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Virtual Power Plants: How to Power the Energy Economy by Stretching Today’s Grid

The challenge posed by surging demand for electricity from data centers and high-performance computing facilities presents an ideal time for innovative energy solutions that efficiently improve grid reliability and increase the availability of clean, affordable electricity.

Not only does the U.S. risk missing more than $100 billion of artificial intelligence (AI) market growth over the next five years if the grid can’t keep up, but the consequences of not keeping pace in AI—socially and economically—would likely dwarf the missed investment opportunities.

Much of this challenge hinges on the moments when the grid is pushed to its absolute limit, which together amounts to a small but critical window of mere hours or days within a year. If we can make demand flexible during these peak hours, we can unlock enough capacity to support growth industries like AI and enable greater productivity across our economy without waiting for new supply to come online.

Virtual power plants are at the forefront of flexible energy solutions due to their immediate availability and ability to scale. VPPs help balance the grid quickly and frequently by leveraging existing, on-site energy resources for a fraction of the cost and time needed to build generation.

The Grid Has the Capacity, We’re Just Not Using It

Despite efforts to the contrary, we cannot build our way out of our current challenge because it is not about a shortage of energy assets. Regulatory conversations and political efforts focus on putting steel in the ground, but the real opportunity is the nearly 100 GW of additional capacity on the grid waiting to be put to work.

By highlighting the scale of this opportunity, Duke University’s Rethinking Load Growth report reinforces what CPower and others in the demand response industry have long known— better managing large, customer-sited loads and distributed energy resources strengthens the grid and enables economic growth.

Therefore, rather than racing to build new supply, especially as AI pushes energy demand higher, we can use the energy assets we already have in smarter and more connected ways.

Why VPPs Are the Fastest Path Forward

VPPs use on-site energy assets like smart thermostats, batteries and curtailable loads to support the grid. Because each of these assets can quickly lower or shift their energy use when demand is high, they can provide the same flexibility and support as traditional power plants when combined into VPPs.

Participating in a VPP often involves making small adjustments to flexible loads like HVAC systems, lighting or industrial processes without disrupting operations. VPPs can also leverage power from backup generators, batteries and other energy sources located in businesses and homes.

VPPs already provide an estimated 30 GW to 60 GW of capacity in the U.S., but we could unlock another 80 to 160 GW of flexible capacity with them through greater adoption, according to the Department of Energy. Given that VPPs can be deployed in months without costly new construction, the resulting savings in time and money would be substantial,

For example, adding the same amount of new natural gas capacity could cost more than $100 billion (excluding fuel costs) and given supply chain constraints, grid and gas infrastructure build-out, interconnections could take more than a decade to complete. Similarly, nuclear energy is a 10-to-15-year solution to a five-year problem.