Getting the VPP Pilot Program ‘Just Right’ in Virginia
In 2025, the Virginia General Assembly passed the Community Energy Act on a bipartisan basis, and shortly afterwards it was signed into law by then-Governor Glenn Youngkin. Advanced Energy United supported passage of the Community Energy Act (CEA) and has remained actively engaged throughout implementation, advocating for a program design that maximizes customer participation, appropriately values distributed energy resources (DERs), and delivers meaningful benefits to the Commonwealth.
Under the new law, Dominion Energy is required to develop a robust virtual power plant (VPP) program, where DERs—such as battery storage, electric vehicles, and smart thermostats—work together to meet peak demand and provide essential grid services.
Why Compensation Matters
One of the most important criteria for designing a successful VPP program is properly compensating DERs for the services they provide.
For example, customers participating with a smart thermostat may choose to allow modest temperature adjustments during periods of peak demand in exchange for financial compensation. The specific level of compensation is very important for the VPP program to be successful. Set the compensation too low, and customers won’t be motivated to sign up. Set the compensation too high, and the utility may overpay for the reduced energy usage, which could result in higher costs for ratepayers.
How do you find that “goldilocks” amount of compensation that is “just right?”
The answer is to ensure compensation roughly matches the costs avoided by dispatched DERs. This approach maintains cost-effectiveness while fairly compensating participants for the actual grid services they provide. By dispatching during peak hours, DERs defer or avoid investments in expensive gas peaker plants or new transmission and distribution infrastructure like poles and wires. These benefits can be quantified and incorporated into program design to ensure compensation reflects the full value DERs provide to the electric system.
Proper Valuation Drives Participation
Through our review of Dominion’s filing, United identified several opportunities to better align compensation with the full value DERs provide to the grid. Our review found that the avoided cost assumptions used in the filing do not fully reflect current market conditions. Dominion’s analysis undervalues avoided costs of generation, transmission, and distribution capacity by approximately $87.76/kW-year in total.
United’s Sam Ressin testifying before the Virginia State Corporation Commission in Dominion Energy’s VPP pilot proceeding.
United joined the proceeding by becoming party to the case and retained counsel to represent our interests before the Virginia State Corporation Commission. Party status allowed United to submit expert testimony and participate in the evidentiary process alongside the utility, commission staff, and other stakeholders.
In our expert testimony, we asked the utility to use updated cost values that reflect inflation observed since 2019. Updating these assumptions would provide regulators with a more complete understanding of the value DERs can provide. Proper valuation of DERs is critical to creating durable market signals that encourage investment in advanced energy technologies and support long-term market growth.
In addition to undervaluing DERs, Dominion’s proposal currently falls short of the targets of the CEA, which envisioned a 450MW program by July 1, 2028. The proposal falls 108MW short of the statutory target and, at the end of the initial phase, would leave the pilot approximately twenty-four percent below the scale contemplated by the CEA.
Scale and Participation Matter
Scale matters. Larger VPP programs can unlock greater customer participation, create stronger market opportunities for advanced energy providers, and deliver more meaningful system benefits. Dominion only proposed residential battery programs that are projected to achieve 7.7MW in Summer Peak 2028, just over half of the 15MW requirement, and way below a realistic near-term potential of 50MW. This amount falls at the low end of programs offered by peer utilities.
Removing Barriers to Customer Participation
United also raised concerns in our testimony about proposals that could unintentionally discourage participation, including penalizing net energy metering (NEM) customers who also participate in the VPP program. By removing NEM credits for customers participating in the residential batter storage programs, Dominion conflated two distinct services that each deserve their own compensation. Volumetric energy, which is generated by rooftop solar systems, is different from dispatchable peak capacity, which is exported by customers participating in the Battery Storage Pilots during a peak load reduction event called by the utility.
VPP pilots should send clear financial signals for customers to deliver capacity to the grid during VPP events. As currently designed, Dominion’s proposal will create a disincentive for customers to send their exports to the grid when they are most needed. In addition, it will create confusion for customers who participate in VPP events when they see their VPP compensation decrease despite no change in the kW contribution of their battery.
The NEM penalty also jeopardizes the success of the VPP. Penalizing NEM customers reduces the market signal for both existing NEM customers with solar-only systems, and prospective customers that are interested in solar and storage. The stronger the market signal, the more engaged the installer, manufacturer, and financing community will be in growing this program. Leveraging private capital and scalability is crucial to maximizing ratepayer benefits.
Simpler and more transparent compensation structures are likely to encourage greater customer participation and provide greater certainty for prospective participants. Whereas customers may have purchased a battery under clearer compensation guidelines, with the NEM penalty, customers will be purchasing batteries under considerable uncertainty.
United recommended maintaining flexibility within the pilot so resources can be directed toward the programs that demonstrate the strongest customer participation and grid benefits. Importantly, many of United’s concerns were echoed by other stakeholders in the proceeding, reinforcing the importance of flexible program design.
We also encouraged Dominion to adopt a more flexible performance-based compensation structure that rewards customer contributions proportionally rather than relying on an all-or-nothing threshold.
Unlocking Virginia’s VPP Opportunity
By getting the details “just right,” Virginia has an opportunity to establish itself as a national leader in VPPs and innovative grid solutions.
A well-designed program can unlock new sources of flexible capacity while delivering affordability and reliability benefits to customers across the Commonwealth. United looks forward to the Commission’s final decision on August 3 and to continuing our engagement with regulators, utilities, and stakeholders to help ensure Virginia’s VPP framework delivers on the promise of the CEA.