The Midwest is Quietly Leading on the Future of Energy
Electricity demand is booming. Data centers, electrification, and new technologies are driving unprecedented load growth — and ratcheting up customers’ energy bills. Communities are feeling the strain and are turning to decision makers to find the solution. But the solution for the energy problems of the AI era can’t be the system of the past. While customer flexibility isn’t the whole solution, it is a critical part of a holistic, scalable approach. Relying on the grid as it exists today will only stall a more affordable and scalable solution: VPPs that connect and coordinate thousands of local power sources in community power networks.
At the end of March, the Michigan Public Service Commission issued a warning to Consumers Energy — pursue a behind-the-meter virtual power plant (VPP) program or take the risk that “future proposed investments that fail to account for VPPs may be disallowed.” And this isn’t an isolated event. Next door in Illinois, utilities are working hard to put limited VPPs in place for this summer after the Illinois legislature required this fast to implement, low-cost, and reliable alternative to costly, fossil fuel infrastructure updates, which is why we were so disappointed earlier this month when, in the midst of approving a related but different Xcel Minnesota program, the Commission declined to require a VPP.
These networks unlock flexible, reliable power solutions already available or readily deployable in our homes and neighborhoods, strengthening our grid, creating local economic growth, and improving the quality of life for communities by keeping the lights on during extreme weather, lowering energy bills, and providing the opportunity to take part in their own energy system. Right now, the Midwest is a VPP proving ground, where growing loads meet a diverse climate and multiple utility models.
A Tale of Three States: Different Approaches to VPPs
Michigan operates (mostly) within MISO under a vertically integrated utility model, while Illinois is part of both MISO and PJM, with a restructured market. Different frameworks, same conclusion: VPPs are moving from optional to essential.
In Michigan, regulators have moved past encouragement. In a recent Consumers Energy rate case, the Michigan Public Service Commission (MPSC) established affirmative requirements for VPPs and notably introduced prospective disallowance language if those programs fail to deliver. The MPSC is no longer simply encouraging VPP adoption — it is backing those expectations with clear consequences for failing to leverage proven, cost-effective solutions.
Illinois is taking a different route but heading in the same direction. There, lawmakers have already mandated the development of VPPs through the Clean and Reliable Grid Affordability Act. Now, it is up to ongoing regulatory proceedings to implement those statutory requirements. In other words, the debate is no longer whether these community power networks should be part of the solution, but rather how far and how fast can we ramp them up.
In contrast, in a recent decision, Minnesota state regulators declined to require Xcel Energy to pursue a behind-the-meter VPP program, despite substantial support on the record and no objection from the utility itself. Vote Solar and our partners had provided examples of other successful programs around the country and requested that the Commission direct Xcel to develop its own implementation of proven solutions. Unfortunately, at the hearing on the decision, Commissioners noted uncertainty about how such programs would function within a regional transmission organization.
That concern is not unique to Minnesota. Questions about how VPPs fit into the RTO framework are common, but also misplaced. These community power networks can shave peak load in ways that save all customers money without ever interacting with regional capacity and energy markets. We know the deployment of these solutions in new markets will require adaptation, but we do not have time to waste: the opportunity is too large, and the need for new capacity is too acute if we want to serve these new loads.
VPP Best Practice: Use What Already Exists and Scale it Quickly
The benefits of VPPs are delivered almost immediately— and locally. By reducing peak demand, these community power networks can lower system costs for all customers, ease the strain on distribution infrastructure, and improve reliability. In many cases, those benefits can be realized without interacting with regional market structures.
The Midwest doesn’t need to wait for the implementation of FERC Order 2222 to deploy VPPs; we already have the conditions to make them work. With acute capacity constraints and long development timelines limiting the deployment of traditional capacity resources, networks of community-based power are economically necessary. And with most customers in the MISO footprint served by large, vertically integrated utilities with substantial load, aggregating and managing demand as a utility program just makes sense. As we’ve seen in Illinois and Michigan, policymakers agree and are ready to act.
Utilities across the region can build upon the programs they already run— smart thermostats, water heating, interruptible load, EV charging pilots, and residential battery offerings. The task is not to create entirely new programs, but to coordinate, aggregate, and optimize these existing resources. In MISO, regulators can treat VPPs as real capacity resources by valuing the load serving entities’ avoided capacity obligation. In practical terms, that means annualizing the seasonal capacity values and applying the resource’s accredited capacity value.
VPPs also move quickly. Regulators in Michigan have explicitly recognized that existing demand programs are, in effect, forms of VPPs. The DOE VPP Liftoff Report, updated in January of this year, showed that these systems can be deployed in months, not years. In a moment when fossil fuel infrastructure can take 6+ years to plan and build, that speed matters.
The Midwest has momentum, but momentum alone won’t deliver results
The promise of VPPs in Michigan and Illinois is real, but not without risks. The most immediate risk is a familiar one: compliance without transformation. Utilities may comply on paper filing tariffs, launch pilot programs, and write reports that technically satisfy regulatory requirements while stopping short of meaningful change.
The details of how utilities implement these programs will determine whether VPPs succeed. Tariff designs must create real incentives for participation. Aggregation frameworks must allow distributed resources to scale. Customers must be able to access programs easily and see clear value. And importantly, utilities must integrate these resources into their planning and operations.
Regulators will also need to stay engaged beyond the initial order. Critical decisions happen in compliance filings, program approvals, and performance evaluations. Michigan’s use of prospective disallowance language offers one model for how to ensure accountability— by tying utility cost recovery to actual performance, not just intent.
There is also a broader opportunity at stake. The Midwest is one of the few regions where VPPs can be tested across multiple market structures, climates, and regulatory frameworks at the same time. That kind of diversity is rare— and it creates a chance to demonstrate that community power networks are not context-specific solutions, but broadly applicable tools. Successful implementation will underscore an important reality: distributed, flexible resources are no longer optional. They are central to maintaining reliability and controlling costs.
If VPPs can work in the Midwest— across MISO and PJM, across different utility structures, across a wide range of operating conditions— they can work anywhere.
So the question isn’t whether this moment exists, it’s whether policymakers, regulators, and utilities will follow through on what the moment demands.
Because, as we are demonstrating across the Midwest, the next generation of the electric grid is not theoretical— it is already taking shape.