Virtual power plants: the expert guide

Every home with a solar & battery system wants to extract the most value from their setup – and virtual power plants may soon be the answer.

By grouping together with other renewable energy generators, you could provide a valuable service to the grid, and make plenty of money doing it.

In this guide, we’ll explain how virtual power plants work, why we need them, and whether you should join one, as well as running through some examples from around the world.

If you’re wondering how much you could save with one of our solar & battery systems, enter a few details below and we’ll generate a quick estimate.

What is a virtual power plant?

A virtual power plant brings together multiple small renewable generators, storage batteries, and/or pieces of smart technology into one collective.

This can include households and businesses with solar & battery systems, wind turbines, or electric vehicle chargers, for instance. These participants are also known as distributed energy resources.

Like a traditional power plant, this group produces and stores energy every day, and can adjust how much energy it’s providing to the grid at any given time.

But unlike a standard plant, a virtual power plant only functions as an individual entity digitally. Physically, they can span a city or even a country.

Every entity involved can benefit financially, since the company running the group can treat it like any other power plant, by buying its energy to sell on to the grid.

Participants may also be incentivised to consume electricity outside of peak hours, or to hand over control of their smart thermostat, storage battery, or EV charger – within limits, naturally.

How does it work?

It can work in a few different ways. For example, homes that generate their own electricity – with solar panels, say – can usually join a virtual power plant without much difficulty.

The company running the project is then able to sell the energy produced by all the small generators in their scheme to a supplier, or directly to the grid.

Since they can negotiate from a stronger position than any of the individual generators, they’re theoretically able to secure a higher price for their electricity, and can pass this profit on to the households.

Virtual power plants can also work by providing financial incentives for people to shift their electricity usage to times when there’s less demand across the country.

If your household or business is a large electricity consumer, you can potentially profit by shifting when your EV chargers or heat pumps come online.

Some customers are also able to join virtual power plants that involve a supplier paying to take control of your smart thermostat, water heater, or air conditioning system. They can then adjust your energy usage to reduce pressure on the grid.

This requires a higher level of trust, but can also be profitable, with some companies able to shift your consumption in ways that make the changes imperceptible.

Why do we need virtual power plants?

We need virtual power plants to reduce the need for new fossil-fuelled power plants to generate electricity, which saves money and emissions.

They may also spell the end for peaking plants, which are power stations – mostly fuelled by gas – that the grid calls upon when other sources aren’t meeting demand.

This is good both because it’ll cut down on millions of tonnes of CO2 emissions, and because the grid in the UK pays peaking plants a premium – sometimes totalling tens of millions of pounds per day.

On 12 December 2022, the grid paid a record £27 million to peaking plants, including an eye-watering rate of £6,000 per MWh to ScottishPower’s gas-powered Rye House station. 

For context, that’s 46 times as much as you’ll get for your electricity on a solar export tariff, on average.

But if renewable electricity can fulfil this need, then households and businesses can benefit without the grid spending ruinous amounts of money for more carbon emissions.

For example, as of January 2025, the US government is aiming to create virtual power plants with an overall capacity of 80-160 gigawatts (GW) by 2030, which it’s said would serve 10-20% of peak demand.

And relying on these virtual power plants is up to 60% more cost effective than using gas plants, according to the Massachusetts Institute of Technology.

Following this path may also bring down the price of electricity, which is directly influenced by the cost of the last unit of electricity required to meet demand. This is usually gas, so if it were renewable, it could make a huge difference.

Cheaper, safer grid expansion

Virtual power plants could also allow the grid to expand at a steady, affordable rate as the UK increasingly electrifies its transport and heating networks over the coming decades.

Every day, the grid experiences peaks of demand that require the grid to move enormous amounts of electricity at once.

As well as providing electricity for these times, virtual power plants can also motivate large groups of people to shift their energy usage away from peak periods – just as the Demand Flexibility Service already does, but possibly with better rewards.

This reduces the strain on the grid and means its expansion – which must constantly stay ahead of the highest daily peak to avoid power cuts becoming too frequent – can be carried out at a more realistic speed.

Easier grid operation

By leaning on virtual power plants, the grid could also have an easier time maintaining its electrical frequency – meaning the number of times per second that an alternating current (AC) moves back and forth.

In the UK, our AC electricity travels 50 times per second, so our frequency is 50 hertz.

The further apart supply and demand are, the harder it is to maintain this status quo – and without it, electrical products would simply stop working.

The benefits of joining a virtual power plant

The biggest potential benefit of joining a virtual power plant is making hundreds of pounds per year by selling some of your renewable electricity to the grid.

However, this is usually more attractive to households in parts of the US, Australia, and Europe that can’t easily access generous export tariffs.

UK homes and businesses should check whether they can make more money by using one of the best export tariffs on the market.

You may also be able to benefit financially from shifting your electricity consumption – though again, you should make sure there isn’t a combination of import and export tariffs that allows you to profit more from changing your usage habits.

In some virtual power plants, homes and businesses can also earn money by allowing a company to control their smart thermostat, hot water heater, EV charger, or air conditioning system.

You can usually choose to manually override their selections, though the less you do so, the more you’ll make.

Being part of a virtual power plant can also help your community by keeping prices down and reducing the likelihood of local power cuts.

How to join a virtual power plant

To join a virtual power plant, you’ll first need the right hardware.

This will depend on which scheme you’re signing up to, but may include a certain brand of solar & battery system, EV charger, or smart thermostat.

Most virtual power plants in the UK are currently aimed at households with an EV charger, so to be eligible, you’ll just need to have a qualifying model.

As long as you fulfil the hardware requirements, it should be a pretty simple process to register online – though sometimes, you don’t even need to sign up.

Joining can be as simple as buying a smart charger and picking the ‘smart’ option. You can then tell it to charge up to a certain level by a specific time, and it’ll choose the best, cheapest time to buy grid electricity.

That would make you part of a virtual power plant, since you’ll be in a group of smart charger owners who are all willing to shift their consumption patterns.

It’s common in the US to receive an upfront fee for joining a virtual power plant, but this doesn’t generally happen in the UK.

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Examples of virtual power plants

There are a wide variety of options for anyone looking to join a virtual power plant.

Your best option will depend on which renewable products you have, what you’d like to buy in future, and how comfortable you’d feel giving a company some control over your energy usage.

Examples in the UK

UK suppliers are starting to accept the concept of virtual power plants, particularly when it comes to EV chargers.

Businesses can also take advantage of other schemes run by energy suppliers like ScottishPower and Octopus.

Octopus Energy

Octopus Energy launched Intelligent Octopus Go in 2022 as an EV tariff – but it’s also a virtual power plant.

It comes with a generously low off-peak rate between 11:30pm and 5:30am which you can always use to charge your car or power household appliances for less – but it’s more flexible than that.

As long as you tell the Octopus app how much charge your EV will need and when you need it to be done by, it’ll happen in that time period – and you’ll still pay the off-peak rate.

Octopus can then shift your energy consumption and that of the 150,000 electric vehicles it’s signed up to its Intelligent Octopus Go to cheaper times of the day.

You get to pay a cheaper rate, Octopus gets to pay the grid less, and the grid benefits from lower peaks in service. It’s good news all round.

EDF and Hypervolt

In January 2025, EDF and Hypervolt launched their own virtual power plant targeted at EV chargers.

This scheme is different to Octopus’s because it’s a frequency response service. That means it helps the grid to maintain its electrical frequency – that is, the 50 hertz level which all electrical items rely on to function.

As with Intelligent Octopus Go, customers will tell the app how much charge they want and when they’ll need it by, and the two companies’ software will do the rest.

They’ll take electricity from the grid when the frequency is high, and avoid doing so when the frequency is low.

Tesla

Households in the UK with a Tesla Powerwall battery can access the Tesla Virtual Power Plant.

You’ll have to hand over control of your Powerwall to Tesla. The company will charge it when it’s profitable for your household and Tesla, then discharge it to the grid during high-demand periods.

Tesla has said it’ll make sure your battery has enough charge for when you need it, so in theory the virtual power plant shouldn’t affect your day-to-day life.

It’s not clear how much participants are paid for their electricity, so you should clarify this before signing a contract to join the Tesla Virtual Power Plant instead of an export tariff.

Examples around the world

Companies in other countries – especially the US – have stolen a march on UK firms when it comes to virtual power plants.

These are some of the most prominent examples of virtual power plants from across the globe.

Sunrun, US

Sunrun, a solar subscription service based in California, has more than 20,000 households in its 16 virtual power plant programmes.

These plants cover nine US states and territories, including Texas, Puerto Rico, and New York. They’re mostly composed of solar energy and battery storage, with different incentives depending on where you are.

New York customers, for instance, can receive a free or heavily discounted battery in return for signing up to a solar & battery virtual power plant for 10 years.

In 2024, Sunrun launched the country’s first vehicle-to-grid virtual power plant in Maryland, meaning several electric cars’ batteries were treated like regular storage batteries.

They stored electricity until it was needed, at which point it was fed into the grid. The small number of participants were paid several hundred dollars during the programme, which showcased another excellent use of virtual power plants.

Also in 2024, Sunrun ran a virtual power plant in New England that fed 1.8 gigawatt-hours (GWh) to the grid between June and August – enough to power around 670 homes.

Next Kraftwerke, Germany

Next Kraftwerke is the largest virtual power plant in Europe, with 13.5GW of capacity under its control – a great deal higher than Intelligent Octopus Go’s 1GW.

The company, which became a subsidiary of Shell in 2021, oversees businesses including solar farms, wind farms, battery storage facilities, biogas plants, and geothermal plants.

By tracking shifts in pricing and grid usage, it can sell the energy these generators produce at the highest price possible. It can also tell generators’ machines when to consume and produce energy each day.

All generators need to do is connect a Next Kraftwerke’s remote control unit, called a Next Box, to their fuse box, and they become part of the virtual power plant.

EGO, Italy

EGO controls the flow of energy in and out of 1,500 production plants, including wind, solar, and hydroelectricity plants with reservoirs.

The Genoa-based company, which was acquired by Shell in 2023, now has more than 3GW of capacity under its control.

It analyses the markets and factors that could influence prices – like weather conditions – and then sells its customers’ energy at the optimal moment.

EGO also helps these firms to make their energy consumption habits more efficient, both by purchasing at the right times, and by making the most effective upgrades to their systems.

Is it worth joining a virtual power plant?

It’s worth joining a virtual power plant if you’re able to earn more than you would through other avenues.

For instance, you may be able to make more money by selling your renewable electricity through a solar export tariff, or get better rates on an EV tariff that isn’t part of a virtual power plant.

It’s important to weigh up all your options, especially if you’ve paid for your renewable products up front, and want to make it to the break-even point as quickly as you can.

However, certain households can already make a lot of money on virtual power plants, and the offerings are likely to improve over the next few years.

Virtual power plants can also help lower energy prices and reduce power cuts across your area, so if you want to be part of a movement like that, it may be worth a try.

If you’re wondering how much you could save with one of our solar & battery systems, enter a few details below and we’ll generate a quick estimate.

Virtual power plants: FAQs