North American VPP Deployments Jump 33%, Yet Capacity Stalls at 37.5 GW: WoodMac

North America’s virtual power plant (VPP) market witnessed rapid growth over the last year, reaching 37.5 GW of behind-the-meter flexible capacity, according to Wood Mackenzie's latest report. 

Its latest report, “2025 North America virtual power plant market report”, finds that the VPP market broadened more than it deepened with the number of company deployments. It attributed this growth to the unique offtakers, and market and utility programs that monetized growth with each growing more than 33%. Whereas, it found a more modest growth in total capacity of 13.7%.  “Utility program caps, capacity accreditation reforms, and market barriers have prevented capacity from growing as fast as market activity,” said Ben Hertz-Shargel, global head of grid edge for Wood Mackenzie. 

Market maturation continues 

Overall, the share of VPP wholesale market capacity from residential customers increased to 10.2%, from 8.8% in 2024, still reflecting market barriers to small customers. Third-party data access for enrollment and market settlement is the primary blocker.  On the electric vehicle and battery storage front, the report found that their penetration in VPP deployments reached 61% of the level of smart thermostats, the incumbent technology.

After the Data Centre, VPPs To Become a New Source Of Grid Flexibility

The report also noted that in the US, states like California, Texas, New York, and Massachusetts are leading, representing 37% of VPP deployments. Meanwhile, PJM and ERCOT, the regions with the greatest utility commitments to data center capacity, also have the highest disclosed VPP offtake capacity. “While data centers are the source of new load, there’s an enormous opportunity to tap VPPs as the new source of grid flexibility,” said Hertz-Shargel. 

Offtake growth 

The study revealed that the top 25 VPP offtakers procured over 100 MW each this year. It also found that while over half of all offtakers increased the number of deployments under them by at least 30% compared to last year, showing the breadth of the market. An “independent distributed power producer” business model has emerged, whose thesis is that energy arbitrage and grid service revenue can finance an electricity retailer’s third-party-owned storage offering. 

Regulatory pushback 

A majority of VPP aggregators and software providers do not support utilities' rate basing DERs, a key plank of the Distributed Capacity Procurement model for utilities. “This model is seen as limiting access of private capital and aggregators from the DER market, rather than leveraging customer and third-party-owned resources,” says Hertz-Shargel. “Meanwhile, there is a broad consensus among experienced wholesale market participants that FERC Order 2222 was a missed opportunity and will not have a significant impact on market access.”