Reimagining the Electricity Sector in Island Nations with Virtual Power Plants

Distributed virtual power plants (VPPs) can revolutionize the Caribbean’s energy landscape. These networks of decentralized and distributed energy sources (DERs) are aggregated and actively controlled by a VPP aggregator, enabling hundreds or thousands of devices to operate as a unified system offering an innovative solution to the region’s energy challenges. Many island nations remain heavily dependent on expensive, imported and polluting fossil fuels for electricity generation, leaving them vulnerable to volatile global fuel prices and frequent power outages due to aging grid infrastructure. Climate change further exacerbates these challenges, with hurricanes posing a constant threat to power systems and economic stability.

However, VPPs offer a promising solution by aggregating distributed energy resources such as rooftop solar panels and battery energy storage systems, as well as flexible loads like electric vehicle chargers and smart thermostats, to provide energy, capacity, or ancillary services to the grid through the VPP aggregator. By increasing the contributions of decentralized and distributed energy resources, VPPs can enhance energy resilience, reduce electricity system costs, and provide greater flexibility for electricity generation and ancillary services requirements on the grid. This report presents an in-depth analysis of these benefits, using a case study from the US Virgin Islands (USVI) to demonstrate how VPPs can stabilize the grid to enhance energy resilience and bolster disaster preparedness, while also improving overall system affordability and flexibility.

Beyond the US Virgin Islands, the report extends its findings to the broader Caribbean region, evaluating the scalability and replicability of VPP programs across other island nations. It examines how tailored strategies can facilitate successful VPP implementation, considering the unique characteristics of each country’s electricity system. Additionally, the report provides actionable recommendations for policymakers, utilities, and stakeholders aiming to transition to cleaner, more resilient energy solutions. By reducing dependence on fossil fuels, VPPs not only mitigate greenhouse gas emissions but also support global climate goals while fostering energy independence. Ultimately, VPPs can pave the way for a more sustainable and secure energy future across the Caribbean and other island nations.

The authors would like to thank Virgin Islands Energy Office (VIEO) Director Kyle Fleming, VIEO Energy Policy Analyst Kieshawne Green, and RMI Islands Energy Program Director of Projects Christopher Burgess for their contributions to this report.