What is a virtual power plant (VPP)? A plain-English guide

The short answer

A virtual power plant (VPP) is a network of small energy devices in homes and businesses, such as batteries, smart thermostats, water heaters and EV chargers, that software coordinates so they can act together like a single power plant. There's no smokestack and no single building. The "plant" is spread across thousands of homes.

The U.S. Department of Energy describes VPPs as aggregations of these distributed resources that can balance electricity demand and supply and provide grid services the way a traditional plant does ^[1].

How a virtual power plant works

The grid gets busy. On a hot evening, or when a big plant trips offline, demand starts to outrun supply.
A signal goes out. The utility or grid operator asks the VPP operator (often called an aggregator) for help.
Devices respond together. Batteries send stored power to the grid, thermostats ease off a degree or two, EV chargers pause. Each home does a little; together it's a lot.
Everyone gets paid. The grid pays for that help. Depending on the program, the money goes to the homeowner, to the company that owns the equipment, or is split between them.

Why grids want them

Grids have to be built for the few hours a year when demand peaks. Meeting those peaks with new power plants is expensive. A 2023 Brattle Group study found that a VPP could provide the same reliability as a gas peaker plant or a utility-scale battery at roughly 40 to 60% of the net cost, and that 60 GW of VPPs could save $15 to $35 billion over ten years ^[3].

Federal rules are opening wholesale markets to them too. FERC Order No. 2222, issued in September 2020, requires regional grid operators to let aggregations of distributed resources take part in their markets ^[5].

How big are VPPs today?

DOE's 2023 report estimated 30 to 60 GW of VPP capacity in the US, mostly from demand response, and set a goal of 80 to 160 GW by 2030, enough to serve 10 to 20% of peak demand ^[1]. Its 2025 update put VPP scale at 33 GW across North America ^[2].

Home batteries are where the growth is most visible. In July 2025, more than 100,000 home batteries in California averaged 535 MW over a two-hour test event, with steady output throughout, according to a Brattle analysis ^[8]. On September 9, 2026, California home batteries in a Tesla and Sunrun VPP sent more than 580 MW to the grid during a heat wave, which Energy-Storage.news called the largest VPP dispatch on record ^[4].

How you can take part

There are five common ways, and the big differences are who owns the equipment and who keeps the money the grid pays:

Own your battery and enroll it in a utility program. In Massachusetts, ConnectedSolutions pays $275 per kW of your battery's average contribution during summer events ^[6].
Host a company-owned battery for little or nothing upfront. The company runs it and keeps most of the grid earnings.
Choose an electricity plan that includes a battery, mostly available in Texas's competitive market.
Use a smart thermostat for small rewards.
Use your EV in early vehicle-to-grid pilots.

Compare all five side by side, or see what's available in your state.

What about my own backup power?

Programs set limits on how much of your battery they can use. For example, Tesla says Powerwalls on its Texas plan won't dispatch below the backup reserve the owner sets ^[7], and ConnectedSolutions limits events to summer afternoons and evenings and lets customers opt out ^[9]. Before you join any program, ask how much charge is kept in reserve for you. More on backup power during events.

Questions people ask

Is a virtual power plant a real power plant?

No single building is involved. A VPP is software that coordinates many small devices in homes and businesses so they respond together, which lets them do some of the same jobs a power plant does.

Do I need solar panels to join a VPP?

Not always. Some programs pair batteries with solar, but many accept standalone batteries, and smart thermostat programs need no solar or battery at all. Check each program's eligibility on our state pages.

Who pays me for joining a VPP?

It depends on the program. Utility and state programs pay the homeowner directly or through the battery maker. When a company owns the battery, the company earns most of the grid revenue and may share some of it.

Will a VPP leave me without power in an outage?

Programs keep some charge in reserve, and events are usually limited to set seasons and hours. The amount varies by program, so ask how much is reserved for your backup before you enroll.

What is a virtual power plant?