, and, like most things that grow quickly, it’s making people nervous. Data centers are multiplying like gremlins after midnight, cars are plugging in instead of filling up, factories are electrifying, and the grid is starting to sweat. Some have concluded that the only solution is to build a lot of new fossil fuel power plants, immediately and everywhere. 

But this would be slow, expensive, carbon-intensive, and guaranteed to cause numerous permitting fights. 

Fortunately, there are other options. Virtual Power Plants, or VPPs, are what happens when the energy system realizes that it already owns a closet full of perfectly good capacity and maybe should use it. Instead of building one giant power plant, VPPs coordinate thousands of smaller energy resources—solar panels, batteries, electric vehicles, smart appliances, flexible buildings—and operate them together as a single system. Think less “new smokestack,” more “group project that actually works.” 

Despite the name, Virtual Power Plants are very real. They do not live in the cloud, they do not mine cryptocurrency, nor are they powered by vibes. In fact, utilities and states have been deploying early versions of VPP programs for years. By 2025, the market had reached 37.5 gigawatts of capacity across North America, according to Wood Mackenzie. And the grid is now under enough pressure that these formerly “nice-to-have” solutions have become necessities.  

With energy affordability ranking as a top political issue this year, heightened by international conflicts, gas market volatility, and policy uncertainty around renewable energy incentives, utilities and state policymakers are scrambling for solutions that can provide additional capacity while cutting costs to consumers. In 2025, DOE, citing analysis by The Brattle Group, found that VPPs could provide peak capacity at 40 to 60% lower net cost to utilities than alternative peaking resources including gas and utility-scale batteries. The estimate did not account for VPPs’ other societal benefits, like emissions reduction or resilience. 

Distributed solar and storage are now among the cheapest and fastest resources available. At the same time, electricity bills are rising, largely because of fossil fuel volatility and because upgrading transmission lines and substations turns out to be expensive and not all that fast. According to Lawrence Berkeley Lab’s 2026 update to the Retail Electricity Price Trends and Drivers report, fuel costs topped the list of primary drivers of price change from 2024 to 2025, followed closely by distribution costs. Expensive upgrades and grid build-out just to serve demand that only peaks for a few dozen hours a year is a bit like buying a second car just for grocery runs on Thanksgiving. VPPs, by contrast, are very good at showing up exactly when needed, when the grid is stressed, and quietly solving the problem. 

In the current context, speed matters too. Resources that are already installed, already connected, and already sitting in homes and businesses need not wait in an interconnection queue. There is no queue for a smart thermostat. This is not to say that markets should focus only on enrolling existing assets into VPPs; tremendous economic opportunities lie in accelerating the deployment of cheap, fast, and clean generation for purposes of bringing flexibility to congested areas that would otherwise require costly work. In Massachusetts, ConnectedSolutions+ now provides different levels of incentives for batteries (and smart thermostats) based not just on when they are dispatched, but also where they are installed. Earlier last year, National Grid launched a sort of “non-wire alternatives 2.0” through which the utility selects and aggregates distributed resources via an online marketplace following this same locational approach, based on their grid constraints.  

VPPs also have the unusual distinction of solving multiple problems at once. They can improve reliability, reduce system costs, lower emissions, and defer expensive grid upgrades. When designed intentionally, they can also deliver real benefits to low-income households and historically underserved communities including lower bills, resilience during outages, and investment in local clean energy assets. Flexible, affordable, cleaner, and socially useful. Annoyingly competent, really. 

So, if they’re so great, why aren’t VPPs everywhere already?  

Because scaling things is hard. Utilities are cautious and don’t necessarily have the right incentives to try something different from what they’ve been doing for a century. Financing can be complicated. Regulations are not always written with coordination in mind. States and cities are busy. Promising VPP efforts like other innovative approaches have a stubborn habit of getting stuck in pilot mode, admired by all, but not replicated at scale. When state teams are under-resourced and working in isolation, learning can stay fragmented, successful approaches spread slowly, and many promising opportunities never make the leap from interesting experiment to core infrastructure. 

This is why we are launching the VPP Acceleration Initiative. 

The Initiative is a coordinated, three-year national effort led by the Clean Energy States Alliance (CESA), and several project partners, including World Resources Institute and Clean Energy Group, to support public sector actors. States and local governments navigating VPP deployment need trusted, unbiased partners who aren’t trying to sell them anything. CESA already convenes two working groups where state leaders learn from each other and from experts across the field, and tackle shared challenges. [Learn more at our website.] The Initiative will provide technical assistance, share replicable program models, support policy and regulatory reform, engage communities, and help connect projects with financing.  

The goal is gigawatt-scale VPP deployment nationwide by 2028, which sounds ambitious because it is, and because anything less would be insufficient. 

The grid doesn’t need revolutionary technologies. It needs the clean, cheap, and reliable solutions that already exist to scale faster, and with the people who use it in mind. VPPs are ready. The technology works. The benefits are clear.  

So let’s get to work.