Demand response and vehicle-to-grid: Economics

Why flexibility is the cheapest peak capacity there is

Flexibility is the cheapest source of peak capacity in DOE's comparison. Most of the money is paid to consumers through programmes and tariffs rather than earned by trading in markets.

Capex versus opex

Upfront costs are small: DOE says a basic VPP (virtual power plant, a pool of devices dispatched together) can launch for under USD 5 million. Device costs are modest too. LBNL lists networked thermostats at USD 96 to 166 and Wi-Fi Level 2 EV chargers at USD 354 to 750. Paybacks run from immediate for heat pump water heaters to 2 to 9 years for a thermostat bought new. The ongoing cost is mainly customer payments, marketing and software. V2G adds the bidirectional charger premium.²¹³

Levelised cost of storage

Flexibility is not usually costed per MWh. DOE instead compares the net cost of peak capacity. For a representative utility in 2030, a VPP of thermostats, water heaters, EV charging and batteries costs about 40% less than new capacity from a utility-scale battery and about 60% less than a gas peaker. Scaling US VPPs to 80 to 160 GW by 2030 could save about USD 6 to 11 billion a year. DOE's comparison predates the latest battery cost falls: IEA reports utility-scale battery project costs fell about 40% in 2024 to around USD 150/kWh, which narrows the gap.¹⁴

Revenue stack and market participation

Money goes to consumers in three main ways. Programme payments: about USD 60 a year per participant in DOE's US thermostat example, or USD 2 per kWh reduced for non-residential users under California's Emergency Load Reduction Program, which runs to 2027 and admits V2G aggregators; San Diego's utility used it for V2G school buses in 2022. Tariffs: India's 2023 rules require time-of-day tariffs, with energy charges in solar hours at least 20% below normal and peak charges at least 20% above for commercial and industrial users (10% for others). Bundles: Octopus and BYD lease a V2G-ready BYD Dolphin with a bidirectional charger and free home charging for under GBP 300 a month (company offer, June 2025). IEA puts V2G owner revenue at several hundred to over USD 1,000 a year, with commercial offers promising up to USD 770. In the US only about 15% of VPP company revenue came from wholesale markets in early 2023.^158111215

Sources

1. Pathways to Commercial Liftoff: Virtual Power Plants US Department of Energy, 2023
2. Liftoff: Virtual Power Plants (2024 update fact sheet) US Department of Energy, 2024
3. Electricity 2026: Flexibility International Energy Agency, 2026
4. Lok Sabha Unstarred Question No. 41: Power Tariff System (answer by Ministry of Power, 20 July 2023) Parliament of India, Lok Sabha, 2023
5. Global EV Outlook 2026: Vehicle-to-grid technology International Energy Agency, 2026
6. Octopus and BYD turbocharge EV revolution with all-inclusive car and charging bundle (company claims) Octopus Energy (press release), 2025
7. SDG&E using V2G technology for emergency load shed events (trade press) Renewable Energy World, 2022
8. Are load flexible technologies affordable? A population-scale cost-benefit analysis (Grahovac et al., ACEEE Summer Study) Lawrence Berkeley National Laboratory, 2026
9. Emergency Load Reduction Program California Public Utilities Commission, 2026