In yet another sign of the momentum gathering for virtual power plants, one of the largest companies already helping droves of utilities to tap into distributed energy assets is buying a rival best known for its advances in integrating smart thermostats into electricity networks.
The Brooklyn-based EnergyHub, whose grid software is already in use by more than 120 utilities, is set to acquire edge DERMS company Resideo Grid Services, Latitude Media has learned.
The two companies have a history. They worked together more than a decade ago, in the days when virtual power plants were still largely thought of as emergency options to balance demand when the grid is overtaxed. In the years that followed, Resideo Grid Services — launched as a division of industrial giant Honeywell — emerged as a leading provider of tools to patch smart thermostats into virtual power plant networks. EnergyHub, meanwhile, made deals to deploy its software on wires controlled by utility giants such as APS, Duke Energy, National Grid, and Southern California Edison.
“We reached the conclusion about a year ago that the industry was ready for a little consolidation, and that we really need to move faster with VPPs,” Seth Frader-Thompson, EnergyHub’s president, told Latitude Media. “We’re all acutely aware at this point of the pressures on the grid, and this felt like an opportunity to join forces and start doing this at a greater scale.”
Resideo, the parent company of Resideo Grid Services, specializes in smart thermostats. But to catch up to where EnergyHub was in the VPP business, “we needed a big investment,” said Dave Oberholzer, the general manager at RGS.
“We were always strong in thermostats since Resideo is a thermostat company. But we were just starting to get into batteries. We were far behind on EVs,” Oberholzer told Latitude Media. “This really accelerates our roadmaps significantly.”
The companies declined to disclose the terms of the deal, which they said closed last month.
VPP growth
VPPs are seeing new interest out of necessity. Electricity demand is surging. Data centers may require nearly 40% more electricity than previously estimated, according to the latest forecast from the consultancy BloombergNEF. Gas turbines, meanwhile, are backordered by years. Nuclear reactors take at least a decade to build and face steep hurdles. Coal plants, on top being dirty, are expensive to operate.
That makes tapping into the gigawatts of solar panels, batteries, and electric vehicles already deployed one of the swiftest ways to power growing demand. Grid operators are increasingly relying on VPPs as a result.
Last month, VPP giant CPower Energy announced that its network of distributed solar and batteries delivered upward of 38 gigawatt-hours of load relief to the U.S. electrical system from January through September of this year. That represents a 137% spike over all of 2024 — in just three quarters. Voltus too saw a spike; in August of this year, it hit the milestone of dispatching assets in its network every day for a year.
“VPPs are having a bit of a moment right now,” CPower CEO Michael Smith told Latitude Media last month. “We’ve been doing this for a long time, but finally you’re seeing the recognition that this is a hugely important piece of the energy transition puzzle.”
Recent research from energy nonprofit RMI found that nearly all of the next decade’s forecast grid demand “could be met by fast, affordable, flexible solutions” such as VPPs. While the most basic early VPPs were primarily used to curb demand during hot summer days when air conditioners stressed the electrical system, the technology has matured to the point where experts increasingly see it as a key strategy for quickly making more room available on the grid for data centers desperate for power. As the VPP market has grown, the industry has started consolidating.
Passing the Huels test
EnergyHub has now set a new target for itself: manage 100 GW of 24/7, dispatchable power by 2035.
It’s a lofty goal, given that the company today manages just over three GW. “We have a lot of work in front of us for the next 10 years,” Frader-Thompson said. “But we have done the bottom-up analysis of what it’d take.”
In the coming weeks, the company plans to release a report on when it expects to pass what’s known in the industry as the Huels test. Akin to the Turing test, which describes the threshold at which artificial intelligence would become indistinguishable from a person to a human, the Huels test defines the point at which a grid operator can no longer tell the difference between a virtual power plant and a conventional generating station.
“Today, I think a VPP can convincingly pass a narrow version of the Huels test for a peaking gas plant that doesn’t run that much,” Frader-Thompson said. “But what we need to do is get more hours and more megawatts for each hour.”
The growing demand for VPPs, he said, should help provide that opportunity.
“VPPs are the fastest thing to deploy out there,” Frader-Thompson said. “They tend to be 50% the cost of traditional generation and are by far the most consumer friendly. Fastest, cheapest and most customer friendly? Not a bad place to be.”
Editor’s note: This story was updated on December 3 to correct how much dispatchable power EnergyHub currently manages. It is just over three GW, not four GW.
