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Let's Know ThingsA podcast about context and the news.. Author: Colin Wright
A calm, non-shouty, non-polemical, weekly news analysis podcast for folks of all stripes and leanings who want to know more about what's happening in the world around them. Hosted by analytic journalist Colin Wright since 2016. letsknowthings.substack.com Language: en Genres: News, News Commentary Contact email: Get it Feed URL: Get it iTunes ID: Get it |
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Virtual Power Plants
Tuesday, 1 September, 2026
This week we talk about peaker plants, blackouts, and at-home battery backups.We also discuss energy resiliency, solar panels, and hydro.Recommended Book: The Tainted Cup by Robert Jackson BennettTranscriptPeaking power plants, often just called peaker plants, are power plants that are turned on only during periods of high energy demand. That’s in contrast to a baseload power plant, which operates more or less 24/7 to ensure there’s a steady amount of electricity available on the local power grid.The need for peak-load energy varies depending on the time of year and which part of the world you’re looking at. In general, though, energy demand tends to increase in the morning and evening because of temperature fluctuations and lifestyle rhythms.People are at home in the morning and return from work in the evening, at which point they turn on their ACs or heaters, TVs, lights, electric kettles, and video game consoles. That leads to an irregular surge in demand compared with the steady office and factory demand met throughout the day by the baseload power plant.When energy demand peaks, approaching or exceeding what the baseload plant can reliably provide, the peaker plant is spun up and more energy is added to the grid. This helps avoid brownouts and blackouts, situations in which people lose access to power because there isn’t enough to go around.This also helps stabilize energy prices. In most countries, pricing is used to manage scarce energy resources, so as a grid approaches the point where it’s running out of available electricity, prices rise to incentivize less energy use. Peaker plants keep those prices from going sky-high by increasing the supply, preventing demand from pushing prices into absolutely ridiculous territory.Some peaker plants operate for a handful of hours basically every day. This is especially true in places with extreme temperature fluctuations, or in areas where the population or manufacturing activity has increased rapidly and the local infrastructure hasn’t caught up. In those places, the backup plant is used more regularly because the baseload supply hasn’t yet increased to meet that new, consistently higher demand.Peaker plants are often less efficient to run because they aren’t meant to be used all the time. Consequently, if the baseload power plant isn’t capable of providing enough energy for a region on a regular basis, electricity can get much more expensive for everyone, all the time. A power plant intended for occasional use is instead operating constantly, and it wasn’t built to be efficient. It was built to come online quickly and operate only during periods of irregular, excessive need.What I’d like to talk about today is an alternative to peaker plants that was conceived of decades ago, but which has only recently started to be deployed at scale in some areas.—As I mentioned in the intro, a peaker power plant is meant to be turned on irregularly to meet above-average energy needs. Those periodic pops in demand are accounted for, and peaker plants are built specifically to meet them. As a result, these plants are typically more expensive and often more polluting than baseload plants, with many using natural gas or coal to produce extra electricity for the grid.In the late 1990s, researchers proposed that it might someday be possible to link energy-production and storage sites together, creating a more flexible grid system they called a virtual power plant. Further research in the early 2000s expanded on the concept, looking specifically at renewable-energy options and how they might be aggregated into a similar virtual-power-plant setup.The basic idea is to recreate the effect of a peaker plant—adding electricity to the power grid when it’s most needed—by aggregating power-generating or storage assets and tapping them only when necessary.Software manages that aggregation of smaller assets, ensuring the additional energy reaches the grid when it’s needed and at the necessary scale. Managing these assets in this way allows smaller production and storage infrastructure to recreate the impact of a larger peaker plant.A German energy company called RWE launched the first real-world virtual power plant in 2008, linking nine of its hydroelectric plants into a virtual 8.6 MW unit whose output could be managed and deployed remotely. A few years later, in 2011, a Swiss energy company called Kraftwerke did the same with a slew of biogas, solar, and wind-power infrastructure scattered across seven countries.The concept expanded to include demand-side residential energy assets in 2016, when the Australian city of Adelaide enacted a program backed by the Australian Renewable Energy Agency. The program deployed 1,000 battery systems to homes and businesses across the city. Those battery systems were hooked up to solar panels, and the software managing the batteries allowed their stored energy to act like a 5 MW peaker plant.Tesla then applied the same general idea across South Australia, where energy prices had long been volatile, beginning in 2018. That program reached 50,000 homes by 2022. It was acquired by an energy company called AGL in 2025, which expanded it further until the virtual power plant had a capacity of 25 MW of peaker solar energy and 37 MW of battery-stored peaker energy.Now, again, there’s a certain amount of energy available on the grid from standard baseload production sources, including traditional coal- and gas-fired power plants, hydroelectric plants, and nuclear power plants.Solar and wind arrays also contribute to the baseline energy load in some parts of the world. That baseline can be augmented by utility-scale battery facilities that store excess wind and solar production. This makes renewables more reliable as baseload options because excess energy generated during the day or during especially windy periods can be stored in those batteries and used later, at night or when the wind isn’t blowing as hard.A VPP addresses periods when the available baseload supply doesn’t measure up to current demand. When temperatures are especially high and everyone is using their air conditioners more, and a gas plant or solar array can’t provide enough electricity to meet demand, the company operating the virtual power plant can draw energy from scattered resources to cover that additional use.In some cases, that means pooling energy generated by small hydroelectric dams. In others, it means drawing a previously agreed-upon amount or percentage of energy from a homeowner’s battery backup.Maybe they have a battery that stores excess electricity from their solar panels, which they can use at night. They might also have an agreement with the VPP operator allowing it to draw a certain amount of energy from that battery when necessary, adding it to the grid to ease excessive demand.This kind of agreement is often beneficial for the homeowner sharing some of their excess energy with the grid to help prevent blackouts and excessively high prices. The cost of the battery installation and hardware might be subsidized, or they might make a small amount of money every time that energy is borrowed.There are also variations on this model that provide the homeowner or renter with a fancy thermostat. During periods of high demand, the thermostat might automatically adjust the AC by a degree or two when the grid is being crushed by demand on crazy-hot days. This ensures there’s enough energy to go around by reducing demand rather than increasing supply.Some models also use energy-pricing arbitrage, automatically selling stored energy when electricity is expensive and buying it back when electricity is cheap. This helps balance the grid’s overall energy load by contributing to it when energy is scarce and expensive, then restoring that energy to the battery when it is abundant and cheap.Increasingly, these systems tap into other resources connected to the grid to reduce demand or increase supply. They might borrow some energy stored in a homeowner’s electric vehicle, for instance, which has been left plugged in to charge but can also act as another, quite large, household battery. Or they might reduce the power being sent to heat pumps or water heaters.Each of these devices or other assets is treated as part of the larger virtual power plant, which may be composed of thousands or tens of thousands of homes and all their connected assets. This helps manage supply and demand so that blackouts and dramatically higher energy prices are less likely, even on days with bizarre weather or when larger energy assets, like power plants, aren’t operating at full capacity.This is a huge win for resiliency, and it’s also often much cheaper than installing and operating a peaker plant, usually around 40–60% cheaper.These systems can also be installed and activated much faster than a full-on power plant, while dramatically reducing the amount of land used for energy infrastructure and the bureaucracy that has to be traversed to get something like a power plant or solar array installed and operating.Those big chunks of infrastructure can take years or decades to bring online, while a VPP can often be up and running within just a few months. It usually requires no new land and no new interconnections in terms of cables or whatnot. It uses infrastructure that’s already there in most cases, though it can also be strengthened by deploying assets, like household batteries, that are useful to the homeowner for other reasons. Kind of a win-win.At the moment, virtual-power-plant capacity is limited primarily by regulatory approval, at least in most countries. Energy utilities don’t have much incentive to move these systems forward because they get paid for building and managing traditional power assets, and VPPs are not that.Sometimes an energy company will run this type of program, but usually only if it gets to sell the hardware and is paid to manage the software that keeps everything running smoothly. Household batteries and similar assets otherwise represent competition, so utilities are less inclined to allow these systems to move forward or even be legally installed without a fight.That said, the major players in the VPP space right now are Sunrun, Tesla, Renew Home, Uplight, Next Kraftwerke, and sonnen. The latter is the largest VPP operator in Europe and has recently been expanding into the US, especially in Utah.Most VPP deployment in the US is happening in California, Texas, Florida, and Puerto Rico. These systems are also being deployed across South Australia, Germany, and China, where the first gigawatt-scale residential VPP, which aggregates air conditioners and water heaters across millions of households, has been launched.This category of energy technology has rolled out more slowly than originally anticipated. When the early models were deployed in Europe, their outcomes were considered broadly beneficial, but expansion was hindered by regulations—paperwork, basically—and pushback from existing utilities that didn’t want the competition.VPPs were also bundled with other renewable-energy infrastructure and consequently faced substantial opposition in the US, in particular, during both Trump administrations. Those administrations pulled support for renewables across the board and, in some cases, actively tried to kill these industries to make even more room for oil and gas companies.In 2025 and so far in 2026, though, the blazing-fast deployment of data centers has brought VPPs back into the conversation. Data centers require a silly amount of energy to run, and power grids in the areas where they’re being built have been strained as a consequence, dramatically increasing energy prices.VPPs won’t solve that problem, but they could ease it in several ways. They can temper energy use and make more electricity available during periods of peak demand without requiring the construction of expensive power plants that might not come online for years or even a decade.They could also reframe the use of VPPs so that they’re no longer seen primarily as environmental efforts, but as economically viable means of addressing data-center-created energy shortfalls. That could lead to more VPP build-outs because these systems would no longer be such obvious targets for anti-renewable-energy legislation and politics.Show Noteshttps://en.wikipedia.org/wiki/Peaking_power_planthttps://en.wikipedia.org/wiki/Virtual_power_planthttps://www.sciencedirect.com/science/article/pii/S2211467X2400097Xhttps://www.theguardian.com/environment/2016/aug/05/adelaide-charges-ahead-with-worlds-largest-virtual-power-planthttps://www.nrg.com/insights/energy-education/understanding-virtual-power-plants--a-guide-to-vpps.htmlhttps://techcrunch.com/2026/08/19/home-batteries-are-suddenly-cheap-and-everywhere-heres-why/https://pv-magazine-usa.com/2026/08/13/tesla-unveils-zero-down-powerwall-lease-program-with-retail-electric-plan-in-texas-touts-global-vpp-potential/https://www.energy-storage.news/base-power-launches-100mw-vpp-programme-in-texas/https://www.ess-news.com/2026/02/12/texas-lands-its-first-battery-only-virtual-power-plant/https://nuwattenergy.com/en/virtual-power-plants-2026https://www.ess-news.com/2026/06/25/sunrun-tesla-renew-home-announce-plans-for-16-8-gw-virtual-power-plant-program/https://www.sciencedirect.com/science/article/pii/S2352484725003865https://www.cleanenergywire.org/news/start-next-kraftwerkes-renewable-virtual-power-plant-stabilises-gridhttps://www.energy.gov/edf/virtual-power-plants-projectshttps://www.woodmac.com/press-releases/virtual-power-plant-capacity-expands-13.7-year-over-year-to-reach-37.5-gwhttps://www.utilitydive.com/news/in-2026-virtual-power-plants-must-scale-or-risk-being-left-behind/810321/https://ieefa.org/resources/case-virtual-power-plantshttps://uplight.com/blog/virtual-power-plants-are-powering-the-grid-of-the-future-and-uplight-is-leading-the-way/https://sepapower.org/knowledge/vpp-and-supporting-der-policy-developments-q1-2026/https://www.energymining.sa.gov.au/consumers/solar-and-batteries/south-australias-virtual-power-planthttps://whatisavpp.com/research/topics/enpal-flexa/https://www.canarymedia.com/articles/virtual-power-plants/rooftop-solar-industry-trump-budget-lawhttps://foleyhoag.com/news-and-insights/blogs/energy-and-climate-counsel/2026/july/virtual-power-plants-the-distributed-energy-revolution-has-arrived/https://ieefa.org/resources/case-virtual-power-plantshttps://sepapower.org/knowledge/vpp-and-supporting-der-policy-developments-q1-2026/https://www.cesa.org/resource-library/resource/puerto-rico-virtual-power-plant/https://www.energy.gov/edf/virtual-power-plants-projectshttps://www.energymining.sa.gov.au/consumers/solar-and-batteries/south-australias-virtual-power-planthttps://www.ess-news.com/2025/01/16/china-launches-work-on-its-first-gw-scale-residential-virtual-power-plant/https://www.ferc.gov/ferc-order-no-2222-explainer-facilitating-participation-electricity-markets-distributed-energyhttps://www.utilitydive.com/news/in-2026-virtual-power-plants-must-scale-or-risk-being-left-behind/810321/ This is a public episode. 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