Virtual power plants (VPPs) are homes and buildings that utilize the latest technology to connect to and communicate with the electric grid during periods of fluctuating demand using various equipment commonly found in a home. This may include thermostats, water heaters, and other devices that can send signals back and forth to and from the electric grid to determine when electricity is needed to power a neighborhood during periods when demand may be high or low. This technology allows for grid flexibility by making sure electricity is being delivered to the right place at the right time and is intended to alleviate strain on the grid.

It is projected that total energy consumption will increase by up to 15 percent between 2022 and 2050. To meet this increasing demand, VPPs can decrease the grid’s reliance on power generation facilities, which have historically been constructed near low-income communities and adversely impact marginalized populations.

VPPs – also known as grid-interactive homes and buildings – operate by making homes and buildings act like mini “virtual” power plants by providing power to the grid in times of need. VPPs share small amounts of electricity with the grid through communication features, where the utility or energy service provider send a signal when there is demand for more electricity, and a home or building responds by sharing energy with the grid, either by slightly adjusting the energy use of the home or building, or by sharing electricity produced onsite with a battery storage system. RMI estimates that demand flexibility measures can save customers 10 to 40 percent annually on electricity bills and could avoid $13 billion per year in grid investments. In New England, utilities have reduced the load of the Independent System Operator New England (ISO-NE) electric grid by 300 MW during peak demand from VPP-related programs

This brief looks at the components of a VPP, explores national model code provisions that advance VPP technology and provides examples of states that have adopted VPP provisions in their energy code. It also lays out the challenges associated with VPPs and discusses future opportunities to incorporate VPP technology into energy codes.