Hello and welcome to Energy Source, coming to you from New York.
Tensions between the US and China rose on Wednesday after Treasury secretary Scott Bessent warned Beijing that its new export controls on rare earths and critical minerals would force the world to “decouple” from China. US trade representative Jamieson Greer added that if China implemented its export controls programme it could give Beijing control over the entire global economy and technology supply chain — including artificial intelligence systems.
Investment in AI has continued to grow. My colleagues Antoine Gara and James Fontanella-Khan reported an investment consortium that includes BlackRock, Global Infrastructure Partners and Abu Dhabi fund MGX struck a $40bn takeover of Aligned Data Centers, one of the world’s largest data centre operators. The partnership will utilise a $100bn pool they created to help secure the capital, semiconductors, industrial materials and energy needed to build the facilities.
Securing power has been a challenge for data centre operators in the US, and utilities are racing to find new energy sources to meet surging electricity demand. In today’s Energy Source we take a look at virtual power plants as a way for the US power grid to become more reliable and resilient. — Alexandra
Could virtual power plants help solve the US power grid’s challenges?
The rapid growth of data centres in the US has put pressure on utilities and grid operators to find new energy sources, but some investors and analysts say there is a shortcut that could help manage rising electricity demand without waiting years to build expensive power plants.
Virtual power plants (VPP) are a decentralised network of energy resources — such as solar panels or home batteries — that can be co-ordinated by software to act as a single energy source on the power grid. They can also help prevent the grid from straining during periods of peak demand, such as on a hot summer day, by either reducing demand or increasing supply.
The technology could also stave off massive capital upgrades to the grid, saving households and businesses money because the price of these investments are typically passed on to them. Some VPP programmes also pay customers to utilise their electric-vehicle chargers or other energy resources.
“Today it’s possible to not build that billion-dollar power plant but instead invest a couple hundred million dollars in hardware and software services that provide the same level of service to the utility in terms of grid stability, resilience and reliability,” said Mark Dyson, managing director of carbon-free electricity at the Rocky Mountain Institute.
During a test event in July, thousands of Tesla and Sunrun home batteries delivered 535 megawatts of electricity to the California grid in a span of two hours — enough to power more than half of the city of San Francisco, according to an analysis done by the Brattle Group.
“These are resources we need at this critical moment for a flexible, affordable grid,” said Amy Heart, senior vice-president of public policy at Sunrun. “We’re hopeful and optimistic we’ll see this grow across the country.”
Despite their promise, advocates of the technology have said progress has been slow. Utilities have been cautious to expand pilot programmes and VPP’s also challenge the traditional investor-owned utility business model.
According to consultancy Wood Mackenzie, VPP capacity has grown 13.7 per cent in 2025, a much smaller rate than the 33 per cent increase in the number of new programmes and companies that have deployed the technology.
Ben Hertz-Shargel, global head of grid edge at Wood Mackenzie, said the reason for the slower than expected growth was utilities often create VPP pilot programmes that tend to be limited to a certain number of participants. There are also barriers in certain markets that prevent residential and small commercial customers from participating.
Adopting a VPP could also threaten the traditional business model for investor-owned utilities that make a profit from capital investments such as building a new power plant or transmission infrastructure.
“If the utility chooses the virtual power plant option instead of the billion- dollar gas power plant option, it has a lower amount of capital invested that it can earn its allowed rate of return on, and that is bad for the shareholders,” Dyson said.
Some US states have also resisted measures that could accelerate expansion. California has some of the highest electricity prices in the country, but Governor Gavin Newsom this month vetoed three bills that would have helped advance VPPs in the state. Newsom said the bills would have created a larger workload for state regulators and hit the California Energy Commission with higher costs.
Still, some advocates of the technology expect the adoption of VPPs to be inevitable as rising electricity prices and the proliferation of data centres put pressure on utilities and grid operators. Data centres need power immediately and utilities may not have the ability to wait years for new infrastructure projects to be completed.
Tim Woodward, managing director of venture capital firm Prelude Ventures, said he saw opportunities in the VPP sector because he expected there to be challenges finding enough labour to build the infrastructure that is needed to modernise the grid.
“We have to find ways to leverage what we already have in the ground as best we can,” he said. (Alexandra White)
Job moves
Santos has appointed Lachlan Harris as its acting finance chief after Sherry Duhe resigned from the position.
Buxton Resources has named Martin Moloney as managing director.
Odessa Minerals has appointed Tim Goldsmith as non-executive chair.
Power Points
UK energy retailers have warned of rising electricity prices because of the increasing cost of investment that has been added to bills.
The EU plans to work on clean energy and climate action with local authorities and businesses in the US instead of the federal government.
Oil prices fell to a five-month low after the International Energy Agency warned of a “large surplus” of crude.
Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Kristina Shevory, Tom Wilson, Rachel Millard and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.
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