Virtual power plants: Homegrown energy

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  Quantumrun Foresight
• February 19, 2025

Insight summary

Growing interest in virtual power plants (VPPs) is reshaping how electricity is supplied and managed, offering real-time coordination of batteries and smart appliances. Experts predict these systems could lower infrastructure costs by billions over the next decade while empowering users to cut monthly bills. VPPs can also prompt new partnerships among utilities, businesses, and policymakers, resulting in new strategies for resource planning and local energy sharing.

Virtual power plants context

Virtual power plants are receiving increased attention as an alternative to large-scale power stations. They involve grouping multiple distributed energy resources—such as batteries, electric vehicle (EV) chargers, and smart appliances—into a cohesive network that meets electricity demand without relying solely on costly infrastructure. Analysts anticipate a surge in these distributed systems within the next decade, driven by technological advances and declining equipment costs, according to the Massachusetts Institute of Technology. Policymakers, utility companies, and organizations like the US Department of Energy also see potential for VPPs to reduce emissions, cut consumer costs, and enhance grid stability.

A VPP relies on software and communication technologies to synchronize energy usage in real time. Operators can coordinate devices like rooftop solar panels or thermostats, ensuring that electricity demand is balanced during critical periods. Green Mountain Power in Vermont, for example, expanded a home battery program in 2023 that allows customers to share stored power with the grid when supply is tight. This approach lowers peak loads, reduces reliance on gas peaker plants, and encourages consumers to play a larger role in the clean energy shift.

Current developments show that several regions have moved beyond pilot programs. In Massachusetts, National Grid, Eversource, and Cape Light Compact compensate households that allow the utilities to manage their home batteries, while the Colorado Public Utilities Commission recently urged Xcel Energy to roll out a fully operational program this year. According to the US Department of Energy, VPPs account for an estimated 4 percent to 8 percent of the country’s peak electricity demand, and that figure could climb in the coming years. In addition, a 60-gigawatt network of distributed resources may save utilities between USD $15 billion and USD $35 billion in net costs over a decade, according to consultancy firm Brattle.

Disruptive impact

Individuals may benefit from more direct control over their electricity usage and monthly expenses. They can take advantage of flexible pricing systems that respond to changes in supply and demand, which could lead to lower energy costs. However, complex enrollment procedures may present barriers to broader participation, causing some people to feel left out. Consumers could see new mobile apps that track their energy habits, plus opportunities to share small-scale battery storage with neighbors.

Companies may develop new subscription offerings that bundle energy services with smart devices and software solutions. They may need to balance near-term revenues with the longer-term benefits of user-centric electricity management. Technology and energy firms might expand into partnerships with other industries, such as EV charging or commercial real estate, to strengthen their services. They might also see new competition from businesses focusing on data analysis, creating a more dynamic marketplace overall.

Meanwhile, governments may direct funding toward standardizing VPP systems across different regions. They may also collaborate with international partners to coordinate cross-border energy policies that support unified standards. Incentives for privately owned power sources could address economic disparities in energy access, but authorities may need to ensure fair distribution of such benefits. Leaders could also develop regulations around privacy, cyber protection, and reliability, which might involve closer work with utility regulators and private firms.

Implications of virtual power plants

Wider implications of VPPs may include: 

• Local communities forming shared energy zones, leading to new neighborhood identities centered on collective resource management.
• Property developers designing energy-ready homes, causing a rise in housing demand tied to virtual power plant integration.
• Households operating direct power trades with neighbors, introducing local markets that bypass conventional utility structures.
• Technical colleges launching programs in VPP operations, creating more specialized job opportunities.
• Mining companies expanding extraction of battery materials, causing heightened debates over ethical sourcing and environmental impact.
• State governments collaborating on interconnected systems, promoting interstate agreements that optimize shared resources.
• Major retail chains investing in charger networks, leading to customer loyalty programs linked to store-based electricity access.
• Traditional utilities overhauling long-term planning, shifting revenue models away from centralized plants toward distributed assets.
• Urban planners applying insights from aggregated data, creating zoning laws that adjust building density based on local energy capacity.
• Social service organizations adding VPP management to their support toolkit, providing energy subsidies for low-income households in peak demand periods.

Questions to consider

• How could your household adapt to take advantage of VPPs?
• How might local businesses and job opportunities evolve with more decentralized energy networks?