Virtual power plant growth is getting very real

Data center demand in the US is putting unprecedented pressure on utilities and power markets to add new supply. With central generation challenged by supply chains, permitting, interconnection queues and - particularly for natural gas generation - construction costs, utilities have increasingly been looking to distributed resources to fill the gap. These resources are aggregated into virtual power plants (VPPs) which are monetized through utility, energy retailer, and wholesale market programs. 

In our 2025 North America virtual power plant market report, we break down the growth of the virtual power plant (VPP) market according to metrics that capture its scale and its maturity. Fill out the form to download an extract from the report and read on for highlights from some key findings.   

A market that is broadening faster than it is deepening 

There was enormous market activity over the last year. Company deployments, unique offtakers, and programs monetized each grew over 33% year-over-year. This reflects pull from new flexibility buyers as well as push from new VPP players, many who are filling new roles in the value chain. 

At the same time, overall VPP capacity grew 13.7%. This more modest growth indicates a market that is broadening faster than it is deepening. Enrollment caps on utility programs, capacity accreditation reforms in power markets (the migration to effective load carrying capability), and market barriers to small customers have limited capacity growth in existing programs.  

VPP offtakes are largest where utility data center commitments are largest 

A particularly interesting finding is that while California, Texas, New York, and Massachusetts are the leading states, representing 37% of all VPP deployments, PJM and ERCOT, the regions with the greatest utility commitments to data center capacity, also have the greatest disclosed VPP offtake capacity. This drives home the opportunity for utilities and even hyperscalers themselves to procure new VPP capacity to offset data center coincident peak demand, enabling faster grid connection. In this way homeowners and business owners might actually earn revenue from the connection of new data centers, offsetting potential bill increases. 

A fault line over utility ownership over DER 

A related finding regards utility ownership of DER, a foundational element of the Distributed Capacity Procurement model. A survey of key players revealed that while hardwire providers are understandably enthusiastic about utilities as a new sales channel, the majority of other VPP companies do not support utilities rate basing DER. This approach could limit private capital and aggregator access to the DER market, unlike the third-party VPP procurement model above. There is far more enthusiasm for utilities integrating DER into system planning and operations, specifying where such resources are needed, but letting the market supply them, via customer programs and competitive solicitations. In this way the market can find the lowest-cost solution and drive innovation across the whole value chain, from program marketing to cross-technology optimization. 

Learn more 

Wood Mackenzie’s Lens Power & Renewables platform provides interconnected intelligence across the power value chain to inform your investment decisions.

Get in touch to find out more or request a demo - and don’t forget to fill in the form at the top of the page to get your free extract from the report.