How the three terms differ
A virtual power plant names the resource. Demand response names what the resource does. A capacity program names what the program pays for.12
| Term | What it describes |
|---|---|
| Virtual power plant | An aggregation of distributed energy resources, such as rooftop solar with batteries, electric vehicles and flexible loads, coordinated to act together |
| Demand response | A change in electric usage from normal consumption in response to a price change or an incentive payment |
| Capacity program | A program that pays for capacity made available during defined periods |
What is a virtual power plant? covers the first term in depth.
One example, three terms
Eversource's Massachusetts battery program calls enrolled batteries 30 to 60 times between June 1 and September 30. The enrolled batteries together are a virtual power plant. Each call is demand response, because the batteries change how much power the homes draw from the grid. The program pays on the average power each battery delivers per event, averaged over the season.3
How battery programs name the service
A program that accepts batteries describes the service in its own words, such as Eversource's "battery storage demand response" or San Diego Gas & Electric's "Emergency Load Reduction Program". Battery and demand response programs lists them.
How to tell which term a program uses
Read three lines in the program terms. The service line says what the program buys. The event line says when and how long. The measurement line says how delivery is counted. How dispatch is validated covers the comparison of request and response. What is dispatchable revenue? covers the steps from equipment to payment. DERMS vs. VPP covers software vs arrangement.
References
- Pathways to Commercial Liftoff: Virtual Power Plants 2025 Update. U.S. Department of Energy, January 2025. Full copy of the DOE report on the Oregon Legislature public-testimony site.
- Annual assessment of demand response. FERC staff, December 2025.
- ConnectedSolutions Battery Storage Demand Response (Massachusetts). Eversource.
Common questions.
Does a capacity program pay for energy or for readiness?
Capacity programs reward readiness to reduce or shift load during system peaks. Energy programs pay for responding to short-term price signals.