Virtual power plants let buildings get paid for helping the grid during peak hours. Owners can stack new grid revenue on top of energy savings. Several states already pay for this. More are piloting programs.
What is a virtual power plant and why should multifamily owners care?
A virtual power plant is a network of devices like batteries, controllable HVAC, EV chargers, and smart thermostats that coordinate to reduce or supply power during peak periods. Utilities and grid operators pay for these services. California tested a coordinated VPP that delivered about 535 megawatts for two hours, which is grid scale output. PG&E
Participation is expanding. The Clean Energy States Alliance maintains a summary of VPP programs across roughly half of U.S. states. Clean Energy States Alliance
For real estate investors, this matters because VPP income can improve net operating income, offset rate volatility, and support resilience narratives that tenants value.
How do VPP and demand response programs pay?
Programs pay in two common ways. Some pay per kWh discharged or curtailed during an event. Some pay a seasonal capacity incentive per kW of average contribution.
Examples of current published terms
- California ELRP residential shows about $1 per kWh for voluntary residential load reduction and $2 per kWh for some non residential participants. California Public Utilities Commission
- PG&E Tesla VPP has offered $2 per kWh for energy delivered during defined events in the pilot period. SolarReviews
- Massachusetts and Rhode Island ConnectedSolutions lists $275 per kW of average summer contribution for residential batteries. National Grid+1
- ERCOT ADER pilot in Texas allows aggregated devices to bid into wholesale markets at defined limits. Revenue depends on market prices and event dispatch. ERCOT+1
Why this matters: Owners can estimate conservative revenue using published rates and expected event frequency. Owners can test a “with program” and “without program” case in their pro formas.
What equipment and data does a rental property need?
You need devices the program can control or meter, plus a way to enroll with an aggregator or utility.
Typical options
- Central battery at the house meter to discharge during events.
- Unit level batteries or controllable thermostats if a program allows aggregated residential devices.
- Smart thermostats on common area HVAC or individual units where allowed.
- Solar paired with storage if economics support it.
- Revenue grade metering or program approved monitoring.
Practical constraint: Installation behind resident meters requires consent and clear program terms. Using a central house meter is often simpler for garden style and mid rise assets.
What could revenue look like for a typical property?
Use conservative assumptions and program published rates. Results vary by site, device size, and event frequency. These scenarios are illustrative and should be recalculated for your property.
Scenario A: California VPP event payouts (pilot context)
- 100 kWh discharged per event from a central battery.
- 10 events in a season.
- $2 per kWh payout.
- Estimated revenue: 100 kWh × 10 × $2 = $2,000. SolarReviews
Scenario B: Massachusetts ConnectedSolutions seasonal payout
- 50 kW average summer contribution from a battery system.
- $275 per kW seasonal incentive.
- Estimated revenue: 50 × $275 = $13,750. National Grid
Owner tip: Combine event revenue with utility bill savings from time‑of‑use shifting where available. That increases the total benefit.
Which programs are the fastest ways to get started?
Owners can focus on states with clear enrollment pathways and published rates.
Starter list with owner actions
- California: Review ELRP program details. If you have eligible batteries, explore aggregator enrollment options such as Tesla VPP.
- Action today: Confirm your service territory rules, event windows, and reserve settings. California Public Utilities Commission+1
- Action today: Confirm your service territory rules, event windows, and reserve settings. California Public Utilities Commission+1
- Massachusetts and Rhode Island: ConnectedSolutions pays per kW of performance in summer season events.
- Action today: Ask your storage installer to model your average contribution and confirm the incentive class. National Grid+1
- Action today: Ask your storage installer to model your average contribution and confirm the incentive class. National Grid+1
- New York: Review NYSERDA demand response program pathways and Con Edison program materials for targeted areas.
- Action today: Check if your asset sits inside a targeted network where incentives are highest. NYSERDA+1
- Action today: Check if your asset sits inside a targeted network where incentives are highest. NYSERDA+1
- Texas: Study the ERCOT ADER pilot rules.
- Action today: Ask your installer or aggregator if your devices can participate and what telemetry is required. ERCOT
- Action today: Ask your installer or aggregator if your devices can participate and what telemetry is required. ERCOT
For a broader view, scan the CESA VPP summary table to see where programs are live or emerging. Clean Energy States Alliance
How do you enroll a portfolio and keep operations simple?
Treat this like a standard building program with clear roles and documentation.
Five steps
- Pick one pilot asset in a state with published rates.
- Choose an approved installer or aggregator with program experience.
- Confirm device eligibility, metering, and event rules in writing.
- Update house rules or lease addenda for any resident facing participation.
- Set measurement and verification so finance can see actual kWh and $.
Owner packet for approvals
- Device list, size, and site map.
- Program agreement and event windows.
- Telemetry and metering specs.
- Expected revenue range with assumptions.
- Contact information for the aggregator and installer.
What risks should owners plan for, and how do you reduce them?
Common risks
- Event fatigue if comfort is impacted.
- Battery degradation if cycles are aggressive.
- Enrollment delays due to interconnection or telemetry.
Mitigations
- Use reserve settings that protect tenant comfort.
- Select programs with modest event counts and clear season windows.
- Get degradation warranty terms in writing and model lifetime cycles.
- Pre‑clear telemetry and metering requirements with the utility.
What do lenders and insurers want to see before you enroll?
Lenders value predictable cash flow. Insurers value mitigations that lower outage risk and claims.
What to share
- A simple cash flow table with low and high case revenue.
- Program contracts and event limits.
- Monitoring screenshots and six months of metered results after launch.
- Any resilience co benefits if you pair storage with critical loads.
New York City’s public facilities have earned more than $153 million from demand response since 2013, which shows that program revenue is bankable when executed well. Private owners can present similar data packs. NYC.gov
Quick links to act today
- Program directories and policy: CESA VPP Summary, SEPA 50 States VPP snapshot. Clean Energy States Alliance+1
- California: ELRP overview, Tesla PG&E VPP enrollment details. California Public Utilities Commission+1
- Massachusetts and Rhode Island: ConnectedSolutions at National Grid and Mass Save. National Grid+1
- Texas: ERCOT ADER Pilot information. ERCOT
- Broader context and demonstrations: PG&E 535 MW VPP test. PG&E
Key takeaways for investors
- Virtual power plant programs are live in several states and are expanding. Owners can earn per kWh event payments or per kW seasonal incentives. SolarReviews+1
- Start with one pilot asset, then roll out across the portfolio using a standard packet and measurement plan.
- Keep comfort first, protect equipment life, and document revenue for lenders and insurers.
- Use the links above to check eligibility and rates in your state today.
