Google is betting that some of the electricity its data centres need can come not from new power plants, but from homes and businesses that agree to use less power at the right moments.
The technology company has signed a deal with Voltus, a San Francisco-based energy company, to build a 1-gigawatt virtual power plant on the PJM grid, ESG Today reported on Friday, October 23. The agreement expands a 100-megawatt collaboration the two companies announced in June 2026, a tenfold increase.
PJM, which covers 13 US states and Washington, D.C., is the largest grid region in the United States and has become a centre of the AI data centre boom, particularly in northern Virginia, home to the world's largest concentration of data centres.
How a virtual power plant works
A virtual power plant (VPP) aggregates many small, flexible energy resources, such as home batteries, smart thermostats, electric vehicle chargers, building cooling systems and industrial processes, and coordinates them to act like a single power plant.
When the grid is under strain, for example on a hot summer afternoon, the VPP signals participating devices to reduce their energy use or discharge stored power. Collectively, these small actions can free up as much capacity as a conventional power plant, without building new generation.
Under the Voltus model, enrolled homes and businesses temporarily cut their energy use to support grid reliability and receive bill savings and cash payments in return. Voltus's "Bring Your Own Capacity" offering draws on spare capacity in batteries, cooling systems and industrial processes across thousands of businesses and homes, dispatching it into electricity markets. Google is funding the VPP.
Why Google is doing this
The deal reflects the enormous electricity demands of AI. Data centres require vast amounts of power, and grid operators in regions such as PJM have warned that demand growth is outpacing new supply, raising concerns about reliability and electricity prices for all consumers.
By funding a virtual power plant, Google can help add flexible capacity to the grid more quickly than building new power plants, which can take years. It also addresses criticism that data centres are driving up electricity bills for households.
"Distributed energy resources are powerful tools for managing a modern, reliable grid while keeping energy affordable," said Ellen Zuckerman, Google's head of energy market development for North and South America. "Expanding our initial commitment tenfold demonstrates our core effort to actively bring our own capacity."
Voltus's ambitions
Founded in 2016, Voltus operates one of the largest distributed energy platforms in North America. It recently raised $225 million and aims to grow its platform to 20 gigawatts by 2030.
"This significant expansion of our work with Google translates data center growth into direct economic benefits," said Voltus chief executive Dana Guernsey. "Through this partnership we are proud to bring much needed clean capacity online, at gigawatt scale."
The deal is notable for the leadership behind it: both Voltus's chief executive and the Google executive leading its energy market development in the Americas are women, in an energy industry where women remain under-represented in senior roles.
The economics of flexibility
Virtual power plants offer several advantages. They can be deployed quickly, use existing equipment, avoid the environmental impact of new power plants and put money in the pockets of participating households and businesses. Studies by the US Department of Energy have suggested that VPPs could meet a significant share of peak demand growth at lower cost than conventional alternatives.
However, VPPs face challenges. They depend on participants' willingness to enrol and respond, and grid operators must trust that the capacity will be available when needed. Market rules in some regions have historically made it difficult for aggregated resources to compete with traditional power plants, though reforms are expanding their role.
Big Tech's energy scramble
Technology companies are pursuing a wide range of strategies to secure power for AI. These include long-term contracts for solar, wind and battery storage, deals to restart or extend nuclear plants, investments in next-generation nuclear and fusion, geothermal projects and, increasingly, demand flexibility. Google has also signed agreements with utilities to reduce its own data centres' power use during periods of grid stress.
The Voltus deal represents a different approach: rather than only adding supply, it helps manage demand across the grid.
What it means for India
India faces its own challenges in meeting peak electricity demand, particularly in the evenings when solar generation falls. Recent months have seen power shortages in several states amid low coal stocks. Demand response and virtual power plants could help, by encouraging industrial and commercial consumers to shift or reduce use during peak periods.
India's growing data centre sector, which CBRE estimates has attracted $173 billion in investment since 2021, will add to electricity demand. Policymakers and utilities are exploring time-of-day tariffs and demand response programmes, and the rapid spread of rooftop solar, batteries and smart meters could provide the building blocks for virtual power plants.
PJM's capacity crunch
PJM Interconnection manages the electricity grid for more than 65 million people across the eastern and midwestern United States. In recent capacity auctions, in which PJM procures commitments from power plants and other resources to ensure reliability, prices have surged to record levels, reflecting tightening supply as old power plants retire and demand from data centres grows. Those costs flow through to consumers' electricity bills.
The surge in capacity prices has made the region a focal point for debates about who should pay for the infrastructure needed to serve data centres. State regulators and consumer advocates have pressed technology companies to bear more of the costs. Virtual power plants offer one way to add capacity relatively quickly and cheaply, easing pressure on prices.
What comes next
Voltus will now work to enrol enough homes and businesses to reach 1 GW of flexible capacity in PJM. The project's performance will be watched as a test of whether virtual power plants can operate at the scale needed to meaningfully support grids strained by AI demand. If it succeeds, the model could be replicated by other technology companies and grid operators facing similar pressures, both in the United States and in fast-growing markets such as India. Its results could influence how regulators and utilities value flexible demand in capacity markets across the United States.
