How Virtual Power Plants are reshaping the energy industry

According to the World Economic Forum’s Energy Transition Index 2025, the global transition towards cleaner and resilient energy systems has accelerated over the past decade. The overall ETI score rose by about 1.1% year on year, which is more than double the average pace of the past three years, reflecting a broad-based yet fragile recovery. However, transition readiness, which encompasses policy, investment capacity and infrastructure, grew more slowly. This shows that long term enablers may be weakening. Meanwhile, rising geopolitical tensions may also expose the transition to potential disruption. In this case, countries’ consistent regulatory frameworks become essential in ensuring long-term stability.  

Is the world ready for the increasing power demand? 

Global electricity demand increased by 2.2% in 2025, driven by many factors, but largely by heatwaves and electrification. Looking ahead to 2030, the global power demand growth from data centers is expected to be 10%, illustrating that the grid is under increasing pressure to maintain stability. Meanwhile, it also shows the need for flexible grid management solutions. In this case, virtual power plants may be one of the effective digital solutions to improve the transition to a cleaner and smarter energy system. They can balance supply and demand to enhance the grid stability. 

What is a Virtual Power Plant (VPP) and how does it work? 

A VPP is a decentralised system that connects multiple small-scale energy resources, with resources including home batteries and solar panels. They can be integrated through software, functioning as a single and flexible power within the grid. By dynamically balancing supply and demand, VPPs help relieve pressure on the grid during peak periods. For example, they can reduce consumption and inject stored energy back into the system during extremely hot summer days. VPPs can also save money for households and businesses, as expenses are reduced by shrinking the need for costly grid infrastructure upgrades. In some cases, VPP programmes even reward participants for contributing their energy assets. For instance, they offer financial incentives for flexibility and grid support. 

Can VPPs help balance the grid and cut costs? 

According to research from the Rocky Mountain Institute, VPPs could provide over 20% of peak electricity demand in the US by 2030. This capacity roughly matches the expected growth in data centre consumption. VPPs can shift demand during peak hours to improve system utilisation. Moreover, technological firms and utilities are already experimenting with flexible contracts, enabling households and small businesses to avoid higher power bills. Overall, these models show an effective digital solution, which satisfies both expansion and consumer affordability. 

What lies ahead for Virtual Power Plants? 

Looking ahead, it is expected to accelerate the growth of virtual power plants by expanding distributed energy resources. For example, these resources include electric vehicles and smart home technologies. Because of advances in artificial intelligence, VPPs may also be able to manage complex networks of assets and optimize grid performance in real time. As more state agencies begin to explore ways for VPPs to integrate into existing energy frameworks, regulatory engagement significantly increases. However, challenges remain. It is difficult for consumers to join or understand the process because of the fragmented procedures across regions. Ultimately, the success of VPPs will depend less on technological feasibility and instead, on supportive policies and coordinated action.