Dive Brief:
A recent report from the NC Clean Energy Technology Center and the Smart Electric Power Alliance reveals that 38 states and the District of Columbia implemented 105 policies regarding virtual power plants (VPPs) and distributed energy resource (DER) aggregations in 2024. This move underscores the growing interest and investment in energy flexibility solutions.
In particular, ten states, such as California, Texas, and Illinois, introduced four or more measures linked to VPPs and DERs in 2024. These initiatives often focused on utilizing battery storage and various types of distributed energy resources, signaling an expectation for further advancements in this area in 2025.
According to Lakin Garth, Director of Emerging Technology at SEPA, there is anticipation of more utility programs and policies being rolled out next year, especially from larger investor-owned utilities across states with significant load growth projections.
Dive Insight:
Virtual power plants and distributed energy resources are becoming essential to meet the expected surge in electricity demand driven by new data centers and manufacturing operations, alongside the shift towards electrified transportation. U.S. electricity demand is projected to increase by 15.8% by 2029, a significant uptick from previous forecasts.
The lengthy process of connecting new generation resources to the grid, due to congested interconnection queues and extended wait times for equipment, contrasts sharply with VPPs. Utilities can deploy these systems more quickly, within just 12 months, according to RMI’s findings.
By adopting VPPs on a large scale, the U.S. could potentially fulfill future resource adequacy needs while avoiding substantial infrastructure costs, estimated between $15 billion to $35 billion over the next decade. Additionally, the benefits could reach $20 billion in terms of emissions reductions and resilience.
There is a growing acknowledgment among U.S. lawmakers and regulators of the significant advantages that VPPs can offer. Garth stated that 2024 is shaping up to be a transformative year for VPPs and their supporting DERs.
The NCCETC-SEPA report highlighted five notable developments within VPPs in 2024:
- Colorado and Maryland enacted laws mandating investor-owned utilities to propose VPP programs. In Colorado, Xcel Energy is pursuing approval for up to 125 GW of VPP capacity.
- In Minnesota, Xcel Energy is also pushing to integrate DERs into its resource plan, seeking approval for 1 GW of DER capacity.
- The North Carolina Utilities Commission endorsed Duke Energy’s PowerPair VPP initiative, which promotes distributed solar and storage.
- Washington State has mandated Puget Sound Energy to manage at least 10% of peak demand through demand response by January 2027.
Autumn Proudlove, Managing Director of Policy and Markets at NCCETC, noted a growing emphasis on utility programs that incorporate battery storage and various DER types, along with broader state frameworks for VPP initiatives.
Moving into 2025, more developments in VPP and DER policies are expected across states, regulators, and utilities. Key actions to watch include potential changes to California’s Demand Side Grid Support program with a new emergency load flex VPP incentive, and pilot programs from utilities in Illinois, alongside an expansion of the Electric Reliability Council of Texas’s DER program pilot.