What Is a Virtual Power Plant? How Your Battery and Thermostat Get Paid
Virtual power plants pay homeowners to let batteries and thermostats help the grid at peak times. Here's how they work, what you earn and what you give up.
A virtual power plant (VPP) is a network of home batteries, smart thermostats, EV chargers and other devices that a utility or aggregator coordinates to cut or supply power during peak demand. Homeowners who enroll earn bill credits or cash, usually in exchange for letting the program adjust their devices during a limited number of events each year.
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On the hottest afternoon of the summer, your utility has a problem. Everyone is running air conditioning at once, and the grid needs more power for a few hours. The traditional fix is to fire up a “peaker” power plant that sits idle most of the year.
A virtual power plant is a different fix. Instead of one big plant, the utility taps thousands of small devices in homes and businesses: batteries that discharge, thermostats that nudge the temperature a couple of degrees, EV chargers that pause. Together they act like a power plant, and the people who own those devices get paid.
If you’ve been offered a “grid services” program with your new battery or thermostat, this guide explains how it works, what you can earn and what you give up.
What a virtual power plant actually is
A virtual power plant (VPP) is a group of distributed energy resources, often called DERs, that are coordinated by software to act like a single power source. The U.S. Department of Energy describes VPPs as aggregations of resources such as rooftop solar with batteries, EVs and chargers, electric water heaters, smart thermostats and smart building controls.
There’s no physical plant. The “virtual” part is the software that sends signals to each device and measures how much power each one shifted or supplied.
A VPP can help the grid in 2 basic ways:
- Reducing demand. Smart thermostats pre-cool a home and then ease off during the peak. Water heaters and EV chargers pause. Pool pumps shift to later.
- Supplying power. Home batteries discharge into the home or back to the grid during peak hours, so the utility needs less power from other sources.
Why utilities are turning to VPPs
Electricity demand is growing again, driven by data centers, manufacturing, EVs and electric heating. The Department of Energy’s 2025 update to its Pathways to Commercial Liftoff: Virtual Power Plants report estimated that VPP capacity had grown to about 33 GW across North America. It said deploying 80 to 160 GW by 2030, enough to serve 10 to 20% of peak load, could help meet that growth while reducing overall grid costs.
The appeal for utilities is simple. Peak demand only lasts a handful of hours a year, and building new power plants and wires for those hours is expensive. Paying customers to shift or supply power during those hours can be cheaper. Our explainer on why electricity bills are rising covers the cost pressures behind this.
Federal rules have also opened the door. In September 2020, the Federal Energy Regulatory Commission (FERC) issued Order No. 2222, which requires regional grid operators to let aggregations of distributed energy resources participate in wholesale electricity markets. Grid operators are implementing it on different timelines, so how VPPs earn money still varies by region.
Key takeaway: A VPP turns your home battery or thermostat into a small, paid piece of grid infrastructure. You earn credits for flexibility during a limited number of peak hours each year.
How homeowners get paid
Payment structures differ by program, but most fall into a few models:
| Payment model | How it works | Common devices |
|---|---|---|
| Enrollment bonus | One-time payment or bill credit for signing up | Smart thermostats, batteries |
| Per-season or annual payment | Paid for staying enrolled and taking part in events | Thermostats, water heaters |
| Performance payment (per kW) | Paid based on how much power your device actually shifted or supplied during events | Home batteries, larger loads |
| Per-event or per-kWh credit | Credit for each event or each unit of energy delivered | Batteries, EV chargers |
| Time-of-use savings | Lower bills by shifting use to cheaper hours, sometimes automated | Batteries, EV chargers, thermostats |
A real example: Massachusetts ConnectedSolutions
One of the best-known battery programs is ConnectedSolutions, offered through Mass Save by Eversource and National Grid in Massachusetts. Per the program’s published terms:
- It pays $275 per kW based on your battery’s average performance during summer events.
- Events run on non-holidays between June 1 and September 30, from 3 p.m. to 8 p.m., last up to 3 hours and are capped at 60 per summer.
- Mass Save estimates a battery that can contribute 5 kW continuously could earn up to $1,375 per year.
- The incentive rate is locked for the first 5 summers you’re enrolled.
- Your battery manufacturer or installer may keep a share of the payment.
Rates, rules and eligibility change, and other states pay very different amounts. Treat this as an illustration of how programs are built, not what you’ll earn.
Which devices can join a VPP
Almost any device that uses or stores a meaningful amount of electricity, and can be controlled remotely, is a candidate:
- Home batteries. The most valuable participants, because they can supply power, not just reduce use. Learn the basics in our guide to how home battery backup works.
- Smart thermostats. The easiest way in. Many utilities run “bring your own thermostat” programs that work with popular models such as Google Nest, ecobee or Honeywell Home.
- EV chargers and EVs. Managed charging programs shift charging away from peak hours. Some pilots test vehicle-to-grid, where the car sends power back.
- Heat pump water heaters and electric water heaters. They can heat water ahead of a peak and coast through it.
- Rooftop solar. Usually paired with a battery, since solar alone can’t be dispatched on demand.
What you give up when you enroll
VPP programs are voluntary, and they’re not free money. Here are the trade-offs to understand before you sign up.
Less battery backup during events
If your battery discharges during a peak event, it has less stored energy left for an outage that evening. Most programs let you or your installer keep a reserve, but read the terms. If backup during storms is your top priority, ask how the program handles severe weather warnings.
Some comfort trade-off
Thermostat events typically adjust your set point by a few degrees for a few hours, often after pre-cooling or pre-heating. Most people barely notice, but homes with poor insulation or people sensitive to heat may.
Opt-outs can cost you
Most programs let you skip events. But performance-based programs may count a skipped event as zero, which lowers your average and your payment.
Data sharing and control
You’re giving a utility or aggregator remote control over a device and access to its usage data. Read the privacy policy, and check whether you can leave the program at any time.
Warranty questions
Extra battery cycles add wear. Many battery makers address program participation in their warranties, but confirm before enrolling.
How VPPs fit with solar and net metering
VPPs matter more as utilities change how they pay for exported solar. Where exports earn less than retail rates, a battery that stores midday solar and discharges during evening peaks becomes more valuable, and VPP payments can stack on top of those bill savings. Our guide to net metering and why utilities are changing it explains that shift.
If you’re weighing rooftop solar in the first place, see is solar still worth it after the tax credit changes. Renters and people without a good roof may prefer community solar, which doesn’t require equipment at home.
Where to start
- Check your utility’s website for “demand response,” “peak rewards,” “bring your own device” or “battery program.” Your state’s energy office may list programs too.
- Look in your device app. Many thermostat and battery apps show available programs in your area and let you enroll in a few taps.
- Read the terms. Look for the number of events, event hours, how payment is calculated, opt-out rules, battery reserve settings and how long the rate is locked.
- Ask your installer if you’re buying a battery. Some programs require specific equipment or enrollment through an approved installer.
- Start with a thermostat if you don’t have a battery. It’s the lowest-cost way to try a VPP, and many programs include a sign-up bonus. Our guide on whether smart thermostats save money covers the device side.
The bottom line
A virtual power plant pays you for being flexible during the few hours a year when the grid is most stressed. For battery owners, the payments can meaningfully shorten payback. For thermostat owners, it’s usually a modest bonus for a small comfort trade-off. Read the terms, protect your backup reserve if outages are a concern, and treat program payments as a welcome extra rather than the only reason to buy equipment.
For terms like DER, demand response and kW vs kWh, see our tech glossary.
Sources
- U.S. Department of Energy: Pathways to Commercial Liftoff, Virtual Power Plants — 2025 update, current VPP scale and the 80 to 160 GW by 2030 estimate
- Federal Energy Regulatory Commission: Order No. 2222 explainer — distributed energy resource aggregations in wholesale markets
- Mass Save: ConnectedSolutions for batteries — payment per kW, event season, hours, limits and rate lock
- National Grid Massachusetts: ConnectedSolutions battery program — utility program terms and eligibility
Frequently asked questions
How much can I earn from a virtual power plant?
It varies widely by utility, device and program. Thermostat programs often pay a modest sign-up bonus and small seasonal credits. Battery programs pay more because batteries can supply power. For example, Massachusetts' ConnectedSolutions program estimates a battery contributing 5 kW could earn up to $1,375 a year. Check your utility's current terms, since rates change.
Is joining a virtual power plant worth it?
Usually yes if you already own an eligible device, because enrollment costs little and the payments are extra. The main trade-offs are less battery reserve during events, small temperature changes for thermostat events and sharing device data. If backup power during outages is your top priority, make sure you can set a reserve level or opt out during storm warnings.
Will a virtual power plant drain my home battery?
It can use a portion of your stored energy during events, typically a few hours on peak days. Many programs and battery apps let you keep a backup reserve so some energy always stays available for outages. Read your program's terms and check your battery settings before enrolling, especially if you live where summer storms cause outages.
Can I opt out of a virtual power plant event?
Most programs let you opt out of individual events through the device app or thermostat. However, performance-based programs may count a skipped event as zero, which lowers your average and your payment. Thermostat programs may limit how many events you can skip before losing a bonus. The rules are in the program terms.
Do I need solar panels to join a virtual power plant?
No. Many VPP programs enroll smart thermostats, water heaters or EV chargers with no solar at all. Battery programs often accept batteries with or without solar, although some require solar pairing. Solar panels by themselves usually can't participate in event-based programs because they can't be dispatched on demand, but a battery paired with solar can.
Is a virtual power plant the same as demand response?
They're closely related. Demand response traditionally means paying customers to reduce electricity use during peaks. A virtual power plant is broader: it coordinates many devices, including batteries and EVs that can supply power, and can provide several grid services. Many utility demand response programs for smart thermostats are effectively a simple form of VPP.
Which smart thermostats work with utility programs?
Many utilities support popular connected models such as Google Nest, ecobee and Honeywell Home through "bring your own thermostat" programs. Eligible models vary by utility, so check your utility's program page or the enrollment section in your thermostat app. Some utilities also offer rebates on ENERGY STAR certified smart thermostats.
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Manishdai
Manishdai writes about the technology that is reshaping every industry — from AI agents and cloud platforms to healthtech, fintech and the IT companies building it all across the United States.
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