Virtual Power Plants 2024: How Distributed Solar+Storage Became Grid Infrastructure
Reading time: ~9 min read
Published August 15, 2024 — PES Supply Energy Storage Analysis
Virtual power plants (VPPs) crossed a critical threshold in 2024. No longer confined to pilot programs and demonstration projects, VPPs have become a daily grid resource, dispatched by operators across multiple wholesale markets to manage peak demand, provide ancillary services, and replace fossil-fueled peaker plants. For installers and contractors, this transformation creates a new value proposition for every solar-plus-storage system: beyond backup power and self-consumption savings, residential and commercial batteries can now generate ongoing revenue through grid services participation.
This article examines how VPPs evolved from concept to commercial infrastructure in 2024, the key programs driving adoption, the regulatory framework enabling market participation, and what installers need to know to enroll their customers' systems.
What Is a Virtual Power Plant?
A virtual power plant is a network of distributed energy resources (DERs) — including solar-plus-storage systems, electric vehicle chargers, smart thermostats, water heaters, and demand-responsive devices — aggregated and coordinated to provide capacity, energy, and ancillary services to the grid. FERC defines DERs as small-scale power generation or storage technologies, typically ranging from 1 kW to 10,000 kW, that can provide an alternative to or enhancement of the traditional electric power system ([FERC](https://www.ferc.gov/media/ferc-order-no-2222-fact-sheet)).
VPP technology has shown immediate promise in replacing natural gas peaker plants on grids, offering additional capacity during periods of peak electricity demand. Unlike a traditional power plant, a VPP requires no additional land, water, or interconnection infrastructure — it aggregates existing behind-the-meter resources into a dispatchable portfolio ([pv magazine USA](https://pv-magazine-usa.com/2024/10/23/sunrun-and-new-york-utility-embark-on-residential-virtual-power-plant/)).
The Scale of VPPs in 2024
Wood Mackenzie's July 2024 North America Virtual Power Plant Market report provided the most comprehensive picture of VPP deployment to date. The report found:
| Metric | Value |
|---|---|
| Total VPP capacity (operating or in development) | 33 GW |
| Total VPP deployments | 1,459 |
| Market, utility, and retailer programs | 321 |
| Residential share of wholesale market capacity | <9% |
The report concluded that VPPs have moved "well past pilot scale in North America" ([Utility Dive](https://www.utilitydive.com/news/vpps-past-pilot-scale-but-policy-tech-challenges-remain-woodmac/724974/)). However, the headline numbers belie deep challenges around market access. A significant number of the 321 monetized programs are bilateral VPP capacity procurements between providers and load-serving entities — closed to public participation. Market access is especially challenging for residential customers, whose capacity accounted for less than 9% of total VPP capacity bid into wholesale markets.
FERC's 2024 Assessment of Demand Response and Advanced Metering estimated the current national VPP capacity at 30-60 GW. The Department of Energy has set a target of tripling VPP capacity to 80-160 GW by 2030, which could meet 10-20% of peak demand and save an estimated $10 billion per year in grid costs ([FERC](https://www.ferc.gov/sites/default/files/2024-11/Annual%20Assessment%20of%20Demand%20Response_1119_1400.pdf)).
FERC Order 2222: The Regulatory Foundation
The regulatory backbone of VPP market participation is FERC Order 2222, issued in September 2020. The order requires the six FERC-jurisdictional Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) to establish participation models that enable DER aggregations to compete in energy, capacity, and ancillary services wholesale markets on a level playing field with traditional resources ([FERC](https://www.ferc.gov/media/ferc-order-no-2222-fact-sheet)).
The Six FERC-Jurisdictional ISO/RTOs
| ISO/RTO | Region | Order 2222 Compliance Status (2024) |
|---|---|---|
| CAISO | California | Fully compliant |
| ISO-NE | New England | Fully compliant |
| PJM | Mid-Atlantic/Great Lakes | In progress |
| NYISO | New York | In progress |
| MISO | Midwest | In progress |
| SPP | Plains | In progress |
By 2024, CAISO and ISO-NE had fully complied with the requirements of Order 2222, theoretically unlocking wholesale market participation from a much wider range of DERs in those regions ([DOE](https://liftoff.energy.gov/wp-content/uploads/2025/01/LIFTOFF_DOE_VirtualPowerPlants2025Update.pdf)). However, the DOE's Pathways to Commercial Liftoff report noted that challenges to integration remain, particularly around electricity consumption data access, DER metering and telemetry, and DER aggregation participation models.
The order requires that regional grid operators revise their tariffs to establish DERs as a category of market participant, allowing aggregators to register their resources under one or more participation models. Each tariff must set a size requirement for resource aggregations that does not exceed 100 kW ([FERC](https://www.ferc.gov/media/ferc-order-no-2222-fact-sheet)).
Implementation Challenges
Despite the promise of Order 2222, Wood Mackenzie identified several barriers limiting residential VPP participation:
- Nodal aggregation restrictions that limit the potential size of individual VPP aggregations
- Poorly defined bidding and qualification rules that create uncertainty for aggregators
- Device-level data restrictions that prevent granular performance verification
- Participant engagement challenges for utilities and load-serving entities
- Regulatory model barriers that have not kept pace with distributed resource technology
Ben Hertz-Shargel, global head of grid edge at Wood Mackenzie and lead author of the report, noted that "the rules of wholesale markets are not conducive to residential customers" ([Utility Dive](https://www.utilitydive.com/news/vpps-past-pilot-scale-but-policy-tech-challenges-remain-woodmac/724974/)).
Key VPP Programs and Deployments in 2024
Sunrun: Leading Residential VPP Expansion
Sunrun emerged as the most active residential VPP operator in 2024. The company reoriented its business around a "storage-first strategy," driving battery attachment rates from 18% in Q2 2023 to 54% in Q2 2024. Sunrun installed 264.5 MWh of energy storage capacity in Q2 2024 alone, up 152% year-over-year ([Utility Dive](https://www.utilitydive.com/news/sunrun-storage-attachment-rate-jumps-to-54-as-ceo-cheers-rising-vpp-potent/723732/)).
Sunrun VPP Programs (2024)
| Program | Location | Enrollment | Compensation |
|---|---|---|---|
| Tesla Electric Partnership | Texas (ERCOT) | 150+ customers | $400/year per Powerwall |
| Orange & Rockland Utilities | New York | 300+ installations | Free/discounted battery |
| CalReady | California | 16,000+ enrollees | Grid services payments |
| PowerOn | Puerto Rico | ~2,000 participants | Grid services payments |
The Tesla Electric partnership, announced in August 2024, enrolled Sunrun customers in ERCOT's aggregated distributed energy resources pilot program, allowing small customer-sited storage resources to participate in the Texas wholesale electricity market. Enrolled customers received an annual payment of $400 per Powerwall ([Utility Dive](https://www.utilitydive.com/news/sunrun-storage-attachment-rate-jumps-to-54-as-ceo-cheers-rising-vpp-potent/723732/)).
The Orange & Rockland Utilities program in New York featured more than 300 solar-plus-storage installations across a 10-year program. Sunrun received revenue from O&R based on the installed base of battery storage, and participating customers received a free or discounted home battery in exchange for enrolling their stored energy in a dispatch schedule ([pv magazine USA](https://pv-magazine-usa.com/2024/10/23/sunrun-and-new-york-utility-embark-on-residential-virtual-power-plant/)).
Voltus: Commercial VPP at Daily Dispatch Scale
Voltus, a leading commercial and industrial VPP operator, achieved a significant milestone in 2024: the company has been dispatched by a grid operator every single day since April 2024. This milestone signals that demand flexibility has moved from emergency backup to standard operating procedure in wholesale markets.
Voltus aggregates distributed energy resources including industrial loads, batteries, and commercial buildings into virtual power plants that participate in wholesale electricity markets. In May 2024, Voltus and Resideo Technologies launched a residential smart thermostat demand response program serving approximately 10 million Commonwealth Edison (ComEd) customers across Illinois in the PJM region, along with over 1 million PSEG Long Island customers served by NYISO ([MarketScreener](https://uk.marketscreener.com/quote/stock/RESIDEO-TECHNOLOGIES-INC-46633591/news/Voltus-Inc-and-Resideo-Technologies-Inc-Launch-New-Residential-Thermostat-Virtual-Power-Plants-i-46722641/)).
Voltus was also recognized as a leading VPP provider in Wood Mackenzie's 2024 market report ([Voltus](https://www.voltus.co/press/virtual-power-plant-2024-wood-mackenzie-vpp-report)).
Tesla: Powerwall Aggregation in Texas
Tesla's Electric VPP program in Texas continued to expand in 2024, leveraging the company's large installed base of Powerwall batteries. Tesla partnered with Sunrun to support the ERCOT grid during periods of high demand, aggregating distributed storage resources to provide capacity when the grid was under stress. The partnership demonstrated the potential for cross-platform VPP aggregation, where multiple battery brands can contribute to a single virtual power plant.
VPPs in Action: Hurricane Beryl
The resilience value of VPP-enabled solar-plus-storage systems was dramatically demonstrated during Hurricane Beryl, which struck the Texas Gulf Coast in July 2024. The storm caused widespread power outages across the greater Houston area, leaving millions without electricity for extended periods.
During the prolonged outages, more than 1,600 Sunrun customers in the greater Houston area were able to keep their homes energized using their solar-plus-storage systems, collectively providing over 70,000 hours of backup energy. These systems demonstrated the dual value of distributed storage: they provide backup power during outages while also being available for grid dispatch during normal operations ([pv magazine USA](https://pv-magazine-usa.com/2024/08/07/sunrun-stock-rises-on-strong-cash-generation-in-q2-earnings/)).
This real-world performance validated the VPP model: distributed batteries that serve as backup power for individual homes can simultaneously function as grid infrastructure, providing capacity and resilience benefits to the broader community.
Market Potential and Economic Benefits
The Brattle Group, in an April 2024 report commissioned for California, found that the state's 2035 VPP market potential exceeds 7,500 MW — representing more than 15% of peak demand. This is roughly five times larger than the demand response capacity currently used for resource adequacy in California (approximately 1,600 MW). Brattle projected that by 2035, VPPs in California could produce over $750 million per year in avoided traditional power plant costs ([FERC](https://www.ferc.gov/sites/default/files/2024-11/Annual%20Assessment%20of%20Demand%20Response_1119_1400.pdf)).
VPP Revenue Streams for Battery Owners
| Revenue Stream | Description | Typical Value |
|---|---|---|
| Capacity payments | Annual payments for committing capacity to grid programs | $400-$1,500/year |
| Energy dispatch | Per-event payments for discharging energy during peak demand | $50-$200/event |
| Ancillary services | Payments for frequency regulation, spinning reserves | Market-dependent |
| Bilateral capacity | Direct procurement by utilities or retail providers | Negotiated rates |
| Free/discounted equipment | Some programs provide battery at reduced cost in exchange for enrollment | $5,000-$15,000 value |
The DOE's Pathways to Commercial Liftoff report emphasized that VPPs face hurdles to deployment despite their financial and grid benefits, including participant engagement, regulatory models, and operational experience barriers. The DOE also noted that the Loan Programs Office (LPO) can support VPP-enabled DER adoption through the Title 17 Clean Energy Financing program, with VPP being among the most requested sectors for loan guarantees ([DOE](https://www.energy.gov/edf/articles/sector-spotlight-virtual-power-plants)).
What Installers Need to Know
VPP-Eligible Equipment
Not all battery systems are VPP-eligible. Installers should verify that the equipment they specify supports the communication protocols, telemetry requirements, and dispatch capabilities needed for program participation. Key considerations include:
- Software integration: The battery system's management software must be able to receive and respond to dispatch signals from the VPP aggregator.
- Telemetry and metering: Programs require granular data reporting — typically at the device or string level — to verify performance and calculate payments.
- Internet connectivity: Reliable internet connectivity is essential for real-time dispatch and monitoring. Systems should include backup connectivity options.
- Inverter compatibility: The inverter must support the power export profiles required for grid dispatch. Explore our hybrid inverter collection for VPP-compatible options.
- Manufacturer partnerships: Some VPP programs are limited to specific battery brands. Tesla Powerwall, Sunrun Brightbox, and Enphase IQ Battery are among the most commonly enrolled systems.
Enrollment Process
For most residential VPP programs, enrollment is handled by the VPP aggregator (e.g., Sunrun, Tesla, Voltus) rather than the installer. However, installers play a critical role in:
- System design: Ensuring the system is sized and configured to meet both backup power needs and VPP dispatch requirements.
- Commissioning: Verifying that telemetry, communication, and dispatch capabilities are properly configured during system commissioning.
- Customer education: Explaining the VPP value proposition to customers, including the revenue potential and any limitations on backup power availability during dispatch events.
- Interconnection: Ensuring the system is properly interconnected and permitted for grid export.
Installers should make VPP enrollment part of their standard commissioning checklist for eligible battery systems. The ongoing revenue stream materially improves customer payback economics and strengthens the value proposition for solar-plus-storage.
The Path Forward
The trajectory of VPPs in 2024 suggests that distributed solar-plus-storage is becoming a core component of grid infrastructure, not just a behind-the-meter customer benefit. Several trends will accelerate this transformation:
- Continued FERC Order 2222 implementation: As more ISO/RTOs complete compliance, wholesale market access for DER aggregations will expand, creating new revenue opportunities for battery owners.
- Growing battery attachment rates: With attachment rates exceeding 50% at leading installers, the pool of VPP-eligible resources is expanding rapidly.
- Utility partnerships: Bilateral VPP procurements between utilities and aggregators are creating stable, long-term revenue streams that de-risk the investment in distributed storage.
- Extreme weather driving demand: Events like Hurricane Beryl demonstrate the resilience value of distributed storage, driving both consumer demand and policy support for VPP programs.
- Electric vehicle integration: Vehicle-to-grid (V2G) and vehicle-to-home (V2H) programs are beginning to add EV batteries to VPP portfolios, dramatically expanding the available resource pool.
PES Supply is committed to helping installers and contractors participate in the VPP opportunity. With 50,000+ SKUs from 169 authorized brands, we offer VPP-compatible battery systems, hybrid inverters, and balance-of-system components from leading manufacturers. Browse our battery storage, inverters, and balance of system collections to find VPP-eligible equipment for your next installation. Standard delivery is 7-10 business days.
Key Sources
- FERC, Order No. 2222 Fact Sheet — ferc.gov
- FERC, 2024 Assessment of Demand Response and Advanced Metering — ferc.gov
- DOE, Pathways to Commercial Liftoff: Virtual Power Plants 2025 Update — liftoff.energy.gov
- SEIA / Wood Mackenzie, North America VPP Market 2024 (via Utility Dive) — utilitydive.com
- pv magazine USA, Sunrun and New York Utility VPP — pv-magazine-usa.com
- Utility Dive, Sunrun Storage Attachment Rate — utilitydive.com
- DOE, Sector Spotlight: Virtual Power Plants — energy.gov
Frequently Asked Questions
How much can I earn participating in a Virtual Power Plant?
Typical VPP enrollment pays $50-150/year per battery for residential participants, with some programs offering $200-500/year during grid emergency events. Tesla's VPP in California has paid out over $1,500 per Powerwall in peak demand response years.
Do I need special equipment to join a VPP?
Yes. You need a UL 9540-certified battery system with internet connectivity and a compatible software platform. Most modern systems from Tesla, Sonnen, and Generac support VPP enrollment out of the box. Legacy lead-acid systems are generally not eligible.
Can I use my battery for backup power while enrolled in a VPP?
Yes. All major VPP programs allow you to reserve a minimum backup percentage (typically 20-30%) that is never dispatched to the grid. Your local backup function remains fully operational even during VPP events.
Shop This Article
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