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The US virtual power plant (VPP) market is growing fast, with 37.5 gigawatts of behind-the-meter flexible capacity now online, according to a new Wood Mackenzie report. VPPs connect small energy systems and smart devices into a single network managed by an energy company or utility. That can include residential solar panels, battery storage, EVs, and smart thermostats. When the grid needs help during peak demand or emergencies, they can be tapped – and you get paid for participating.
Wood Mackenzie’s “2025 North America Virtual Power Plant Market” report shows that the market is expanding more broadly than deeply. The number of company deployments, unique buyers (offtakers), and market and utility programs each grew by more than 33% in the past year. But total capacity grew at a slower pace – just under 14%. “Utility program caps, capacity accreditation reforms, and market barriers have prevented capacity from growing as fast as market activity,” said Ben Hertz-Shargel, global head of grid edge at Wood Mackenzie.
Residential VPP customers are gaining ground
Residential customers are making a bigger dent in wholesale market capacity, increasing their share to 10.2% from 8.8% in 2024. But small customers still face roadblocks, mainly due to limits on data access for enrollment and market settlement.
Battery storage and EVs are also playing a bigger role. Deployments that include batteries or EVs now account for 61% as many as those that include smart thermostats, which have long dominated VPP programs.
Leading states and markets
California, Texas, New York, and Massachusetts are leading the pack, making up 37% of all VPP deployments. In wholesale markets, PJM (which manages the electric grid for 13 states and DC) and ERCOT (the Texas grid), both home to massive data center commitments, also have the highest disclosed VPP offtake capacity. “While data centers are the source of new load, there’s an enormous opportunity to tap VPPs as the new source of grid flexibility,” Hertz-Shargel said.
Offtake growth and new business models
The top 25 VPP offtakers each procured more than 100 megawatts this year. Over half of all offtakers expanded their deployments by at least 30% compared to last year. That’s fueling the rise of a new “independent distributed power producer” model, where companies aim to use grid service revenue and energy arbitrage to finance third-party-owned storage for electricity retailers.
Policy pushback
Not everyone is on board with how utilities are approaching distributed energy resources (DERs). Many VPP aggregators and software providers oppose utilities putting DERs into their rate base under the Distributed Capacity Procurement model.* “This model is seen as limiting access of private capital and aggregators from the DER market, rather than leveraging customer and third-party-owned resources,” Hertz-Shargel explained. He added that most wholesale market experts believe FERC Order 2222 was a missed opportunity and won’t significantly improve market access.
*I really like this model, personally. I leased two Tesla Powerwalls under Green Mountain Power’s Lease Energy Storage program in Vermont for $55 a month, and it’s an excellent VPP program that’s grown much more rapidly than other models, such as bring-your-own batteries.
Read more: California’s grid gets a record power assist from a 100k home battery fleet
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