How Virtual Power Plants Are Making the Grid More Affordable, Reliable, and Secure

America’s power grids are changing. AI and data centers are demanding abundant generation resources. Extreme weather events are putting increasing pressure on our electric grid. Distributed energy resources (DERs) like solar and storage are helping homes and businesses take control of their energy needs.  

These changes create opportunities and challenges for the future, but one grid innovation is providing a model for how the next era of grid stability and affordability could look.  

Virtual Power Plants (VPPs) are a network of small energy generation sites—think hundreds of homes with rooftop solar—that are combined with storage technologies like home batteries and electric vehicles to help grid operators manage peak demand, improve affordability, and bolster grid resilience.

Here’s how VPPs work:

SEIA first wrote on VPPs back in 2023, and now only a few years later, America is experiencing how these networks can deliver affordable, reliable, and secure power to American homes and businesses.  

Affordability 

VPPs deliver cost-savings to homeowners and ratepayers alike.  
 
For Americans who own a home solar system and opt into a VPP, the network can provide lucrative benefits when the grid operators need to rely on their distributed resources at moments of peak demand. 
 
For ratepayers, VPPs can reduce overall system costs. Because VPPs consist of hundreds or thousands of your neighbors’ home energy systems, power is available closer to where it’s needed and less likely to be stuck behind congested power lines. One study found that deploying 60 gigawatts (GW) of VPP capacity nationwide could directly save ratepayers between $15 billion and $35 billion in infrastructure costs over the next 10 years. Additionally, VPPs help keep costs down during periods of peak demand. This past January, the Department of Energy projected that a new 400-megawatt (MW) VPP would have a net cost of $43 per kilowatt-year, while a gas peaker plant would cost $99 per kilowatt-year. During a 2025 heat wave in Vermont, 275,000 customers collectively saved about $3 million thanks to Green Mountain Power’s VPP more efficiently calling on available energy resources. As utilities look to address both rising energy demand and future blackouts, investing in VPPs will keep rates low and more money in consumers’ pocketbooks.   

Reliability 

VPPs have proven themselves to be a critical resource in tackling reliability challenges when energy demand spikes.  

On June 24, 2025, a heat wave scorched New England, but VPPs helped avoid an outage and keep ACs humming. Mark Christie, chair of the Federal Energy Regulatory Commission (FERC), noted that PJM was supported by 5 GW of power and load shifting from VPPs and that it was a critical resource in helping meet demand. 

This included power delivered by Sunrun, a residential solar energy company and operator of VPPs, dispatched over 340 MW on the evening of the June 24^th with VPPs in New York, Massachusetts, Rhode Island, California, and Puerto Rico. 

Security 

Finally, VPPs help shore up American national security on several fronts. Creating more energy locally means that we rely less on unpredictable fuel prices that fluctuate with international markets. These distributed resources also help to decentralize our energy systems, making communities more resilient and reducing the risk of attacks on critical energy infrastructure.  

As America’s electricity system faces new and unique challenges, grid innovations like VPPs are essential tools in our energy toolbox. VPPs are proving their value in communities across the country and more jurisdictions are becoming interested in this technology. In May of this year, Virginia Governor Glenn Youngkin signed legislation directing Dominion Energy to formally explore using VPPs for managing the grid during peak demand.  

Whether the challenges are related to demand, affordability, or national security, VPPs provide innovative solutions to our energy systems’ most difficult problems. With VPPs, grids and communities take full advantage of all the local power available to them to create a more promising American energy future.