Tackling Virginia’s Power Problems with Virtual Power Plants
It’s no secret that Virginia has a looming power problem. In its 2024 Integrated Resource Plan (IRP), Dominion Energy, the state’s leading utility, said it anticipated electricity demand to grow 5.5% annually in the next decade, doubling its current demand by 2039.
Much of that growth is expected to be driven by data centers—specifically cloud computing, digital services, and power-hungry artificial intelligence. Thanks to friendly tax incentives and a robust fiber optic infrastructure, the Commonwealth is home to the largest data center market in the world, according to the Virginia Economic Development Partnership.
But capacity isn’t the only challenge facing the state. Affordability of power is a factor as well.
In its most recent power capacity auction—where the grid operator secures commitments from power providers to have electricity available during peak demand—PJM set jaw-dropping record-high prices for the 2025–2026 delivery year. What cost $28.92/MW-day in 2024-2025 will now cost $269.92/MW-day for a large swath of the grid operator’s 13 state region.
In the Dominion Energy territory, which covers Virginia and North Carolina, prices hit zonal caps of $444.26/MW-day.
These higher capacity costs are passed on to consumers through their electric bills, meaning ratepayers will pay significantly more for power availability—even if their actual electricity use doesn’t change.
Clearly, if the Commonwealth of Virginia wants to maintain its position as a data center market leader, it has to solve its affordability and capacity problem.
An all-of-the-above approach to solving the energy crisis
Dominion Energy has proposed new joint transmission projects with other utilities in the PJM interconnection to bolster electric reliability and availability, but in October, Ed Baine, president of Dominion Energy Virginia, made it clear that new transmission alone would not be enough.
"We are experiencing the largest growth in power demand since the years following World War II," Baine said in a statement. "No single energy source, grid solution or energy efficiency program will reliably serve the growing needs of our customers. We need an "all-of-the-above" approach, and we are developing innovative solutions to ensure we deliver for our customers.”
Virginia Gov. Glenn Youngkin set in motion one of those innovative solutions earlier this month when he signed the Community Energy Act (HB 2346/SB 1100). The new law directs Dominion Energy to launch a 450-MW virtual power plant (VPP) pilot program to assess electric grid capacity needs and the capability of VPPs to provide grid services, including peak-shaving during high demand periods.
The legislation mandates Dominion submit plans for the VPP to the State Corporation Commission (SCC) by December 1. The SCC is the Virginia regulatory agency responsible for public utility companies and other regulated industries.
The power of VPPs
VPPs use advanced software and communication technologies, including artificial intelligence, to manage, optimize and coordinate the output of distributed energy resources (DERs), like rooftop solar and energy storage systems, electric vehicles, smart thermostats, and smart home devices, such as appliances, televisions and smart lights.
A virtual power plant aggregates tens, hundreds or even thousands of DERs into a single, dispatchable resource that can either reduce load or create supply during times of peak demand, helping the grid to stay in balance.
Participants are typically compensated for their participation in a VPP and in some cases may pay lower-than average rates.
Increasingly, artificial intelligence is being used to optimize VPP operations and help address the growing electricity demand generated by AI technologies themselves—especially from energy-intensive data centers. AI-powered VPPs can forecast load curves, manage storage assets in real time and coordinate DER participation.
A broad spectrum of technologies
The Virginia legislation was drafted to give the commission significant discretion in determining the program attributes over the long-term, according to Angela Navarro, president of ALN Policy and Law, a regulatory and policy focused firm in the energy space.
Navarro and her client, the Virginia League of Conservation Voters, were involved in developing the language of the bill Youngkin signed.
“You'll see in this legislation you have technologies that include battery storage, electric vehicles and solar,” she said, “but it didn't limit it to just those…it also leaves open the opportunity for technological innovations.”
The act also has a provision ensuring low income communities have access to the VPP program and can benefit from participation.
The language requires participating DERs be positioned in multiple regions of the Commonwealth and that the utility propose programs of at least 15 megawatts that incentivize residential customers to purchase battery storage devices.
“Virginia is not really known as a big residential battery market,” said Thad Culley, director of regulatory policy at Sunrun. Sunrun is one of the largest residential solar and energy storage companies in the U.S. It also runs one of the largest VPPs in the country with a combined instantaneous peak of nearly 80 MW.
He said the uptake of residential batteries through the Community Energy Act will be “pretty dramatic.”
Expanding Dominion’s electric school bus program
The Community Energy Act also requires Dominion to propose a broader electric school bus program as part of a grid transformation filing by December 31, 2027.
This part of the law is a mandate for Dominion to expand its existing Electric School Bus Program (ESBP).
Launched in 2019, the utility partners with Commonwealth school districts to electrify school bus fleets. When not in use, Dominion dispatches the energy stored in the buses’ batteries using vehicle-to-grid (V2G) technology, stabilizing the grid during peak demand.
As of March, 2024, more than 135 electric school buses were in service across the state and had traveled more than 1.5 million miles.
Benefits all around
The Community Energy Act will have many benefactors, according to Navarro and Culley. Certainly, the VPP will ease strain on the grid, though at just 450 MW, Culley said the small pilot will just be scratching the surface of what’s needed in Virginia.
Participating homeowners will benefit from the resilience provided by a battery, as well as the compensation they’ll receive for supporting the grid during peak demand.
Local communities also stand to win, according to Jim Purekal, director at Advanced Energy United, a national industry association representing advanced energy and transportation solutions companies, which worked to secure industry feedback and support for the bill.
“It's relatively easy to see how the owners of these assets will benefit. They're going to start to see their electricity bills go down,” Purekal said. “But you should also start to see costs more in control [for local communities] because of the grid benefits these programs offer. We're creating additional supply to that grid, and we're doing it without impacting ratepayers.”
Ultimately, Navarrao, Culley and Purekal expect all ratepayers, even those not participating in the VPP, will benefit, especially if the program expands and is made permanent as is hoped.
“The whole goal of the program and programs like this is to use distributed energy resources in a way that has a net benefit for the grid,” Navarro said, “and that should benefit everyone, not just those who participate.”
“All ratepayers would benefit from lower system costs,” Culley confirmed.
Virginia will have one of the first East Coast VPPs
Unlike Western states, such as California, Texas, Utah and Colorado, VPPs have been slow to gain traction on the East Coast. “There haven't been a lot of programs like this in Virginia or the Mid-Atlantic,” Culley said, “the bulk of the capacity that's being utilized now is in California and the West.”
Case in point, Sunrun has more than 16,000 customers participating in its California VPP, which delivers an average of 48 MW of solar energy to the grid during peak demand hours.
GoodLeap, which launched a VPP last summer, now delivers 5 MW of distributed capacity in California, enough electricity to power roughly 3,600 homes during a two-hour outage, according to a recent company statement.
The company, a fintech platform for sustainable home upgrades, said its VPP is on pace to reach over 60 MW of total capacity in the coming months.
"This program turns everyday homeowners into active participants in California's clean energy future," Ani Backa, vice president of virtual power plants for GoodLeap, said in a statement. "By intelligently coordinating thousands of distributed energy resources, we're not just helping families save on electricity costs, we're fundamentally reimagining how communities access reliable, sustainable power during critical demand periods."
Out East, VPPs are rarer. Sunrun has a demonstration VPP program with Orange & Rockland Utilities in New York, and Culley pointed to Massachusetts as having “one of the best programs out there in connected solutions that allows a really simple customer experience and a pretty streamlined way for aggregators to participate.”
Maryland and New Jersey are also in various stages of VPP development, he said.
“I think a lot of other places are looking to this program in Virginia as a bellwether of how these virtual power plants can perform,” Navarro said. “Because we are a state that has significant growth, we’ll be a test case to show how these programs can help to alleviate some of those concerns.”
Looking beyond the pilot
Navarro, Culley and Purekal have high hopes for the Virginia VPP pilot and are optimistic that homeowners and companies alike will get excited about the technologies and the ability to be a part of the solution to Virginia’s power problems.
“I certainly hope that we have a really robust deployment. I hope that we reach that 450 MW target with lots of different types of resources located all over the Commonwealth, and that we can demonstrate those grid values,” Navarro said.
