Published August 24, 2026
By NZero
Distributed energy resources (DERs) are becoming an increasingly important part of the US power system. Batteries, rooftop solar, electric vehicles (EVs), smart thermostats, HVAC systems and flexible commercial loads are being deployed across homes and businesses, creating a growing network of energy resources outside traditional power plants. Historically, many of these assets have been managed primarily around individual customer needs. A battery might provide backup power, an EV might simply be charged overnight, and a building’s HVAC system might operate according to occupancy and temperature. Virtual power plants (VPPs) are changing how these resources can interact with the wider grid. By connecting and coordinating many distributed assets through software, VPPs can make thousands of small resources operate as an aggregated source of flexibility. The US Department of Energy (DOE) estimates that 30 to 60 GW of VPP capacity is already operating with commercially available technology, while its 2025 analysis points to significant potential for further expansion. As electricity demand rises due to electrification, data centers and industrial growth, the ability to coordinate existing distributed resources is becoming an increasingly relevant part of grid planning.
A VPP changes the role of a distributed energy asset by connecting it to a broader network. Rather than operating independently, batteries, EV chargers, smart buildings and flexible loads can respond to signals based on grid conditions, electricity prices or system demand. The DOE defines VPPs as aggregations of DERs that can balance electricity supply and demand and provide utility-scale grid services. For example, a collection of commercial batteries can discharge during a period of high demand, while EV charging can be shifted to a later period when the grid is less constrained. HVAC systems can also temporarily reduce consumption without necessarily affecting building operations. Individually, each resource may have limited impact. When aggregated, their combined response can reach a scale that is meaningful to utilities and grid operators. This creates a shift in how distributed energy is viewed. A customer-sited battery can remain an important backup asset for a business, but when connected to a VPP, it can also become a flexible grid resource. The same principle applies to EVs, smart appliances and building systems. Their value increasingly depends on both what they can do and when they can do it.
The growing interest in VPPs is closely connected to the changing economics of the US power system. Electricity demand is expected to increase as transportation, heating and industrial processes become more electrified. At the same time, many parts of the grid face transmission and distribution constraints that can require substantial investment. The DOE has identified VPPs as a potential tool for addressing rising peak demand, distribution congestion and interconnection challenges. Instead of relying exclusively on new centralized generation or physical grid upgrades, utilities can potentially use flexible distributed resources to manage demand during specific periods. This is particularly relevant for non-wires alternatives, where distributed generation, energy storage or demand response can help address a local grid constraint. National Grid’s Massachusetts program, for example, is currently seeking non-wires alternative solutions across 19 areas and is considering standalone or aggregated resources including distributed generation, storage and demand response. The approach does not mean VPPs can replace every transmission or distribution project. Their effectiveness depends on factors such as the location, timing and availability of participating resources. However, where a grid constraint is concentrated in a particular area and flexible resources are available, a VPP can provide utilities with another option for managing capacity.
The economic value of VPPs is also becoming broader. Reliability remains an important reason for aggregating DERs, but utilities and customers can potentially benefit from several services at the same time. During periods of high electricity demand, batteries can discharge and flexible loads can reduce consumption. Shifting EV charging or other flexible loads can help avoid periods when electricity is more expensive. VPPs can also improve the utilization of distributed assets that customers have already invested in. The DOE has highlighted affordability, flexibility and resilience as important benefits of VPP deployment, while its commercial liftoff analysis estimated that expanding VPPs to 80 to 160 GW by 2030 could help reduce overall grid costs by around $10 billion annually. The customer side of the equation is equally important. Participation needs to provide a clear financial incentive, whether through direct payments, lower electricity costs or other program benefits. For utilities, the value comes from having a flexible resource that can support system operations without necessarily requiring the construction of a new centralized asset. This creates a two-sided business case in which distributed energy resources can generate value for both the owner and the wider electricity system.
The expansion of VPPs ultimately depends on more than the number of batteries, EVs or smart devices connected to the system. Utilities and aggregators need accurate information about where resources are located, how much capacity they can provide and when they are available. They also need reliable forecasting, automated controls and appropriate measurement systems to verify performance. This makes energy visibility an important foundation for VPP deployment. A commercial building, for example, may have significant flexible loads, but those opportunities are difficult to capture without understanding the building’s consumption patterns and identifying when demand can be shifted. The same principle applies across thousands of distributed assets. FERC Order No. 2222 established a framework allowing DER aggregations to participate in organized wholesale electricity markets, creating a pathway for distributed resources to compete alongside traditional resources. Yet implementation still requires coordination between utilities, aggregators, customers and grid operators. DOE has also noted that inconsistent tools and processes for evaluating, integrating and compensating VPPs remain barriers to wider deployment. As VPPs grow, energy management systems that can monitor consumption, forecast demand and identify flexible loads will become increasingly important to turning distributed assets into reliable grid resources.
The growth of VPPs signals a broader change in the role of distributed energy across the US power system. Batteries, EVs, solar installations, HVAC systems and other flexible resources are increasingly capable of serving both customer needs and grid needs when they are connected through coordinated software and appropriate market structures. VPPs provide the mechanism for bringing these resources together, allowing small changes across many sites to produce a system-level response. Their future growth will depend on customer participation, compensation, regulatory frameworks, data quality and the ability of utilities to integrate distributed resources into grid planning and operations. As electricity demand continues to grow, the ability to coordinate existing energy assets may become an increasingly valuable complement to traditional infrastructure investment. For businesses, this also creates a new reason to understand their energy consumption at a more granular level. Knowing how much energy a facility uses is important, but understanding when that energy is used and which loads can respond can determine whether those assets can participate in the increasingly flexible US electricity system.
