Georgetown Energy Storage Station Virtual Power Plant

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:

What are virtual power plants and how do they work? A virtual power plant is a system of distributed energy resources—like rooftop solar panels, electric vehicle chargers, and smart water heaters—that work together to balance energy supply and demand on a large scale. They are usually run by local utility companies who oversee this balancing act.

One way a transactive energy system is coming to fruition is through virtual power plants (VPPs). Definitions of VPPs have changed over time, and the absence of a standardized definition for VPPs has historically limited categorization that enables the analysis of VPPs .

LPO investments in virtual power plant projects help advance equitable clean energy access and empower Americans to support grid flexibility, resilience, and reliability.

Tripling the current capacity of VPPs—to 80-160 GW—by 2030 could address 10-20% of peak load and save on the order of $10B in annual grid costs through avoided generation buildout, delayed power infrastructure investments, and reduced operation of expensive peaker plants. Deployment at this scale is possible within the decade.

Despite these proven successes, a number of barriers still stand in the way of further VPP deployment. In 2025, the DOE published Pathways to Commercial Liftoff: Virtual Power Plants, an update to the 2023 report highlighting the potential and challenges for VPPs. The report highlights five key challenges to broader deployment of VPPs: