Virtual power plant provider Voltus is betting that scaling VPPs to mitigate data center load growth is more about designing the right commercial structure than it is about redesigning power markets.
As part of a new offering announced today in partnership with data center infrastructure developer Cloverleaf Infrastructure, Voltus is looking to evolve the concept of bilateral contracting for capacity for the AI era. “Bring your own capacity” is a go-to-market framework in which data centers can finance and then harness the flexibility potential of the communities around them, bringing those megawatts to utilities as part of their capacity stack.
Hyperscalers participating in Voltus’ BYO program will be committing to financing a VPP program in the particular region where they’re building a data center, Voltus CEO Dana Guernsey told Latitude Media, and Voltus will deliver that contracted capacity directly to the load-serving entity.
In other words, instead of selling flexible capacity into a market, Voltus is selling it out of market — at a higher value — to a hyperscaler. That approach sidesteps market-based capacity constructs, allowing negotiations between resource aggregators and large end users, who have deep pockets and place massive value on capacity.
It’s a framework designed to help data centers bridge the capacity gap they’re currently facing between now and the early 2030s, Guernsey explained. Voltus already has a pipeline of contracts it plans to announce, she said, and will be building out capacity ready to come online starting in 2027 — in line with the timelines of those specific projects contracting VPPs.
But BYO also enables VPP expansion on a faster timeline and in more diverse regions than may have been possible without hyperscaler financing, Guernsey added: “We’re stimulating more virtual power plant development…by adding that price signal in the location we need it.”
“It’s really an innovation of contract structure and bringing the right parties to the table to sort it out,” she added. “It takes a little more thought, a little more computation, and some of these conversations have lasted years, but at the end of the day it is a more elegant solution that I just want to get out there.”
And while this is the first time such a structure has been used for hyperscalers to contract VPP capacity, it’s far from a new construct. Corporates have long been contracting megawatts through bilateral agreements, which historically allowed large industrials and commercial users to reduce exposure to price volatility while ensuring reliability, Guernsey explained.
She pointed to the announcement this summer of an agreement between Google and Indiana Michigan Power for a new $2 billion data center in Fort Wayne. As part of that agreement, Google will transfer accredited capacity from its contracted renewable energy projects directly into the utility’s PJM capacity portfolio, offsetting what’s needed for the data center they’re building.
That structure is inherently different from Voltus’ BYO approach, Guernsey acknowledged, but it’s another example of “data centers taking responsibility for sourcing their own load, and the market recognizing that it’s possible.”
Building the bridge to the 2030s
The new framework comes at an inflection point for VPPs in the U.S. According to recent data from Wood Mackenzie, the VPP market is expanding rapidly, with company deployments, offtakers, and monetized programs growing by more than 33% in the last year. And the markets experiencing the largest growth in data center demand, including PJM and ERCOT, also have the highest disclosed VPP offtake capacity.
But the significantly slower growth in overall capacity — 13.7% year-on-year — indicates that the market “broadened more than it deepened,” a challenge Wood Mackenzie’s head of global grid edge Ben Hertz-Shargel attributes to barriers to adoption like enrollment caps on utility programs and capacity accreditation reforms in power markets.
It’s a financing structure that Voltus anticipates will open up new market opportunities for VPPs, by circumventing at least one persistent barrier to adoption: utility hesitancy. “Traditionally, utilities have looked at demand response and VPPs as kind of eating their lunch,” Guernsey acknowledged. Now though, many utilities are grappling with the question of how to secure large load while maintaining grid reliability, and without increasing costs for ratepayers.
To start, Voltus is “leaning on the accreditation process in the wholesale markets,” she explained — but that doesn’t mean that BYO couldn’t work in a vertically integrated structure.
PJM and MISO, for example, have established definitions of capacity, which makes it easier to implement BYO. Leveraging that structure in vertically integrated markets isn’t impossible, she added, but will take longer because of the need to define exactly what capacity means in each specific market context.
Early projects — Guernsey declined to name specific data centers but said Voltus is in conversations with many of the hyperscalers and has announcements coming soon — will build on Voltus’ existing resource mix. “It’s certainly easier to add to a foundation of something that’s already small and just grow it,” she explained.
Making the markets work for the moment
Ultimately, the BYO framework is essential for leveraging the deep pockets and massive needs of the AI boom, Guernsey said.
There’s general agreement that hyperscalers — some of whom say they are planning to build 10 GW of AI infrastructure in the next decade — should be financing the long-term price signals needed to build generation, she explained. The value that those offtakers place on that capacity is massive, she added, and not currently being realized.
It’s a phenomenon that Brian Janous, the former Microsoft energy executive who founded Cloverleaf last year with $300 million in non-dilutive funding, describes as “the watt-bit spread”: a disconnect between the cost of a watt, and the value of the bits those watts enable.
The BYO program is an attempt to fix that disconnect, Guernsey explained. The reality of VPP programs is that the more a resource gets paid, the more it gets utilized, and the more valuable it is to a utility. In other words, the deep pockets of hyperscalers, plus their “incredible willingness to pay and incredible urgency” are perfectly aligned with what well-funded VPP programs can offer: “When there’s more money on the table, there’s more that we can do.”
In Guernsey’s view, BYO — and the commercial and financial innovation that it represents — is what’s been missing in the conversation about the ability of power markets to meet the current moment.
“We’re expecting the markets to give us long-term price signals, when in reality we should be asking the hyperscalers to do that,” she explained. “There’s nothing that says we can’t take that [price signal] out of market, and leverage the markets for what they’re phenomenal at: keeping the lights on.”
The increasing politicization of power markets, and various calls for scrapping the current system altogether, are distracting from achievable solutions within existing frameworks, she added: “Maybe there’s another way, where the market is affording us a way to give hyperscalers a long-term price.”
In Guernsey’s view, power markets weren’t designed to be the sole capacity procurement mechanism, but rather a piece of a broader procurement system; and they continue to deliver on their core mission, which is ensuring reliability at reasonable cost. BYO, she added, is an example of making the power markets work for the present moment, filling in financing and risk allocation gaps with new commercial structures.
“My preference would be that electricity markets just keep evolving,” she said. “Here’s one more evolution.”
