Virtual Power Plants

FERC Order 2222 opened wholesale markets to DER aggregations. But VPP participation in those markets remains minimal: as of 2024, VPPs provide less than 1% of US wholesale capacity. The gap between regulatory permission and market reality reveals how much institutional change is needed beyond the regulatory text.

The barriers. The implementation gaps from Order 2222 remain open: verification, settlement, and distribution-utility coordination are all unsolved at scale. Telemetry built for a few hundred large generators cannot yet confirm that 10,000 home batteries delivered 50 MW in a dispatch window, let alone settle the revenue among them.

Where VPPs work today. Australia leads: Tesla's South Australia VPP, built toward a 50,000-home, 250 MW design, actively participates in the National Electricity Market. California's ELRP (Emergency Load Reduction Program) demonstrated 1,000+ MW of aggregated demand response during 2022 heat waves. Both markets have higher electricity prices and more acute peak challenges than most US RTOs, creating stronger economic incentives for aggregation.

What needs to change for VPPs to reach 10-20% of US capacity?

Three things. First, distribution-level visibility: utilities need real-time data on DER output to approve wholesale dispatch without risking local grid damage. Second, standardized communication protocols so aggregators can operate across multiple utility territories. Third, market rule changes that compensate VPPs for the specific services they provide (fast response, peak shaving) rather than forcing them into market constructs designed for large generators.

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