Virtual power plants can help avoid overbuilt grid if AI boom goes bust
A new report suggests scaling virtual power plants could cut grid costs by $614 billion and lower household bills by $122 annually by 2050, while mitigating risks from uncertain data center power demand.
Utilities face a dilemma: underinvest in power infrastructure and risk energy shortages, or overinvest and saddle customers with unnecessary costs. A report by The Brattle Group, commissioned by The Pew Charitable Trusts, proposes scaling virtual power plants (VPPs) as a solution. These networks of rooftop solar, batteries, and other distributed resources can be remotely controlled to free up grid capacity, avoiding the need for costly new power plants and infrastructure.
The report estimates that expanding U.S. distributed energy resources from 113 gigawatts in 2025 to 524 gigawatts by midcentury could prevent $614 billion in grid investments. It also projects average household electricity bills would drop by $122 per year by 2050. Previous analyses have similarly highlighted VPPs' cost-saving potential, but Brattle’s report adds new insights by examining their role in hedging against uncertain data center demand.
In a hypothetical scenario where data center power demand falls 5% short of forecasts by 2030, overinvestment in traditional infrastructure would add $84 billion in costs for utility customers from 2030 to 2040. Expanding VPPs could reduce these overbuilding costs by $33 billion, or roughly 40%, according to the report. Ryan Hledik, lead author and Brattle principal, noted that VPPs offer flexibility, allowing utilities to delay investments until demand is confirmed.
The findings come as utilities, regulators, and policymakers grapple with balancing data center growth against public backlash and the need for reliable power. States like Colorado, Illinois, Maryland, and Virginia have already passed VPP mandates, while companies like Google are exploring partnerships to aggregate distributed capacity. However, implementing VPPs requires upfront costs and compensation for participants, though the report finds the benefits outweigh these expenses.