Virtual power plant market hits 37.5 GW as deployments surge, but barriers cap growth

<h2 class="wp-block-heading has-text-align-center has-medium-font-size" id="h-wood-mackenzie-finds-vpp-deployments-offtakers-and-monetized-programs-each-grew-by-more-than-33-year-over-year-even-as-total-capacity-rose-a-modest-13-7-due-to-utility-and-regulatory-constraints">Wood Mackenzie finds VPP deployments, offtakers, and monetized programs each grew by more than 33% year-over-year, even as total capacity rose a modest 13.7% due to utility and regulatory constraints</h2>

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<p>The <a href="https://solarbuildermag.com/tag/vpps/">virtual power plant (VPP)</a> market added 4.5 GW of new capacity in the past year, bringing the global total to 37.5 GW of behind-the-meter flexible resources, according to Wood Mackenzie’s new 2025 North America virtual power plant market report. While that represents a 13.7% year-over-year capacity increase, market participation is expanding far faster: company deployments, unique offtakers, and programs monetized each climbed more than 33%.</p>

<p>“Utility program caps, capacity accreditation reforms, and market barriers have prevented capacity from growing as fast as market activity,” said Ben Hertz-Shargel, global head of grid edge for Wood Mackenzie.</p>

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<h3 class="wp-block-heading has-medium-font-size" id="h-vpp-participation-widens-but-small-customers-still-blocked">VPP participation widens, but small customers still blocked</h3>

<p>Residential customers now account for 10.2% of wholesale VPP capacity, up from 8.8% in 2024. Still, the report notes persistent barriers: third-party data access for enrollment and market settlement continue to block broader small-customer participation.</p>

<p>Technology mixes are shifting as well. Battery storage and EV assets are now included in 61% as many deployments as those with smart thermostats, eroding the dominance of the original incumbent technology.</p>

<h3 class="wp-block-heading has-medium-font-size" id="h-states-and-markets-driving-adoption">States and markets driving adoption</h3>

<p>California, Texas, New York, and Massachusetts lead the way, representing 37% of deployments. Regional grid operators PJM and ERCOT — both contending with heavy new data center load — also reported the largest disclosed VPP offtake capacity.</p>

<p>“While data centers are the source of new load, there’s an enormous opportunity to tap VPPs as the new source of grid flexibility,” Hertz-Shargel said.</p>

<h3 class="wp-block-heading has-medium-font-size" id="h-offtake-expands-new-business-models-emerge">Offtake expands, new business models emerge</h3>

<p>The 25 largest VPP offtakers each procured more than 100 MW this year, while over half expanded their deployment count by at least 30%. Wood Mackenzie points to the rise of an “independent distributed power producer” model, in which energy arbitrage and grid services revenue finance third-party-owned storage tied to retail electricity sales.</p>

<h3 class="wp-block-heading has-medium-font-size" id="h-regulatory-pushback-ahead">Regulatory pushback ahead</h3>

<p>Despite this activity, the regulatory landscape remains unsettled. Most VPP aggregators and software providers oppose utilities rate-basing distributed energy resources under the Distributed Capacity Procurement model, viewing it as a way to crowd out private capital and aggregators.</p>

<p>“Meanwhile, there is broad consensus among experienced wholesale market participants that <a href="https://solarbuildermag.com/news/ferc-order-2222-opens-up-wholesale-electricity-markets-for-der-what-happens-now/">FERC Order 2222</a> was a missed opportunity and will not have a significant impact on market access,” Hertz-Shargel added.</p>
<p>-- Solar Builder magazine</p>