CFC Solutions Cast

Welcome to Solutions Cast. I’m Brian Sloboda, CFC’s Director of Utility Research & Policy.

Let’s talk about an industry trend that has grabbed a lot of headlines: virtual power plants, or VPPs, for short. Judging by the hype alone, you would be forgiven for thinking that VPPs are kickstarting a revolution in the electric utility industry. I’d like to provide a more grounded and nuanced view of what’s *actually* going on with VPPs, where they may evolve over the next 12 to 24 months and, more importantly, what electric cooperatives should keep in mind as the technology landscape continues to shift.

Across the country, interest in VPPs continues to grow as distributed energy resources like rooftop solar, batteries, smart thermostats and EVs become more common. At the same time, it’s important to separate hype from practical realities. Wood Mackenzie estimates VPPs provide about 37.5 gigawatts of flexible capacity nationwide, yet growth is slower than headlines suggest due to regulatory, operational and market barriers.

One key regulatory driver is FERC Order 2222, which requires regional transmission organizations and independent system operators to allow aggregated DER participation in wholesale markets. This could affect cooperatives in those RTO/ISO territories. But the opportunity is not uniform, and neither is the obligation.

Importantly, FERC included a “small utility” exemption for utilities that sell less than 4 million megawatt-hours per year. Those utilities are not automatically required to allow DER aggregation under the order. For many cooperatives, that means you choose whether to opt in—and move at a pace that fits local needs. DER aggregators must verify whether a customer’s utility is above or below the threshold and whether the utility has opted in.

Even with this flexibility, cooperatives must continue to play their most essential role: serving as the trusted local energy provider. Members look to their cooperative, more than to third party aggregators, for reliability, fairness and community driven decision-making. In a world with increasingly complex DER ecosystems, trust and local knowledge remain competitive advantages that national aggregators can’t match.

Let’s consider the business case for VPPs. Not every cooperative will see the same value. Member demographics, climate, local resource mix, wholesale power contract structures and whether your cooperative is part of a G&T family all shape what a VPP model may, or may not, offer. The Department of Energy notes that while VPP adoption is growing, it’s not keeping pace with national goals, suggesting that the benefits are not uniform across regions or utility types.

For some cooperatives, VPPs can help reduce peak demand, defer capital investments or improve resilience. For others, the economics may be modest, especially where member DER adoption is limited or when wholesale market participation isn’t available.

A major consideration is the technology stack, including DERMS, or distributed energy resource management systems. DERMS can help cooperatives coordinate member-owned DERs, manage grid impacts, support utility programs and, in some cases, participation in wholesale markets. On the flip side, DERMS platforms can be expensive and complex to implement, especially for smaller or resource constrained cooperatives. They also require integration with existing systems, staff training, and ongoing operational support, all of which must be factored into a realistic business case.

In addition, cooperatives that belong to a G&T family also need strong coordination. FERC Order 2222 implementation requires alignment among distribution utilities, transmission operators and DER aggregators to maintain reliability and prevent conflicting dispatch instructions. The DOE similarly emphasizes that coordination across transmission, distribution, and aggregators is essential to avoid operational issues when DERs participate in wholesale markets. For cooperatives supplied by a G&T, this may require aligning VPP or DER programs with G&T resource planning, contractual obligations and peak management strategies.

Looking ahead, the message for cooperatives is straightforward: VPPs may play a role in your future, but they don’t have to be a centerpiece. Over the next 12 to 24 months, expect more pilot programs, more regulatory clarity and continued discussion. But each cooperative should evaluate VPP opportunities based on local needs, local economics and the trust of local members.

The energy transition will continue. Cooperatives have the advantage of moving deliberately, choosing technologies that provide real value and keeping member owners at the center of every decision. That’s what will continue to make you the trusted, reliable, community driven energy provider your members depend on.

That’s all for today. As always, thank you for joining us. Be on the lookout for more industry and technology content at nrucfc.coop/Solutions. We’ll talk with you soon!