Author: Andrew Foster, IOTech Chief Product Officer
As virtual power plants grow, edge computing and distributed intelligence will play an increasingly important role in coordinating renewable energy resources.
For years, much of the energy transition has focused on one question: How do we get more renewable energy onto the grid?
We’re making progress on that front. Solar and wind capacity continues to grow, battery storage is expanding, and electric vehicles and other distributed energy resources (DERs) are becoming a larger part of the energy landscape. But that progress is creating a different challenge: How do we get all of these assets to work together?
We’re already seeing the industry wrestle with that question. Reuters recently reported that U.S. virtual power plant (VPP) capacity grew 13.7% in 2025 to 37.5 GW, as utilities and technology providers increasingly aggregate batteries, EVs, smart thermostats and other flexible energy resources. Projects are getting larger, too, including a 450 MW VPP pilot from Dominion Energy and plans by Sunrun, Tesla and Renew Home to develop a 16 GW VPP.
The numbers are impressive. But what’s more interesting is what they tell us about where the energy transition is heading.
The challenge is shifting from generation to orchestration.
Why Are Distributed Energy Resources Becoming Harder to Manage?
The grid was built largely around centralized generation. Today’s energy environment is moving in the opposite direction.
Solar panels may be generating electricity across thousands of homes and businesses. Batteries are storing power at different points on the grid. EVs create new demand but can also serve as flexible energy resources. Commercial buildings and industrial facilities can adjust consumption in response to grid conditions.
Each of those resources can provide value on its own. The bigger opportunity comes from getting them to operate together.
Battery storage is a good example. Batteries can store renewable electricity when it’s plentiful and make it available when it’s needed. That’s an important part of addressing intermittency. But installing more batteries doesn’t automatically create a coordinated energy system.
Someone, or increasingly, some software, still has to decide when those batteries should charge or discharge. The same applies to flexible loads. When should demand be reduced? When should locally generated power be consumed, stored or sent back to the grid?
Those aren’t decisions that can always be made hours in advance. Conditions change, and the system has to change with them.
How Do Virtual Power Plants Help?
Virtual power plants offer a useful glimpse of what this more coordinated energy system can look like.
A VPP brings together distributed energy resources and manages them collectively, enabling hundreds or thousands of smaller assets to provide capabilities traditionally associated with a conventional power plant.
This is one reason VPPs are getting more attention. Electricity demand is rising, yet adding generation and transmission infrastructure can take years. Meanwhile, a tremendous amount of energy capacity and flexibility already exists in batteries, buildings, EVs and other distributed resources.
The question is how effectively we can use it.
That sounds straightforward until you consider what has to happen behind the scenes. A VPP may be coordinating devices from numerous manufacturers, each running different software and communicating through different protocols. It needs up-to-date information on what those assets are doing and a way to respond when demand, generation, pricing, or grid conditions change.
This is where the technology discussion gets interesting.
Why Does Edge Computing Matter for Virtual Power Plants?
If the energy system becomes more distributed, some of its intelligence needs to become more distributed as well.
Interoperability is part of the equation. Bringing a new battery, inverter or other energy asset into a larger system shouldn’t require starting the integration process from scratch each time. Different devices and protocols need a common way to exchange useful data.
Then there’s the question of where decisions are made.
The cloud will continue to play an important role in energy management, particularly for larger-scale analytics, coordination and planning. But not every operational decision needs to make a round trip to the cloud. Processing data closer to the asset can enable systems to respond to local conditions more quickly while still participating in broader grid and VPP strategies.
Researchers are exploring this model today. A 2026 Scientific Reports study of IoT-enabled VPPs explored how processing and intelligence closer to energy assets can help address challenges such as latency, cybersecurity and real-time energy management.
That’s important because the real challenge isn’t simply connecting more distributed energy resources. It’s creating an environment in which those resources can exchange data, make decisions and respond as conditions change.
Getting More From the Renewable Energy Infrastructure We Build
We will continue to need more renewable generation, storage and grid infrastructure. Orchestration isn’t a substitute for any of them.
But as billions of dollars are invested in distributed energy resources, we also need to think about how much value we’re getting from those investments.
A battery that operates independently can solve one problem. Thousands of batteries, solar installations, EVs and flexible loads that can communicate and respond as part of a larger system can solve a much bigger one.
That’s where the energy transition is heading. The next gains won’t come only from adding more assets. They’ll also come from improving how the assets we’ve already deployed work together.