US Virtual Power Plant Capacity Surges to 37.5 GW by 2025, Driven by EVs and Batteries




The US virtual power plant (VPP) sector is undergoing significant growth, reaching an impressive 37.5 gigawatts of flexible, behind-the-meter capacity. This expansion, detailed in a recent Wood Mackenzie analysis, highlights the increasing adoption of interconnected energy systems such as residential solar, battery storage solutions, electric vehicles, and smart home devices. These VPPs are instrumental in supporting grid stability during periods of high demand or emergencies, offering participants financial incentives.
US Virtual Power Plant Market Sees Rapid Expansion, Driven by EV and Battery Integration
According to Wood Mackenzie's comprehensive \"2025 North America Virtual Power Plant Market\" report, the VPP landscape is broadening significantly, with a more than 33% increase in company deployments, distinct buyers, and market programs over the last year. Despite this widespread activity, the overall capacity saw a more modest growth of under 14%. Ben Hertz-Shargel, Wood Mackenzie's global head of grid edge, attributed this slower capacity growth to factors like utility program limitations, adjustments in capacity accreditation, and other market obstacles.
A notable trend is the rising influence of residential customers in wholesale energy markets, with their share of capacity increasing from 8.8% in 2024 to 10.2%. However, smaller participants still face challenges, particularly concerning data access for enrollment and market settlements. Electric vehicles and battery storage are playing an increasingly vital role, with deployments incorporating these technologies now almost matching those utilizing smart thermostats, which traditionally dominated VPP initiatives. Leading states in VPP deployments include California, Texas, New York, and Massachusetts, collectively accounting for 37% of all such projects. Wholesale markets managed by PJM (serving 13 states and D.C.) and ERCOT (Texas), both experiencing substantial growth in data center commitments, also exhibit the highest disclosed VPP off-take capacity. Hertz-Shargel emphasized the dual opportunity presented by data centers: they introduce new load but also create a significant demand for VPPs as a new source of grid flexibility. The top 25 VPP off-takers each acquired over 100 megawatts this year, with more than half expanding their deployments by at least 30% compared to the previous year. This surge is fostering the emergence of an \"independent distributed power producer\" model, where companies leverage grid service revenues and energy arbitrage to fund third-party-owned storage for electricity retailers.
However, the sector also faces policy resistance. Many VPP aggregators and software providers are concerned about utilities integrating distributed energy resources (DERs) into their rate base under the Distributed Capacity Procurement model. Critics argue that this approach restricts private capital and aggregators from the DER market, rather than utilizing customer and third-party-owned resources. Furthermore, many wholesale market experts believe FERC Order 2222, intended to facilitate market participation, has not significantly improved market access for DERs.
The burgeoning VPP market, particularly with the integration of EVs and battery storage, signifies a transformative shift in energy management. It underscores a future where decentralized energy resources play a crucial role in grid stability and efficiency. Addressing policy hurdles and fostering greater collaboration between utilities and private entities will be essential to fully unleash the potential of VPPs and accelerate the transition to a more resilient and sustainable energy ecosystem.