The Missing Link to VPP Success? Customer Knowledge.

Signs of the momentum behind virtual power plants (VPPs) are everywhere. States including New Jersey, Virginia, and Illinois are advancing legislation and regulations designed to accelerate VPP adoption, hoping to seize the potential of aggregated and managed distributed energy resources (DERs) to simultaneously meet rapidly growing demand for electricity while tackling the challenge of quickly rising rates.

An increasing body of research underscores the potential benefits of VPPs. The U.S. Department of Energy, for example, concluded that tripling the capacity of VPPs to between 80 and 160 gigawatts by 2030 could address 10% to 20% of peak load and save nearly $10 billion annually in grid costs. While regulatory, policy, and utility support are important accelerators, a little-recognized, very-human roadblock could limit the scale and value of VPPs. 

Simply put, many homeowners who could participate in VPP programs mistakenly believe they have DERs like battery storage or heat pumps when they don’t. This misunderstanding is a barrier to the success and scaling of VPPs. ​“I suspect that many homeowners who’ve recently purchased electric water heaters assume they have heat pump water heaters,” said Lee Ann Head, director of solution management for Franklin Energy, a company that designs and manages electrification, efficiency, and load-management programs for utilities. ​“I also suspect that a backup battery storage system could easily be misinterpreted to mean any of the various battery chargers people have lying around the house.”

A wide knowledge gap

This gap in understanding is nothing new. Head has been leading studies of consumer perceptions of energy efficiency and energy-efficient products for a quarter of a century and says that self-reported ownership nearly always exceeds market penetration. That observation aligns with the findings of a recent Franklin Energy study and report, ​“Behind the Meter: A Research-Backed Guide to Electrification and Customer Participation.”

Based on a survey of 350 homeowners across the country, the report found a striking gap between perceived and actual ownership of many of the electrification technologies that VPPs, demand response, and other programs need. For example, about 25% of respondents said they own a heat pump water heater, even though the industry data pegs actual adoption at closer to 2%. Similarly, 14% of respondents said they own a battery storage system; the actual market penetration is under 1%.

More than a perception problem

The yawning gap between perception and reality has direct consequences for VPP capacity and program efficiency. The problem is more than confusion about technology. In fact, what determines VPP and demand-response participation isn’t simply whether a home has an eligible electric device. It’s whether that device is internet-connected and program-eligible. A standard electric water heater and a Wi-Fi–enabled heat pump water heater are not the same thing. 

Enrollment projections built on self-reported ownership data are likely overstated, giving utilities and program administrators a distorted picture of how much flexible, controllable capacity is available. And when utilities reach out to customers who think they have eligible devices but don’t, the result is wasted utility resources and frustrated customers.

Knowledge is power

Utilities and program administrators are not helpless in the face of this common misunderstanding. A combination of persistent education and smart program design can help increase the total number of device owners and incentivize them to enroll in VPP, demand response, and other electrification programs. 

Head points to precise product descriptions as a critical first step. ​“Crystal-clear eligible product feature descriptions are needed,” she said. Utilities and program administrators need to spell out exactly what makes a device program-eligible. A broad technology category is not enough. Specific features that determine whether a device can be enrolled and controlled, including Wi-Fi connectivity, also need to be effectively communicated. Pairing those descriptions with clear product images removes confusion at the all-important moment when homeowners are getting ready to make a purchase.

Long before customers are ready to buy a device, targeted digital ads can build valuable awareness and understanding through short and entertaining ​“Technology 101” videos that explain what the devices are, how they work, and what program participation looks like. But enrollment is a unique opportunity to combine education and program incentives directly. Through Q&A content, explainer videos, and expert chats, customers learn how participation in a VPP or other program delivers benefits beyond what a device provides to their home.

This connection becomes even more compelling when purchase incentives are tied to VPP enrollment. Making a rebate contingent on signing up for a program that enables control of the device creates a direct and unmistakable financial motivation to participate. For the utility, connecting incentives and VPP enrollment does the important work of ensuring that only eligible, connected devices enter the program. In effect, the enrollment serves as the vetting process as well. ​“The more utilities can tie the product purchase to VPP enrollment, the better,” Head said.

The scale of VPPs ultimately depends on the total number of connected and enrolled devices. While they’re essential, policies and regulations are not enough. Homeowners must clearly grasp the value of participation and make choices that give them access to those benefits. Customer education and knowledge are what make it possible.