As solar and wind power grow, alternative models for storing and distributing that energy, such as virtual power plants (VPPs), are becoming more relevant.

The nonprofit Rocky Mountain Institute (RMI) defines VPPs as “grid-integrated aggregations of distributed energy resources.” With digital connectivity, utilities can manage power from various sources at the far end of their distribution networks, such as residential battery storage, electric vehicles, smart thermostats, demand-response programs and other resources, in a collective fashion that serves to provide large reserves of power, much like a power plant would.

With the growth of renewables, these managed resources are seeing their value and relevance grow. Utilities need to enhance their ability to manage intermittent power generation and improve grid reliability, and VPPs offer a unique and cost-effective resource to help utilities meet their goals.

VPPs have many advantages. They are cost-effective because utilities do not have to build more generating facilities to increase their access to power. They are clean because they do not result in any increased emissions, and they facilitate the integration of renewable generation into the distribution network.

VPPs also encourage more customers to embrace electrification, and they empower consumers by engaging them in the management of their own power. Finally, VPPs can help increase grid reliability and relieve grid congestion.

The potential impact on utilities is significant. In a study published earlier this year, RMI projects that by 2030, VPPs could reduce peak demand in the United States by 60 gigawatts (GW). That number could grow to more than 200 GW by 2050. In the process of doing so, VPPs could help reduce annual power sector expenditure by $17 billion in 2030.

The power sector is taking notice and is already investing into VPP enabling technology. According to a recent analysis published by Market Growth Reports, the global Virtual Power Plant market was estimated at $1125.9 million in 2022, and it is anticipated to more than triple to $3814.09 million in 2028, with a compound annual growth rate of 22.55% during the forecast years.