The case for using prices rather than VPPs to coordinate distributed energy

Most people think that coordinating the behavior of thousands of distributed energy resources requires some kind of third-party middleman, like an aggregator managing a VPP. My guest today, veteran research scientist Bruce Nordman, believes there’s a better way: dynamic, time- and location-specific retail prices, communicated directly to consumer devices, which would cut out the middleman and leave more value with customers. 📌 Instructions to add paid episodes to your preferred podcast app via mobile / desktop (PDF transcript) (Active transcript) David Roberts Hello everyone, this is Volts for May 8, 2026: “The case for using prices rather than VPPs to coordinate distributed energy.” I’m your host, David Roberts. The electricity grid has more and more participants. There are increasing numbers of small distributed energy resources (DERs) — solar panels, home batteries, EVs, EV chargers, hot water heaters, commercial and residential HVAC systems, and on and on — that need to be coordinated to work as efficiently as possible for the good of the grid as a whole. But how should they be coordinated? One answer, which I have discussed many times here on Volts, is what are called virtual power plants, or VPPs. This involves a single aggregator, usually but not always a private party, contracting with dozens, hundreds, or thousands of distributed energy device owners, agreeing to control and coordinate their devices’ behavior, monetize the flexibility, and share the value with them. My guest today, Bruce Nordman, spent nearly four decades as a research scientist at Lawrence Berkeley National Laboratory working at the intersection of network technology and energy systems, and he thinks VPPs are the wrong answer. Not because they don’t work — they do — but because the gap they’re exploiting, between the real-time locational value of electricity and the flat, time-invariant rates actually charged to customers, shouldn’t exist. If retail electricity prices actually reflected real-time value, there would be nothing to arbitrage — the flexibility value currently being split with aggregators would just stay with customers, captured automatically by their own devices, without any private third party reaching into their home to do it. The technologies needed to do this — basically, a central price server to send the price signal and devices capable of responding to it — have become cost-effective on a mass scale in recent years, and there are limited experiments underway in some places. In this conversation, Nordman and I dig into it pretty deeply. Okay, very deeply. This is an intensely wonky discussion, more technical than most of what happens on Volts, and a pretty punishing two hours, but if you’re a real head and you want to understand how to actually get the most out of DERs, I think it’s worth it. With no further ado, Bruce Nordman, welcome to Volts. Thank you so much for coming. Bruce Nordman Thank you. David Roberts This is a lot, Bruce, and I’ve been thinking about how to ease into it. Where I want to start is at the big abstract level. When you first approached me with this, you said, “Hey, let’s use prices instead of VPPs.” I had in mind, “Oh, you’re going to design some novel tariff for PJM or something.” Something like that. But this is much bigger than that. This is a ground-up new vision for how electricity works. It’s a bit more to get into. Part of the big vision here is similar to Jonas, who we talked to a couple of weeks ago — Jonas Bergerson — in that this is about transitioning the electricity industry from the old unitary model to a networked system. That is what I talked with Jonas about. This is, I think, an excellent adjunct to that or your sequel, or I do not know exactly what you would call it, but you are involved in, broadly speaking, the same project. You write that the telephone system and the electricity grid were invented at roughly the same time, roughly the same place. They are interesting analogs to track. As listeners know at this point — we covered it a little bit on the Jonas pod — the telephone system has now entirely been transformed into the Internet. This involved, as I said, going from a unitary system to what’s called a networked system. The electricity grid notably has not. One of the things I want to talk about starting up front is some of the aspects of what it means to go from a unitary to a networked system. Then we can look at how the Internet did it and how the electricity grid has not done it. You have this chart here of qualities of a unitary system and qualities of a network system. A lot of this I think people understand intuitively. You’re going from a centralized system to a distributed system. You’re going from a largely analog system to a largely distributed digital system. But here’s one that I want to look at because I think it’s important for understanding the electricity grid and why it’s such a problem. One of the things that the telephone system did is go from tightly coupled systems to loosely coupled. Briefly, and keep in mind briefly because we have a lot of territory to cover, talk about what it means for systems to be tightly coupled or loosely coupled and maybe tell us how the Internet is loosely coupled and then contrast that to tightly coupled systems in the utility grid. Bruce Nordman On the telephone system, when I was a child, if I picked up the phone and called my grandmother, a circuit was set up and there was a continuous flow of data at a constant data rate between the two ends of the system over one specific circuit. Even if no one was talking, it was there. One thing which enables things to be loosely coupled is storage. On the Internet, you can connect links of different communication technologies that run at different speeds because you can store and forward packets, which accounts for the fact that things are running on different technologies and different speeds. For communications, storage changed everything. Data storage was just as essential as digital communications for being able to move to Internet technology. David Roberts One of the themes here — and I might as well just put an exclamation point on it now — is normal people, even people who think about electricity, I don’t think anybody has fully absorbed what a big deal it is to go from a system with no storage to a system with storage. It just fundamentally changes the architectural possibilities. It’s more fundamental than people appreciate. Give me an example of a tightly coupled system. Bruce Nordman The old phone system was tightly coupled, where everything was interconnected. The old electricity grid was where every customer site was just part of the grid. It didn’t have any functional identity. It couldn’t operate separately. The grid ended at every end-use device. David Roberts For every customer to be part of one big pool, that means if I pull on anything in the customer site, it affects everything, because everything is part of the same system. Everybody’s coupled together. Loosely coupled means that you get some distinction — functional distinction — between these systems such that they can operate somewhat in isolation without affecting one another. Is that fair? Bruce Nordman Absolutely. Part of this is the AC frequency of 60 Hz, as we use, is part of what enforces this in that things are all very interconnected and all the load affects the frequency. David Roberts One advantage of having loosely coupled systems, as opposed to a tightly coupled system, is if you pull on one string, you affect everything. You can’t fiddle with the machine without fiddling with the whole thing. But if you have loosely coupled systems, you can innovate and change and evolve the systems separately and independently. Bruce Nordman Exactly. David Roberts That enables much faster evolution and expansion and scope. The one underneath that on the list, I think, is similar and related: entangled technologies versus isolated technolog…