The Duck Curve

What is a virtual power plant?

A virtual power plant, or VPP, is a fleet of small devices in homes and businesses, mostly batteries, smart thermostats, water heaters, and EV chargers, that one operator controls together so that a utility or a grid operator can treat the whole fleet as a single resource. Nothing about it is a plant. It is an agreement to reduce or shift demand, or to discharge stored energy, on command, and the Department of Energy's January 10, 2025 release announcing its Liftoff update on VPPs put the scale at 33 GW across North America.

There is no single national definition. Colorado's SB 24-218, as quoted in the state commission's December 15, 2025 decision, defines one as a "program that achieves the collective management of dispatchable demand or distributed energy resources connected to the utility distribution grid." New Jersey's utility board staff, in their July 15, 2026 straw proposal for a statewide program, adopt a working definition with two parts: an aggregation of distributed energy resources and other load management technologies that can balance electrical loads to defer or avoid transmission or distribution upgrades, and that can provide "utility-scale, utility-grade grid services analogous to those provided by traditional generation resources." The same document says the resources include smart thermostats, managed EV charging, and electric water heaters, so a VPP does not need a single battery in it.

The three pieces

Homes and businesseshome batteriessmart thermostatswater heatersEV chargersthousands of themAggregatorenrolls, forecasts,dispatches, settlesThe buyerstate programutility tariffwholesale marketlarge customerpays for capacity and energycapacitydispatch, paymentcapacitydispatch, payment
Capacity flows right, dispatch signals and payments flow left. In most programs the aggregator is the only party that talks to both ends.

The devices. A home battery can discharge to the house or export to the grid; a thermostat can pre-cool a house and then coast through the peak; a water heater can heat early and skip the peak; an EV charger can pause. Individually each is a few kilowatts. A June 24, 2026 release from Sunrun, Renew Home, and Tesla sorts its fleet into "dispatchable capacity" from home batteries and "flexible peak capacity" from thermostats and other devices, and that is the practical distinction: a battery delivers energy on command, a thermostat delivers a reduction in demand that lasts only while the house is warming back up.

The aggregator. The Federal Energy Regulatory Commission defines a distributed energy resource aggregator, in Order No. 2222, as "the entity that aggregates one or more distributed energy resources for purposes of participation" in the capacity, energy, or ancillary service markets of the regional grid operators, and a distributed energy resource as "any resource located on the distribution system, any subsystem thereof or behind a customer meter." In practice the aggregator is the company whose app the homeowner enrolled through: a battery installer, a thermostat maker, a utility, or a specialist. It signs up the devices, forecasts what the fleet can deliver, sends the dispatch signal, measures what happened, and passes payment back.

The buyer. The fleet sells its capacity to whoever will pay for it, which has meant a few kinds of buyer. A state program: California's Demand Side Grid Support program, which the California Energy Commission says offers incentives to reduce customer net load during extreme events, with upfront capacity commitments and per-unit reductions in net load, and whose funding past 2026 is unsettled. A utility program under a state-approved tariff: Colorado's, described in the next section. A wholesale market: Order No. 2222 requires every regional transmission organization and independent system operator to let aggregations participate, with a minimum aggregation size of no more than 100 kW, and set a compliance-filing deadline of September 17, 2021; where each operator stands now is on the reference page. And, in some recent offers, large customers directly: the Sunrun, Renew Home, and Tesla release pitches its fleet "to hyperscalers and utilities," and says available capacity would be allocated to hyperscalers "on a first-come, first-served basis." Which door is open depends on the state.

Who pays whom

Colorado's program has a fully published price list. The Colorado Public Utilities Commission approved the settlement establishing Public Service Company of Colorado's aggregator program in Decision No. C25-0903, issued December 15, 2025, and the utility's program plan, filed February 25, 2026, sets the terms. It pays aggregators a first-year generation capacity incentive of $151.70 per kilowatt-year for year-round aggregations, or $106.19 for summer-only ones, plus smaller transmission and distribution capacity incentives. In return the utility can call up to 80 load control events a year, at any hour of any day, for year-round aggregations, and up to 60 for summer-only ones between June 1 and September 30, each at most four consecutive hours; a battery must keep at least 20 percent of its energy in reserve after an event; and the rates are fixed for five years for aggregations enrolled in the first program year. The plan opens enrollment to support an estimated 25 MW a year, subject to a commission-approved budget, and the utility estimates 125 MW enrolled by the end of 2030. It pays the aggregator, which recruits and enrolls the customers, and it says compensating those customers is "at the discretion of the Aggregator." New Jersey's storage proposal, below, takes the opposite view and would require aggregators to pass through "not less than 70%" of the performance incentives to host customers.

The unit in Colorado's price list is the kilowatt-year: the buyer is paying for capacity, the ability to deliver, more than for the energy delivered (kW vs kWh explains why that decides what a battery is worth). For the household's side, New Jersey's August 2026 storage straw proposal is the one of these documents that publishes a worked example of a household's check: board staff recommend $200 per kilowatt of awarded storage capacity, "representing the maximum annual payment available to a project achieving a 100% Performance Factor," at a rate fixed for a 10-year term. At that rate an 11.5 kW battery reads like $2,300 a year; the straw's own example for that battery, with 35 dispatch events and a 23.5 percent performance factor, lands at $540 (Duck Curve coverage). The distance between those two numbers is the household economics of a VPP: the rate is per kilowatt promised, the payment is for what the battery delivered.

Why it matters

The duck curve is the reason. On a grid with a lot of solar, the hard hours are the evening ramp, when the sun sets while people arrive home, and a fleet of batteries discharging and thermostats coasting through those hours is capacity that arrives exactly when it is needed and disappears when it is not. DOE's release puts the scale of the opportunity at 80 to 160 GW of VPPs by 2030, which it says is enough to serve 10 to 20 percent of peak load and "could support rapid load growth while reducing overall grid costs."

What a VPP is not

It is not a power plant in the sense a grid planner means. A conventional plant is rated once and is expected to deliver that rating whenever it runs; a VPP's thermostats deliver less as the afternoon goes on, and its batteries are limited by what they stored that day and how much of it the program may use. That is why the Colorado plan tests each aggregation and reserves the right to suspend one that fails a test event, and why New Jersey's payment scales with a measured performance factor. (Colorado's 20 percent reserve floor has a different stated reason, "battery health and customer resiliency.") It is also not free capacity: someone pays the kilowatt-year, so the argument about VPPs is the same as about every other resource, whether that kilowatt-year costs less than the alternatives.

Where all of this stands today is the job of the maintained Virtual power plants in the US reference page; the news as it happens is under #virtual-power-plants.

Sources