Some lawmakers and advocates hope to harden Michigan’s electric grid and cut utility bills by adding new power plants, all without moving a single shovelful of dirt.

How is that possible?

The state could tap small energy sources and power-saving technology — from rooftop solar panels to smart thermostats and electric vehicles charging in driveways — that are already scattered across thousands of homes and businesses.

They could then be pooled together into so-called “virtual power plants” that pay participants to inject small amounts of electricity back into the grid or cut usage during peak periods.

“When you describe it to somebody, it sounds really futuristic,” said Justin Carpenter, director of policy for the trade group Michigan Energy Innovation Business Council, whose member companies install energy technology. “But it’s just using existing resources. It’s more just an efficient use of stuff that’s already on the grid.”

The programs have shown promise in other states. Michigan currently uses aspects of them to reduce peak demand. But the state currently has no full-scale virtual power plants, according to regulators and experts.

With the highest power rates in the Midwest and a poor track record for outages, that should change in Michigan, some argue.

Utilities say they already have programs that safeguard the grid and save customers money during periods of high electric usage, though critics contend they’re more worried virtual power plants could eat into their profits.

“If we can avoid having the residents pay for a new power plant, and we can instead meet our energy needs reliably in a cheaper way, we should allow that possibility in our law,” said state Sen. Jeff Irwin, D-Ann Arbor.

He introduced part of the two-bill package, Senate Bills 731 and 732, with Sen. Sue Shink, D-Northfield Township, and five other Democratic co-sponsors.

Proponents call virtual power plants a cost-effective measure that can be rolled out quickly to respond to massive growth in electric demand driven by projects like artificial intelligence data centers, as well as outages that arise when increasingly extreme weather collides with an aging grid.

Some experts say the name can be misleading.

They’re not actually virtual and don’t necessarily serve as power plants in every circumstance, said Richard Boehnke, a consultant and advocate for the approach who has worked on behalf of the Great Lakes Renewable Energy Association.

Running the power grid is essentially a large balancing act between supply and demand, with adjustments happening in less than a second, he said. When demand rises, it can be met by injecting more power or simply decreasing demand somewhere else.

There’s a number of ways to keep the teeter-totter level, and they don’t all involve big, centralized power projects. Customers just want power when they need it. “If people want cold beer and hot showers, well that’s different than we need more electrons,” Boehnke said.

Virtual power plants can “shave” demand peaks on the grid when power is most expensive, for example using smart thermostats to pre-cool homes before air-conditioning use spikes in the afternoon.

They could also draw small amounts of power from thousands of EV batteries, rooftop solar arrays or home backup systems aggregated together when needed. Distributing the power sources could reduce grid strain and bring other benefits.

The approach can save money and cut planet-warming emissions when compared to utilities’ traditional tactic, activating fossil fuel-burning “peaker” plants that lay dormant most of the year and only kick on when demand spikes. A federal report found virtual power plants could be more than 40% cheaper and be rolled out in months.

Some even consider traditional energy efficiency measures, like adding home insulation, as potential components of a virtual power plant, since there’s value behind reducing energy demand during the hours when it’s highest, Boehnke said.

Customers are usually compensated for participating in the programs, in the form of upfront incentives or ongoing payments when their homes or businesses are called upon to support the grid.

For example, a Vermont utility offers up to $10,500 for home backup battery purchases, which then share power with the grid. In Utah, another program offers $400 per kilowatt upfront payments and an ongoing $15 per kilowatt bill credit for enrolling home batteries.

The new Michigan legislation includes provisions requiring this kind of compensation, mandating state regulators develop requirements for utilities to allow virtual power plants and providing oversight of third-party aggregator companies that can manage the programs. Utilities themselves can also run virtual power plants.

The initiatives can bring big benefits.

A utility program in Massachusetts and New York enrolling customers with smart thermostats, EVs, home batteries and other systems cost $500,000 to start up but has provided some $300 million in grid benefits since launching in 2019, according to the U.S. Department of Energy.

Not everyone is convinced, however, including at least one of Michigan’s largest utilities.

The new virtual power plant legislation “jeopardizes ongoing regulatory efforts with attempts to accelerate unproven technology,” said Consumers Energy spokesperson Trisha Bloembergen, who also pushed back on the notion that the bills support customer affordability.

Existing utility energy savings programs and others that push customers to shift usage away from peak times have long been in place, she said. Between 2009 and 2024, energy savings across Consumers’ electric and natural gas business from the initiatives have totaled the annual output of 18 gas power plants, Bloembergen added.

DTE Energy spokesperson Ryan Lowry also pointed to existing “demand response” programs, like those that compensate customers for allowing DTE to make small adjustments to smart thermostats during demand peaks, as an example of existing solutions that improve grid reliability while saving customers money.

DTE is also working with EV owners to find ways to power vehicles during times of low demand, he said. Lowry didn’t answer a question about DTE’s exact position on the new virtual power plant bills.

“As these technologies evolve, the Michigan Public Service Commission already has the regulatory processes in place to thoroughly vet pilot proposals and programs to ensure all Michiganders benefit from these solutions, and do not pay for expensive or untested technologies,” he said.

Irwin says he anticipates pushback on his bills from the state’s dominant utilities.

They earn a guaranteed profit on investments in new physical power plants and large-scale grid upgrades, he said. “Because there is no means to bring forward these (virtual power plant) solutions, the ratepayers are forced to swallow the utilities’ more expensive solutions.”

The prospect of lower utility profits and a lack of incentives has “in part stifled” virtual power plant deployment by for-profit power companies, according to a 2025 Department of Energy report.

There are now roughly 30 gigawatts in virtual power plants nationwide, accounting for less than 4% of the nation’s peak demand, the report found.

But, as new manufacturing, EVs and data centers lead to explosive growth in demand while utilities also face major costs to upgrade aging power systems, virtual power plants may become more attractive, it states.

Michigan is behind some other states in going down that path because of slower adoption of “distributed energy resources” like rooftop solar, home backup batteries and EVs, said Dan Scripps, chair of the Michigan Public Service Commission, which regulates big utilities.

But installation of those technologies is on the upswing, bringing greater attention to the possibility of virtual power plants, he said.

Scripps pushed back on the notion that they were somehow unproven, pointing to successes like a New York City utility deferring a $1.2 billion substation upgrade through $200 million in demand management initiatives.

Michigan has years of experience with programs that shift power demand to benefit the grid, he said, and those can be key components of virtual power plants too.

As part of an initiative to establish incentives and penalties to improve utility reliability, Michigan regulators have solicited input on solutions like virtual power plants, and Scripps expects further action next year.

They have also created a pathway for utilities to get expedited approval for pilot programs that could include virtual power plants. Though, so far, none of that kind have been proposed.

Scripps said regulators need to ensure virtual power plants don’t add “undue” risk to the grid, though even traditional solutions aren’t risk free. Michigan will go “further faster” if its utilities are partners in the effort, he said.

“I think we do see a pretty significant upside if we can get this right,” Scripps said.