Virtual Power Plants (VPPs): A Smart, Flexible Energy Approach for Arizona Households
Across Arizona, electricity demand is growing—driven by population growth, data centers, transportation electrification, and expanding industry. That has utilities exploring new ways to manage demand, increase reliability, and control costs. For many households, especially those in suburban, rural, and Tribal communities, combining solar, electric vehicles (EVs), and Virtual Power Plants (VPPs) offers a practical and future-ready path for energy management and resilience.
Rather than relying on just one technology, the smart approach brings multiple tools together so households can increase their resiliency today, participate in emerging grid programs, and potentially reduce costs tomorrow.
Why EVs Are a Core Energy Asset
People often think of EVs only as transportation. But an EV’s battery—especially one capable of bidirectional charging (the ability to not only put power into the battery but also take stored energy in the battery and use it to power a house or other load) is one of the largest energy storage assets a household can own.
For example:
A typical residential battery system might store ~25–30 kWh of energy at a cost that approaches $30,000 installed.
A bidirectional-capable EV such as a Nissan LEAF—offers 75 kWh of energy storage for similar overall dollars spent—and also provides daily transportation.
With the right equipment, an EV can:
Power household loads during outages
Store solar energy for later use
Shift energy uses away from expensive peak times
For reference, the average residential home in Arizona uses about 1,000 kWh per month, or ~35 kWh per day (Source). While EVs don’t eliminate the role of home batteries today, they will likely reduce their benefits in the future and can significantly expand household flexibility and resilience today.
But Home Batteries Still Matter Today
Until bidirectional charging and utility programs are fully widespread, behind-the-meter home batteries remain an important option for:
Supporting household loads during grid outages
Storing excess solar energy for use during peak times
Participating in early grid support programs that can provide customers with additional payments for their performance
A system design pairing Solar → Home Battery → EV (with optional bidirectional charging and VPP participation), provides a layered approach that gives families multiple benefits today while positioning them for likely increased benefits in the future.
Virtual Power Plants (VPPs): What They Are
A Virtual Power Plant is a network of distributed energy assets—solar panels, batteries, EVs, smart thermostats and other devices—that can be coordinated to act like a single power plant when the grid needs capacity or demand reduction. These resources can help manage peak demand and reduce stress on the grid by providing coordinated capacity back to the system when needed.
In Arizona, utilities are actively developing programs that allow customer-owned resources to participate:
⚡ Arizona Public Service (APS) (Link)
APS operates one of the largest utility VPPs in the state. It aggregates thousands of customer-owned devices—such as smart thermostats, managed EV charging, and battery storage—to help reduce demand during high-stress periods, effectively acting like a generation resource. APS’s VPP has approached nearly 200 MW, equivalent to powering tens of thousands of homes. Customers participating in programs like APS Cool Rewards have helped reduce demand by over 140 MW, illustrating how customer systems can act as virtual resources. (Link)
APS also operates a managed EV charging pilot program, designed to allow customers to share EV charging data and to allow APS the flexibility to charge vehicles at times that are optimal for the grid. Customers in this program are compensated for their participation, and the program is currently accepting customers in 2026. This program does not utilize the EV’s battery to provide energy to the grid but instead manages charging times to align with the grid.
⚡ Salt River Project (SRP)
SRP offers a variety of customer programs to aggregate distributed resources (such as smart thermostats and load flexibility programs) for grid support, to help reduce demand during high-stress periods, effectively acting like a generation resource, demonstrating that the utility values customer-provided flexibility. (Link)
Recently, SRP’s Board has committed to developing a Virtual Power Plant pilot program that would allow residential battery systems to be part of its broader demand response portfolio, with compensation tied to supplying energy during times of high grid costs or shortages. This emerging program is designed to support customer flexibility and reward customer for supporting the grid.
⚡ Tucson Electric Power (TEP) (Link)
TEP’s emerging VPP includes Smart Rewards (smart thermostat program) and Energy Storage Rewards (residential battery program). Smart Rewards will enter its fourth season in 2026 with over 20k enrolled devices. Energy Storage Rewards offers a pay-for-performance model where residential customers with qualifying batteries (Tesla, Solar Edge, and Enphase) can earn incentives—currently $120 per average kW across each season’s events—for allowing their stored energy to supply grid needs during times of peak demand.
On deck for TEP’s VPP include Smart Charge (EV managed charging) and Commercial Smart DR. Such programs illustrate how customers can get paid to support grid reliability while still preserving backup capacity at home. (Link)
What This Means for Arizona Families
Participation in VPP-related programs can offer:
Cash compensation or bill credits for providing capacity to the grid
Expanded value from existing solar and battery systems
Market support for more resilient energy systems
A path to integrate future EV-based storage participation
Important points to understand:
VPP participation is voluntary, and homeowners retain control over how much of their storage is offered.
These programs are growing but not yet universally available for EV batteries; home batteries are currently the more common entry point.
EV bidirectional participation and broader VPP capability are expanding through utility pilots and future rate designs.
VPPs: A Flexible Path Forward
Today, pairing rooftop solar with a home battery gives households backup power and savings from better self-consumption. Adding an EV—especially one capable of bidirectional energy flow—adds a much larger storage asset that can further enhance resilience and potentially reduce energy costs in the future.
As Arizona’s utilities continue to develop VPP programs, these same assets—particularly when coordinated—will be able to help support the grid during high-demand periods, reward participating customers, and reduce the need for costly new infrastructure, thereby increasing affordability for all customers.
VPPs are not about replacing the grid—they are about creating new opportunities for households to benefit from the energy transition in a way that increases resilience and can reduce costs.