The Practical Implementation of Virtual Power Plants (VPPs) in PJM

What is a Virtual Power Plant?

(Source: https://www.energy.gov/lpo/virtual-power-plants-projects)

Virtual Power Plants (VPPs) are an important part of the energy transition by aggregating distributed energy resources such as small solar and wind, along with storage options like batteries, into a unified virtual power plant. In doing so, they enable the real-time control and optimization that empowers these typically variable and distributed sources to act collectively as though they were a traditional power plant.

PJM Interconnection (originally Penssylvania-New Jersey-Maryland) coordinates the procurement of capacity and movement of wholesale electricity through several states (see map below of PJM footprint). VPPs are practically implemented within the PJM Interconnection, with this blog extending to discuss their application across the entire United States by considering and detailing economic and environmental merits— and demystifying challenges that inevitably follow.

VPP Implementation in PJM

(Source: https://www.pjm.com/about-pjm/who-we-are/territory-served )

Capacity Market Participation: VPPs have the opportunity to participate in the PJM Capacity Market, where market participants are paid for making capacity available when system reliability is at risk. Depending on the auction clearing price and specific location, payments estimate between $270 and $466 /MW-day for 2025/2026. The VPP commits capacity to load curtailment or dispatching stored energy during peak periods.

Wholesale Energy Market: VPPs can sell energy from their aggregated resources (e.g., solar, batteries, etc.) into PJM’s Day-Ahead and Real-Time Energy Markets. When the VPP’s resources generate electricity or discharge stored energy from batteries, they can participate just like traditional generators.

Economic Demand Response: Participation in PJM's Economic Demand Response programs enable VPPs to lower their electricity consumption at times when market prices are high, thereby generating revenues and simultaneously contributing to grid stability.

Emergency Demand Response: In emergency situations, VPPs can provide immediate load reductions, offering this vital support to the grid.

Ancillary Services Market Participation: VPPs in PJM can additionally provide ancillary services such as frequency regulation, voltage support, and spinning reserves. These are very important for keeping the grid reliable.

Map of select VPP Projects in the U.S.

(Source: www.vppdata.com)

Conclusion

In the modern energy transition, both centralized and distributed energy sources will play critical roles. Virtual Power Plants (VPPs) play at this intersection by aggregating distributed resources and resemble a more traditional, centralized energy resource. Innovative electricty market design enable VPPs to work economically as they help in improving the resilience of the electric grid.