Michigan's utilities continue to face scrutiny over their aging energy distribution grid and unreliable service. In fact, the state takes longer than any other in the country to restore power after outages. Michigan, like many states, is dealing with evolving energy demand from new manufacturing, data centers, and consumer adoption of electric technologies, further straining the grid. If policymakers and the utilities fail to make changes and modernize, customers will be on the hook for these issues–in the form of ever-increasing utility bills.
As Michigan decisionmakers tackle the issues of rising costs, rising reliability challenges, and rising demand, they should consider policies that:
When it comes to better utilizing BTM resources, Michigan has an immediate opportunity to take advantage of resources already installed in customers’ homes and businesses by deploying virtual power plants (VPPs). VPPs prevent outages and circumvent the long process for building traditional power plants. In turn, VPPs also deliver substantial savings to consumers in the form of avoided costs. Distributed energy resources (DERs)–such as home battery storage, rooftop solar, and smart thermostats–can supplement, and in many cases serve as an alternative, to costly grid infrastructure investments like substation upgrades, or new local poles and wires—which would otherwise be necessary to address frequent brownouts and blackouts.
The first step to unlocking the benefits of VPPs for Michigan is to pass Senate Bills (SB) 731 and 732. Senators Sue Shink (SB 731) and Jeff Irwin (SB 732) introduced the legislation on December 10, 2025. These bills would require Michigan’s two main investor-owned utilities, Consumers Energy and DTE Energy, to each establish a technology-inclusive VPP program within about six months of the bill’s passage.
This legislation would work by allowing third-party aggregators licensed by the Michigan Public Service Commission to enroll devices into the VPP program. These aggregators could bundle DERs and serve the energy grid, acting like a power plant. This would lower electricity prices and improve the reliability of the state’s distribution and transmission system. Resources eligible to be aggregated include solar paired with battery energy storage, smart thermostats, smart appliances, cogeneration or waste heat recovery systems, electric vehicles (EVs), and other devices on the grid’s edge. Third-party aggregators would be compensated for using these resources in a coordinated manner to respond to a signal from the utilities. Utilities can send a range of signals that can serve the grid in unique ways, like a dispatch signal for battery systems to increase or decrease load, or a peak demand signal when the system is strained on a hot summer afternoon. By enrolling their devices with approved aggregators, owners would also receive compensation for serving the grid.
The substantial benefits from VPPs stem from the wide range of grid services they offer. VPPs provide both grid-scale and more localized benefits, placing downward pressure on and altogether lowering costs for all customers using the power grid, not just those who own the BTM resources. VPPs offer grid-scale benefits in the form of reduced peak system demand and rapid deployment, minimizing and eventually eliminating the need for gas peaker plants, the most expensive generators on the system, and through basic supply and demand economics. VPPs can target strained or aging circuits and transformers, maintaining safe operating parameters for that infrastructure and thereby deferring replacement or allowing for less costly upgrades.
The owners of BTM resources participating in a VPP program deliver immense benefits to the grid and are therefore compensated, creating a positive feedback loop that incentivizes greater adoption of those devices because of the new revenue stream. Success in the program is measured by delivering maximum cost reduction and relies on robust participation, which means eligibility from a wide-range of devices, a clear path for owners of those devices to enroll and participate, compensation in the form of upfront incentives and performance incentives that reflect the full range of grid services.
Over a dozen states have established or are considering establishment of VPP-style programs, and Michigan can learn from the businesses like those in Advanced Energy United’s membership who have a front seat to what works and what doesn’t. These companies can guide lawmakers on this emerging model that can provide lower system costs and meet the demands of a rapidly evolving power system landscape.
VPPs are not the only tool for Michigan to improve grid reliability and affordability, but they are an essential part of the solution set.