2026: The Year of the VPP and the Rise of the “Missing Middle”

As load growth, extreme weather, and emerging load shapes are accelerating grid pressures, utilities are challenged to build infrastructure on pace with rising electricity demand. With more electrification, they are increasingly seeking scalable, reliable demand‑side flexibility. 

The power industry has discussed virtual power plants (VPPs) for years. Now, increasing utility needs are changing the conversation from proving concept to operationalizing. The discussion has shifted from “Can this work?” to “How do we scale?”

Here’s a look at how residential VPPs are expanding, how there’s untapped potential in “missing middle” commercial buildings, and why 2026 is shaping up to be a defining year for virtual power plants.

Residential VPPs: Scaling the Model

Over the last ten years, U.S. residential virtual power plant programs have multiplied, enrolling thousands of participants. Now, the market is moving from early-stage programs toward broader scale. 

Battery-based aggregation is rapidly growing. Ratepayers who own or lease batteries can join a VPP in more than half of states. They earn compensation for their grid service. This momentum is driven by rising home solar and storage adoption, along with third-party aggregators coordinating with utilities and state programs. 

Previously, mostly investor-owned utilities ran residential VPP programs. Changing state regulations are expanding eligibility to publicly-owned utilities, third-party battery manufacturers, Community Choice Aggregators (CCAs), and other organizations.

Policymakers are showing greater interest in VPPs. As load increases, regulators want to encourage cost-effective, scalable alternatives to building new generation, making better use of distributed energy sources (DERs) to manage customer energy costs. Some states—including Maryland, Illinois, and New Jersey—are requiring utilities to develop programs. Proven pilots and more legislation are prompting utilities to incorporate residential VPPs into formal grid planning and capacity discussions, rather than treating them as optional customer programs.

Residential VPPs are evolving into measurable grid assets that deliver reliable, repeatable results. Grid operators want to know if they can perform as well as traditional generation. To find out, they are testing whether a VPP’s performance is indistinguishable from a conventional power plant. One framework from VPP developer EnergyHub compares visibility, schedulability, and availability. These evaluations will be key to identifying capability gaps and earning operator trust.

So, while residential VPPs are no longer conceptual, they face increasing demands. In 2026, success will be defined less by enrollment growth and more by operational performance.

Commercial VPPs: Moving Past Pilots

While residential VPPs are maturing and enrolling at scale, the commercial market remains less developed. In 2026, however, the significant load within commercial buildings is driving states and utilities to view this sector as a strategic response to grid strain.

Small and medium non-industrial commercial buildings have long been one of the biggest opportunities in demand‑side flexibility. These “missing middle” customers are often too small for traditional C&I demand response programs and too complex for single‑technology solutions like smart thermostats. They represent an untapped, controllable load.

One major barrier to commercial VPP expansion has been transforming these buildings from passive loads into grid participants that utilities can engage to balance energy demand during peak hours and in daily operations. Commercial buildings are not standardized environments; each site has different equipment, control sequences, and operating schedules. Utilities can’t manage growing complexity without better data, deeper visibility, and operational control. Grid planners need demand flexibility to look and feel like infrastructure they can count on. 

Evolving open industry standards and AI technology are helping reduce the need for customization. OpenADR (Open Automated Demand Response) provides a shared language between utilities and buildings, forming the communication backbone for scalable flexibility. 

Edo’s platform connects directly with building systems to give utilities real-time visibility, control, and quantifiable load response. Today’s technology can model how buildings behave and quantify available flexibility to consistently deliver. This is necessary to elevate flexibility from an innovative experiment to a meaningful input in utility planning. 

Still, VPPs face credibility at scale. Programs are still stuck on verifying the concept instead of delivering measurable, repeatable performance across large portfolios. VPP advocate Jiger Shah points out that utilities have more than ten years of DER experience. 

“All that piloting we’ve done since 2012 is ready for prime time.” —Jiger Shah

VPP Snapshot

More than 30 states have programs encouraging utilities to deploy smart thermostats, water heaters, batteries, EV chargers, and energy management systems to address rising electricity costs. A dozen more are considering policies to expand VPPs. Meanwhile, aggregated customer-based resources are already delivering hundreds of megawatts of capacity in regions like California, Texas, New England, and Puerto Rico—rivaling the scale of power plants.

Here’s a snapshot of VPP activity across the country:

• Thousands of residential customers are eligible for the Arizona Public Service Storage Rewards Pilot, which aggregates residential batteries and allows either customer or third-party ownership. 
• Proposed legislation would require New Mexico’s investor-owned utilities to offset 15% of peak demand through VPPs while allowing third-party aggregators to participate. 
• By mid-2025, one DER aggregator reported more than 15,000 dispatch events—a threefold increase over the prior year. These instances where customer resources were called upon to respond to grid needs demonstrate rising operational activity across VPP portfolios. 
• In New York, Edo is working with utilities to show how grid-interactive commercial buildings can reduce strain on grid infrastructure and increase reliability.

Even with these developments, there’s pressure to move faster. Data centers and shifting load patterns are creating unprecedented demand along with increasing energy affordability concerns. There is enough energy efficiency and load flexibility potential in the U.S. to offset this demand. VPPs alone could meet more than 20% of peak needs by 2030, saving customers billions in annual grid costs. These plants can deliver flexible capacity in months rather than years, but only if programs move beyond pilots and into scalable performance. 

Edo is seeing the market respond. Demand flexibility has shifted from concept to procurement. Utilities are asking how quickly Edo can get started and how many megawatts can you provide. In 2026, the mandate for utilities is clear: move from experimentation to execution. Those that integrate residential and commercial flexibility into coordinated, dispatchable solutions will be better positioned to manage reliability, affordability, and rising demand.