U.S. Virtual Power Plant Market Is Entering a Business-Model Shakeout

The U.S. virtual power plant (VPP) market is entering a sorting phase.

As load growth, extreme weather, and infrastructure bottlenecks intensify, utilities increasingly need flexible capacity that can be deployed faster than new generation or transmission. As load growth and grid constraints intensify, utilities are rethinking demand-side programs - programs that ask or incentivize customers to use less electricity, use it at different times, or allow certain loads and devices to be managed in ways that support the grid. That shift matters because utilities are now under pressure from both rising demand and rising system stress.

NERC’s 2025 Long-Term Reliability Assessment reinforces the scale of the challenge. Using a bottom-up approach that includes on-peak demand, system energy needs, demand response, resource capacity, and transmission projects, NERC projects summer peak demand across the bulk power system to grow by 224 GW over the next 10 years. Separately, Grid Strategies estimates total U.S. electricity use could increase by as much as 32% by 2030, with data centers accounting for roughly 55% of projected demand growth.

Of course, data centers are a major part of the load-growth story. Lawrence Berkeley National Laboratory estimates U.S. data-center electricity use rose from about 76 TWh in 2018 to 176 TWh in 2023, increasing from 1.9% to 4.4% of national electricity consumption. The same report projects that by 2028, data centers could consume 325 to 580 TWh annually, or 6.7% to 12% of U.S. electricity use. That surge is already reshaping utility planning, especially in regions facing tight reserve margins and long infrastructure lead times.

DOE’s January 2025 VPP update positioned VPPs as one of the fastest tools available to help meet near-term grid needs. DOE said peak demand could rise from roughly 800 GW in 2024 to roughly 900 GW in 2030, driven by “energy-intensive data centers, domestic manufacturing, and electrification of transport and heating.” It also said deploying 80 to 160 GW of VPPs by 2030 could serve 10% to 20% of peak load while supporting rapid load growth and reducing overall grid costs.

At the same time, extreme weather is becoming more frequent and more expensive. NOAA recorded 27 separate U.S. billion-dollar weather and climate disasters in 2024 alone, and since 1980 has tracked more than 400 such events with total losses approaching $3 trillion. Together, rising load and rising system stress are pushing utilities to look for flexible resources that can be deployed faster than many traditional generation and transmission buildouts.

As the question further shifts from whether VPPs matter – now the question becomes which business models utilities and regulators are most likely to back at scale.

Taken together, NOAA’s disaster data, DOE’s VPP analysis, NERC’s reliability outlook, and Grid Strategies’ load-growth estimates point to the same reality: our power system needs flexible capacity that can be deployed faster than many traditional generation and transmission projects--and that is where VPPs stand out. They can turn existing distributed assets into dispatchable, flexible capacity without waiting years for new central generation or major grid upgrades.

Recent market data from Wood-Mackenzie also points to accelerating adoption, with North American VPP capacity reaching 37.5 GW in 2025. A January NC Clean Energy Technology Center (NCCETC) and Smart Electric Power Alliance (SEPA) report documenting 106 state and utility actions in 2025 shows the market broadening beyond traditional demand response into formal VPP programs, active EV managed charging, expanded technology eligibility beyond batteries, and greater use of DERMS to support VPP programs.

That shift is pushing VPPs from a promising concept toward a more practical grid resource, while raising a more important question: which business models are most likely to prove reliable, scalable, financeable, and workable within utility and regulatory structures? We’ll look beyond individual technology adoption, and focus on how the U.S. power sector is deciding what kind of distributed flexibility market it wants to build – and how.

But first…regulatory and rate design

Regulatory and commercial design will play a major role in determining which VPP business models scale. Key issues include performance-based compensation, access to customer data, the balance of control between utilities and third-party aggregators, and the uneven pace of wholesale-market access under FERC Order 2222. Recent state actions in places such as Colorado and New Mexico show regulators moving beyond generic support for VPPs and into harder questions of valuation, market structure, and competitive access.

Here my adopted home state of California, it offers a timely case study in how states are still working through the regulatory structure for VPPs. The California Energy Commission’s Demand Side Grid Support program provides performance-based payments for load reduction during extreme events, and as of this writing, state officials are debating whether to preserve it through 2026, shift participants into a CPUC-administered structure, or replace it with a new CPUC program still under development. That makes California a useful example of the broader U.S. challenge: not whether flexible demand-side resources can deliver value, but which regulatory home, funding mechanism, and program design can support them durably at scale.

California still has not made a final long-term decision on the future of DSGS. The current path appears to be a temporary bridge for summer 2026 while state leaders consider shifting participation into a CPUC-run demand response structure in later years. That keeps the program alive for now, but it stops short of giving developers, aggregators, and customers the durable funding certainty they need to keep scaling. For the broader DER market, the message is clear:

California sees the value of virtual power plants, but it has not yet resolved how they should be funded and institutionalized.

“The economics of traditional demand response are getting squeezed, especially once revenue is divided across OEMs, aggregators, and customers, said Jenya Kirshtein, founder and principal at EnergyPad. "At the same time, customer enrollment remains a bottleneck - consumers are being asked to give up control over assets like home backup batteries or EV charging for incentives that often don’t feel meaningful enough.

"Companies like SunRun, Tesla, GoodLeap, and automaker-backed ChargeScape, with direct access to customers through hardware, have a natural advantage in enrollment and engagement, but running grid services at scale is ultimately a software, operations and policy problem," Kirshtein added. "As VPPs evolve, success will depend on combining customer reach with sophisticated optimization, forecasting, utility partnerships, and program designs that create meaningful value for customers."

6 examples of leading VPP business models taking shape in the U.S.

These models differ not just by technology, but by who controls dispatch, how participants are compensated, who owns the customer relationship, and whether the primary grid value is peak reduction, local reliability, wholesale market participation, or portfolio-level flexibility.

1) Utility-led aggregator programs
These are utility-run or utility-procured programs in which customers enroll distributed devices, are compensated for event performance, and provide utilities with dispatchable flexibility for peak reduction, capacity, and grid support.

• National Grid – ConnectedSolutions: demand flexibility program using connected batteries, thermostats, and other devices to reduce peak demand.
• PSEG Long Island – Battery Storage Rewards: dispatch program that pays residential and commercial customers for participating in battery-based grid events.
• Xcel Energy – Aggregator Virtual Power Plant (Colorado): utility program that allows third-party aggregators to enroll and manage customer-owned DERs for grid services.

2) Utility-orchestrated DERMS-based models
In these models, the utility is building the operating layer to monitor, coordinate, and increasingly orchestrate DERs at scale, with customer participation often mediated through utility programs or platform partners and grid value centered on visibility, control, and operational flexibility.

“Some VPPs struggle to recruit and retain participants, with rates in the 2-5% range, often due to inadequate marketing or a poor customer relationship,” said Brian Grunkemeyer, Founder & CTO at FlexEnergi. "Device connectivity ranges from easy with thermostats & EVSEs to a monthly challenge with some automakers. Underneath the covers, VPPs must provide trustworthy data and reliable dispatch of capacity, where maturation required focus for the better part of a decade.”

Utilities require a mind shift to treat load management as firm capacity, comparable to a battery or gas turbine.  On the regulatory side, IOUs need either mandatory DR targets in the hundreds of MW range or a higher rate of return.  Either approach will align incentives to grow VPPs as fast as possible.

Device manufacturers from thermostats to automakers also need to realize they are important players of a very large ecosystem, and any one device manufacturer may only have 20% market share at best.  Utilities want a single pane of glass for managing dispatch across all device types.  VPP effectiveness requires one centralized scheduling algorithm managing dispatch based on grid conditions and availability of all DERs,” added Grunkemeyer.

• FlexEnergi: useful example of a utility-focused orchestration platform spanning DER management, feeder-level flexibility, and VPP operations.
• Hawaiian Electric – BYOD + DERMS: Hawaiian Electric’s DERMS work has included support for its Bring Your Own Device program and broader customer DER participation.
• PG&E – DERMS / VPP integration roadmap: PG&E is working to integrate VPPs into its DERMS environment and expand EV-based participation.

3) Third-party aggregator and open-access structures
Here, third parties rather than utilities alone aggregate, control, and monetize customer flexibility, typically owning more of the customer relationship while creating grid value through retail programs, wholesale market participation, or both.

• Con Edison – Smart Usage Rewards / Smart Usage Partners: uses independently operated third-party partners to run the program on Con Edison’s behalf.
• New Mexico – Virtual Power Plant Act: notable because it explicitly allows aggregation by either the utility or a third party.
• NYISO – DER & Aggregation Participation Model: enables aggregated DERs to provide energy, ancillary services, and capacity into wholesale markets.

4) EV managed charging and vehicle-grid integration pathways
These models use EV charging flexibility, and in some cases bidirectional capability, as a grid resource, with customer value typically tied to incentives or bill savings and grid value tied to load shifting, peak management, and potentially exportable capacity.

• ChargeScape: automaker-backed vehicle-grid integration platform focused on managed charging, demand response, and V2G/bidirectional services, using OEM telematics to turn EVs into grid assets for utilities and drivers.
• Con Edison – SmartCharge New York: pays EV drivers and light-duty fleets to shift charging off-peak.
• EnergyHub – EV managed charging / VPP platform: strong platform example for utility-managed EV, thermostat, and battery orchestration.
• ev.energy: utility-focused managed charging and EV-centric VPP platform that helps utilities launch customer-friendly charging programs and aggregate EV flexibility as a grid resource.
• PG&E – Vehicle-to-Everything (V2X) pilots  (this one is near and dear to me): explores bidirectional charging as a bridge to EV-based VPP participation.

5) Building- and portfolio-based aggregation
These models aggregate value across multifamily, commercial, and C&I portfolios rather than relying only on single-device participation, with building owners, operators, or platforms coordinating assets and sharing value across optimization, demand response, and grid services.

"For multifamily buildings, the biggest challenge is aligning owner economics with operational simplicity, said Jeff Hendler, President at Logical Buildings. Property owners want new revenue streams from demand flexibility and distributed energy resources, but fragmented utility programs, complex enrollment requirements, and limited resident engagement tools often make scaling across portfolios difficult.

The business models gaining traction are those that combine energy management, resident incentives, and automated demand response into a single platform that monetizes flexibility without adding operational burden to property teams. Regulatory structures that support aggregated DER participation, standardized utility incentives, and clear pathways for multifamily VPP enrollment are accelerating adoption, while inconsistent market rules and utility-by-utility program fragmentation continue to slow broader scale deployment," added Hendler.

That makes multifamily one of the clearest tests of whether VPP business models can move from promising concept to repeatable, low-friction execution.

Robert Cooper, PhD, Founder, President & CEO at Embue: “Multifamily housing, especially affordable housing, has been left out of VPPs for too long. It represents an estimated 10 GW opportunity for peak load management, but adoption depends on keeping residents comfortable and making participation easy for staff. Multifamily owners buy energy every few years, not every fifteen minutes, so the companies that will succeed are the ones that make VPPs automatic.”

• Budderfly – Commercial-building VPP: commercial-building example focused on behind-the-meter coordination across customer sites.
• CPower – C&I aggregation / VPP platform: portfolio-based aggregation across multiple C&I sites and DER types.
• Embue: strong fit for the multifamily angle, using whole-building intelligence and controls to support portfolio-level flexibility in apartment buildings and similar properties.
• Logical Buildings – Multifamily VPPs: strong multifamily example using smart thermostats and portfolio aggregation. Logical Buildings is focused on turning multifamily and commercial buildings into grid-responsive assets.
• Voltus – C&I and market-facing VPP aggregation: market-facing aggregator spanning commercial, industrial, residential, and transportation resources.

6) Additional BTM-Oriented Players
These companies do not fit neatly into a single model type, but they illustrate how the behind-the-meter ecosystem is expanding across homeowner participation, battery aggregation, and software platforms that connect customer assets to utility and market needs.

• AutoGrid: platform example for utility and energy-as-a-service provider orchestration of behind-the-meter DERs, even without a direct quote source.
• Base Power: fast-growing Texas residential battery company using distributed home storage fleets as a utility-facing VPP resource.
• GoodLeap – GoodGrid: GoodLeap is scaling residential battery aggregation; positioning GoodGrid as a way for homeowners to share battery capacity or reduce usage with smart thermostats to support the grid.
• Haven Energy: emerging homeowner-facing solar + battery platform that pairs a leasing model and installer channel with utility and CCA partnerships to scale distributed power and VPP participation.
• Lunar Energy: in February 2026 it announced $232 million to scale home battery deployments and AI-powered VPP software, which makes it a strong example of the hardware-plus-software residential VPP model
• SPAN: adjacent rather than a core VPP company, but it is increasingly relevant to the market. SPAN now positions its utility product, SPAN Edge with strategic Landis+Gyr announcement, enabling real-time load management, electrification enablement, and participation in VPP and DERMS programs.
• Sunrun: strong example of the homeowner-facing residential solar + battery VPP model.
• Tesla VPP: homeowner-facing residential battery VPP model that aggregates Powerwalls into utility-backed programs, with enrollment through the Tesla app or utility/installer partners and program-based incentives for grid support.
• Virtual Peaker: centered on utility-facing DER and VPP orchestration software through DERMS, customer engagement, and load forecasting.
• WeaveGrid: utility-focused EV managed charging and distribution-level orchestration platform, increasingly positioned around using EV flexibility to manage local grid constraints and broader capacity needs.

The next VPP frontier