The challenge facing Oregon’s energy grid

Oregon’s energy needs are rapidly evolving. Electricity demand is surging primarily due to the rapid expansion of energy-intensive data centers, alongside the broader electrification of homes, buildings, and vehicles. Meanwhile, extreme weather is putting more pressure on our power grid than ever before. At the same time, recent federal rollbacks of clean energy policies and incentives that threaten to slow progress and are already contributing to significant job losses for Oregon businesses and workers.

To keep power reliable and affordable while staying on track to meet our clean energy goals, Oregon must rapidly deploy a range of clean energy solutions. Virtual power plants are a key part of that toolkit.

From homes to the grid: The power of Distributed Energy Resources (DERs)

Oregon has set goals to reach 100% clean energy. The Oregon Department of Energy created the state’s first Oregon Energy Strategy to provide a roadmap for meeting these goals, and Governor Kotek followed up with an executive order to ensure state agencies make its implementation a top priority. Both the Strategy and the Governor’s directive make it clear that moving to clean energy is the most cost-effective and resilient path forward for Oregon households and businesses alike.

One of the Energy Strategy’s central findings is that Oregon’s primary challenge is not lack of energy, but how and when that energy is delivered. Building and upgrading transmission (or the infrastructure that carries energy from the grid to households and businesses) is essential, but planning, permitting, and construction can take many years. In the meantime, Oregon needs near-term solutions to manage power and to ensure that new transmission infrastructure is used as efficiently as possible, reducing long-term costs for customers.

That’s where Distributed Energy Resources (DERs) come in. These tools help manage when and how electricity is used. Many Oregonians already rely on DERs like smart thermostats, heat pumps, electric vehicles, and rooftop solar. On their own, these tools provide important benefits to individual households and businesses. But when they are coordinated and actively managed, they can deliver system-wide benefits that help Oregon’s entire energy grid become more resilient.

What is a virtual power plant?

A virtual power plant (VPP) is one way to bring distributed resources together. Rather than relying on one centralized power plant, a VPP connects hundreds of small, local energy tools, like your home battery, electric vehicle (EV), or smart thermostat, into one powerful team. Instead of these devices working alone, the VPP syncs them up to balance electricity supply and demand in real-time across the grid.

By using the energy we already have in our neighborhoods, VPPs help utilities maintain reliability without turning to expensive, fossil-fuel-fired backup power. This is a lifesaver especially during peak times, like a freezing winter night or a summer heatwave, when everyone is using electricity at once. It keeps the grid stable and your bills lower by using local energy first.

How a virtual power plant works

A virtual power plant works a lot like how you manage electricity use in your own home to avoid tripping a circuit breaker. You probably don’t run the oven, dishwasher, washing machine, and space heater all at the same time. You stagger those tasks to stay within your home’s limit.

Scaling that idea up, a VPP performs this same function across thousands of homes and businesses at once. For example, it can automatically wait to charge an EV or run a water heater until a heatwave passes, or draw energy from local batteries during a wildfire-related disruption when the grid is stressed and reliability risks are highest.

By doing this, virtual power plants make the entire system more efficient. That efficiency matters. Avoiding short periods of extreme demand reduces our reliance on costly infrastructure and backup resources that Oregonians pay for year-round, even though they might only be used for a few hours a year.

Why virtual power plants matter for Oregonians

Virtual power plants help build the kind of Oregon we can be proud to call home. They keep energy bills lower by reducing reliance on expensive gas-fired power plants. They keep our communities safe during extreme weather events. And they keep our energy dollars in Oregon.

The tools that make up a VPP, such as home batteries and smart appliances, are installed and maintained by local electricians and technicians. At a moment when federal policy changes threaten clean energy jobs, expanding VPPs and other distributed energy solutions can stabilize and grow Oregon’s clean energy workforce, creating high-quality Oregon jobs and keeping our money circulating in our own communities instead of sending it out of state to pay for imported fossil fuels.

Virtual power plants are not the only solution, but they are an essential part of a stable and resilient grid. Working alongside new power lines and energy efficiency, VPPs reduce our reliance on expensive gas-burning plants that leave our families vulnerable to volatile fossil fuel prices. By leading the way with these innovative tools, Oregon can demonstrate how to build a power system that is truly by the people and for the people.

What are the gaps in Oregon’s VPP ecosystem?

While investor-owned utilities (IOUs) in Oregon are already testing virtual power plants through small pilots and programs, much of this work remains limited in scale and impact. The Oregon Energy Strategy identified a major structural hurdle: the IOU business model. Currently, IOUs often make more profit by building massive physical infrastructure–like giant power plants and long-distance transmission lines–than by investing in flexible, customer-focused solutions like VPPs. As a result, utilities lack strong financial incentives to scale program-based distributed energy resources, even when those resources deliver significant public benefits.

The Energy Strategy and Governor Kotek’s executive order present a clear opportunity and direction for the Oregon Public Utility Commission to integrate virtual power plants into core planning and ensure that these resources are appropriately valued. To maximize their full potential, regulators must appropriately assess the resiliency, affordability, climate, economic benefits of VPPs in utility planning and investment decisions.

Governor Kotek’s executive order is an important first step, but it is just the beginning.

Turning strategy into action: The 2026 legislative opportunity

The 2026 legislative session presents a critical opportunity to maximize the scale and reach of virtual power plants as a tool for Oregon. Thoughtful legislation can accelerate deployment, make it easier for customers to participate, and translate the Oregon Energy Strategy into near-term action with real-world benefits.

By acting to expand and accelerate VPPs, the Legislature can lower system costs, improve reliability, and grow our local workforce today, while ensuring Oregon remains a leader in clean and reliable energy for generations to come.