Imagine you’re at a dinner party, and someone asks about your job. You explain that you help manage the electric grid. They probably picture large coal plants, spinning turbines, and towering metal structures across the landscape. That’s the grid most of us have known for a century. It’s a top-down, one-way system where power begins at a big plant and ends up in a toaster.
But if you attended the DTECH conference in San Diego this week, you know that the world is changing. The focus of the conversation wasn’t on building more “muscle”—meaning large power plants. It was about developing “brains.” We’re talking about Virtual Power Plants, or VPPs.
In simple terms, a VPP is a way to connect millions of small devices—smart thermostats, home batteries, electric vehicle chargers, even water heaters—and make them work together like a single power plant. When the sun sets, and everyone turns on their AC, instead of starting up an expensive gas plant, you just tell a million home batteries to send power back into the system.
It sounds like a tech project, but for middle managers and senior leaders in our industry, it’s actually a huge leadership challenge. For decades, our job was to manage assets we owned and controlled. Now, we have to manage assets owned by our customers. We need to convince them to let us peek inside their garages and control their thermostats.
We’ve moved beyond the “pilot project” phase. By early 2026, global VPP capacity will have exceeded 75 gigawatts. It’s a $6 billion annual market. However, scaling this from a few thousand early adopters to millions of everyday households is where the real challenge begins. It demands a shift in how we view reliability, how we communicate with customers, and how we collaborate across departments that haven’t worked together in years. If we don’t get this right, we’ll be stuck building costly hardware in a world increasingly focused on flexible software.
Moving from Asset Ownership to Resource Orchestration
The biggest mental challenge for utility leadership is shifting from owning assets to orchestrating systems. In the traditional model, if you needed 50 megawatts of peaking capacity, you built a 50-megawatt peaking plant. You owned the land, the equipment, and the fuel. You knew exactly how it would behave when you activated it.
With a VPP, you don’t own the assets. The customer owns the EV charger. The neighbor down the street owns the solar-plus-storage system. Your role is to “orchestrate” these resources so they are available when needed. This transforms how we define reliability.
Leaders are used to deterministic systems. If I turn the key, the plant starts. VPPs are probabilistic. You don’t know for certain if every home battery will be full or if every EV will be plugged in at 5:00 PM on a Tuesday. You have to build statistical models and use sophisticated software to predict how much “flexibility” you actually have.
This demands a new kind of trust. We must trust the software, the data, and most importantly, the customers. If we view these resources as “unreliable” because we don’t own them, we will never achieve scale. The most successful teams in 2026 will be those that have integrated their VPP data directly into their control room operations.
They aren’t viewing VPPs as a separate “demand response” program managed by the marketing team. Instead, they see them as a dispatchable resource visible to operators on their screens alongside traditional plants. Achieving this isn’t an engineering challenge; it’s a management one. It requires the operations and customer experience teams to collaborate and agree on a shared goal.
The Customer Engagement Gap
We’ve been discussing “customer-centricity” in the power industry for a long time, but VPPs turn it into a matter of life or death for our programs. If customers don’t sign up, you don’t have a power plant. It’s that simple.
Right now, there’s a big gap in how we communicate with people. Most utility messages about VPPs are filled with technical terms like “load shedding” and “ancillary services.” Nobody cares about that. They care about their bill and their comfort.
A recent Accenture report for 2026 shows that while executives are confident in their AI and VPP strategies, only 18 percent of employees feel the vision has been clearly communicated. If our own people don’t understand the story, how can we expect the customers to?
Successful leaders are rethinking the “value proposition.” Instead of just asking people to save the grid, they’re showing them how their EV can pay for itself by participating in grid services. They’re making enrollment as easy as a single click in an app. They’re moving toward “Resiliency-as-a-Service,” where customers get a home battery at a discount in exchange for letting the utility use it a few times a month.
But there’s a deeper issue: trust. People are naturally skeptical of their power company controlling their devices. If we have a history of poor customer service or high rates, they won’t opt in. This means that every touchpoint—from billing to outage response—is part of your VPP strategy. You can’t separate your “innovation” programs from your core service. Trust is the currency that makes VPPs work, and you can’t buy it with a $25 signing bonus.
Breaking the Silos Between IT and OT
To operate a VPP at scale, you require a level of data integration that most utilities have not yet achieved. You need information from the customer’s smart meter, the manufacturer’s cloud platform (such as Tesla or Ford), and your own grid management systems to communicate with each other in real time.
This brings us to the well-known conflict between Information Technology (IT) and Operational Technology (OT). The IT team is familiar with cloud systems and customer data, while the OT team is accustomed to the high-security, low-latency environment of the control room. Scaling a VPP requires these two worlds to come together.
The security concerns are serious. Every connected device in a customer’s home could be a target for a cyberattack. If a million thermostats are linked to your grid operations, the danger increases dramatically. That’s why there’s a strong push in 2026 for integrated cybersecurity strategies that protect both parts of the home.
Middle managers are responsible for bridging this gap. You must navigate the cultural differences between the “move fast” world of software and the “never fail” world of grid operations. It requires a shared language and common metrics.
If the IT team is rewarded for “agility” and the OT team is rewarded for “uptime,” they will always be at odds. Leaders need to create a third category: “flexibility.” We require systems that are secure enough to protect the grid but open enough to include the millions of devices already in use. The utilities leading the way in 2026 are those with a unified “digital operations” department that owns the entire VPP platform.
The Regulatory Hurdle: Moving Past the Pilot Phase
Regulators are beginning to recognize the potential of VPPs, but the rules are still being developed. For a long time, utilities were encouraged to “pilot” these programs. Pilots are simple. You find a few hundred enthusiasts, give them some free equipment, and write a report.
Scaling to the entire territory is a different challenge. It requires a regulatory framework that treats “avoided cost” the same way it treats “new capital.” If a VPP allows you to delay building a $50 million substation, the utility should be able to earn a return on that software investment just as they would on the steel and concrete.
This is the “institutional innovation” Michael Webber at UT Austin has been discussing this year. It’s not a technical issue; it’s a ratemaking issue. We need to work with commissions to develop “performance-based regulation” that rewards us for managing a flexible grid instead of just building a bigger one.
Leaders must act proactively here. We can’t rely on regulators to tell us how to proceed. We need to provide them with data from our pilots and demonstrate how VPPs save money for all ratepayers, not just those participating. We also need to prove that VPPs are a more affordable solution for managing the massive load growth caused by AI data centers.
If we don’t act, the VPP programs will remain small, and we’ll have to keep building costly, traditional infrastructure to handle demand. The political backlash over rates we saw in January will only get worse if we don’t use every tool available to keep costs down.
The Talent Challenge: Upskilling for a Software-Defined Grid
Finally, we need to discuss the people working on the project. The skill set required to operate a VPP is different from what we’ve previously looked for. We don’t just need electrical engineers; we need data scientists who understand the physics of the grid. We also need customer experience experts who understand energy markets.
The workforce transformation reports for early 2026 are clear: we face a significant skills gap. It’s not just about hiring new people; it’s about upskilling the ones we already have. Your substation technicians need to understand the communication protocols that enable devices to talk to the grid. Your control room operators must learn to manage a fleet of 1,000 “virtual” resources alongside a traditional plant.
This requires a significant investment in training. Programs like the new Utility Leadership Accelerator, which launched this month, are a start, but every company needs to build its own internal academy. We must foster a culture of continuous learning.
We also need to change our recruiting approach. The top data scientists in the world can choose any job they want. Why would they come to a utility? We must tell a stronger story. We need to show them they’re not just working for a “power company”—they’re building the most complex, distributed machine in human history.
This is where leadership visibility matters. If the senior team isn’t discussing VPPs as the company’s future, young, tech-savvy talent won’t take us seriously. We need to demonstrate that we are a technology-first industry. If we continue acting like a 1950s utility, we will only attract people who want to work for a 1950s utility, and that could lead to obsolescence in the 2020s.
The Path Forward
Scaling Virtual Power Plants represents the most significant shift in utility management in our lifetime. It signifies a transition from being simply a commodity provider to becoming a platform orchestrator. This shift demands that we be more open, more collaborative, and more customer-focused than we ever imagined possible.
The technology is ready. The market is expanding. The only question is whether our leadership is prepared. Can we break down the silos between departments? Can we build the trust needed to manage millions of customer devices? Can we work with regulators to develop a new financial model?
This isn’t something that will happen in 2030 or 2040. It’s happening right now. The utilities successfully scaling VPPs today are the ones leading the energy system of tomorrow. They will be the ones able to manage the huge demand from AI and the intense scrutiny of the “rate case revolt.”
The grid’s new brain is already here. Our role as leaders is to ensure it’s connected to the core of our companies. Let’s move beyond discussing pilots and focus on the platform that will drive the next century. The DTECH conference showed us the way. Now we just need to follow it.