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North America’s virtual power plant (VPP) market grew rapidly over the last year, reaching 37.5GW of behind-the-meter flexible capacity, according to a report from Wood Mackenzie.
The report, 2025 North America virtual power plant market, finds that the VPP market broadened more than it deepened, with the number of company deployments, unique offtakers, and market and utility programmes monetised each growing more than 33%, while total capacity grew a more modest 13.7%.
Commenting in a release was Ben Hertz-Shargel, global head of grid edge for Wood Mackenzie: “Utility programme caps, capacity accreditation reforms, and market barriers have prevented capacity from growing as fast as market activity.”
Market maturation continues
The share of VPP wholesale market capacity from residential customers increased to 10.2%, from 8.8% in 2024, still reflecting market barriers to small customers. Third-party data access for enrolment and market settlement are the primary blockers.
Penetration of battery storage and EV in VPP deployments continues, with 61% as many deployments including these technologies as those including smart thermostats, the incumbent technology.
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Leading markets
California, Texas, New York, and Massachusetts are the leading states, representing 37% of VPP deployments. Meanwhile, PJM and ERCOT, the regions with the greatest utility commitments to data centre capacity, also have the greatest disclosed VPP offtake capacity.
“While data centres are the source of new load, there’s an enormous opportunity to tap VPPs as the new source of grid flexibility,” said Hertz-Shargel.
Offtake growth
The top 25 VPP offtakers procured over 100MW each this year, while over half of all offtakers increased the number of deployments under them by at least 30% compared to last year, showing the breadth of the market.
An ‘independent distributed power producer’ business model has emerged, whose thesis is that energy arbitrage and grid service revenue can finance an electricity retailer’s third-party-owned storage offering.
Regulatory pushback
A majority of VPP aggregators and software providers do not support utilities rate basing DERs, a key plank of the Distributed Capacity Procurement model for utilities. “This model is seen as limiting access of private capital and aggregators from the DER market, rather than leveraging customer and third-party-owned resources,” says Hertz-Shargel.
“Meanwhile, there is broad consensus among experienced wholesale market participants that FERC Order 2222 was a missed opportunity and will not have a significant impact on market access.”
