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A Brattle Group analysis for The Pew Charitable Trusts estimates that expanding virtual power plants could reduce the cost of utility overbuilding if electricity demand grows less than forecast. In its scenario, virtual power plants cut $33 billion from $84 billion in projected customer costs between 2030 and 2040; the estimates depend on utilities being able to rely on these resources.
A report by consultancy The Brattle Group, commissioned by The Pew Charitable Trusts, estimates that expanding virtual power plants could reduce the cost of utility overbuilding if electricity demand falls short of forecasts, including forecasts tied to data centers. In a hypothetical scenario where load growth is 5% below projections through 2030, the report says virtual power plants cut $33 billion from $84 billion in projected costs for utility customers between 2030 and 2040.
Virtual power plants, or VPPs, combine distributed equipment such as rooftop solar, home batteries and other resources that utilities can coordinate remotely, as discussed in California’s embrace of virtual power plants. They can help manage peak demand by reducing electricity use or supplying power, potentially easing pressure on existing grid infrastructure, including in the PJM grid.
The report says the United States had 113 gigawatts of distributed energy resources that could be used in VPPs as of 2025, a model explored in inclusive utility investment and virtual power plants. If that capacity grew to 524 gigawatts by midcentury, the analysis estimates the country could avoid $614 billion in grid investments and reduce the average household electricity bill by $122 per year by 2050. These are projections, not observed savings.
For its near-term overbuilding analysis, Brattle modeled a nationwide case in which actual load growth came in 5% below forecasts between now and 2030. It estimated that excess power plant and grid spending would cost utility customers about $84 billion from 2030 to 2040. Expanding VPPs reduced that modeled burden by $33 billion, or roughly 40%, according to the report.
A Flexible Alternative to Grid Builds
Utilities must plan power plants and transmission and distribution infrastructure years ahead, while the scale and timing of data center demand remain uncertain. Building too little could constrain economic activity or threaten reliability; building too much could leave customers paying for facilities that are underused. The report presents VPPs as a way to add capacity in smaller increments and defer some major decisions until demand becomes clearer.
That flexibility does not mean VPPs can replace every power plant, line or substation. Their value depends on whether the resources are available when needed, whether utilities can coordinate them, and whether the cost of enrolling and compensating participants is lower than the infrastructure they help avoid. Brattle’s analysis finds their grid benefits exceed participant payments, but the report’s modeled savings rely on assumptions about future deployment and performance.
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Planning for Uncertain Data Center Load
The data center boom is prompting utilities to revisit forecasts as new facilities could add substantial electricity demand. The source report says planners face risks on both sides: underestimating demand could jeopardize reliability, while overestimating it could lead to customer-funded investments that are not fully needed.
Brattle’s analysis builds on prior studies of VPPs’ potential to lower costs by shifting or supplying electricity during periods of peak grid demand. Its additional focus is whether these distributed resources can serve as a hedge against uncertain load growth. The report also notes that states are adopting special rates and rules intended to limit the risk that other customers pay for infrastructure built for data centers that do not materialize; how fully those policies would protect households in worst-case cases remains unclear.
“These are smaller modular resources we can bring online, once the necessary systems are in place. You can wait longer to figure out if that demand is actually going to appear, and then build the VPP at that point.”
— Ryan Hledik, Brattle Group principal and lead author
Savings Depend on Reliable Participation
The figures are scenario-based estimates, not guarantees that utilities will avoid those costs or that household bills will fall by the projected amount. The report’s near-term case assumes load growth is 5% below forecasts; it does not establish that this shortfall will occur. The source material does not specify how likely that scenario is.
It is also unclear how much VPP capacity utilities can count on at peak times, how quickly programs can expand, or how costs and participant payments may change. Hledik said lowering incentives if resources are no longer needed could weaken a program’s appeal. The report argues the resources’ grid value exceeds what participants are paid, but deployment costs and customer retention remain relevant to the outcome.
Utilities Must Put VPPs in Plans
The report’s authors say the next step is for utilities to include VPP options in grid planning and compare them with conventional investments. Pew has published a policy playbook and a state policy explorer covering possible approaches, including VPP mandates adopted in Colorado, Illinois, Maryland and Virginia.
Data center developers could also help supply distributed resources. The report points to Google and Voltus seeking one gigawatt of distributed capacity within PJM Interconnection, the country’s largest electricity market, as an example. Whether that effort or similar projects produce capacity utilities can depend on remains to be seen. Future utility plans and program results will show whether VPPs can meaningfully defer infrastructure spending as data center demand develops.
Key Questions
What is a virtual power plant?
A virtual power plant is a network of distributed energy resources, such as rooftop solar and home batteries, that can be coordinated to reduce demand on the grid or supply power.
How much could virtual power plants reduce overbuilding costs?
In Brattle’s hypothetical scenario where load growth is 5% below forecasts through 2030, VPP expansion reduced estimated customer costs by $33 billion out of $84 billion from 2030 to 2040. The result is a model estimate, not a guaranteed saving.
Does the report say data center demand will fall short?
No. The report analyzes a scenario in which actual load growth is 5% below forecasts; it does not predict that this will happen.
What could prevent the projected savings?
Utilities need to be able to rely on VPP resources when the grid needs them. Program costs, participant compensation, deployment speed and customer willingness to remain enrolled could affect whether VPPs defer conventional infrastructure.
Source: canarymedia.com
