The City of Boulder’s virtual power plant pilot project, meant to boost the city’s energy efficiency and reliability, is on hold indefinitely following the cancellation of a federal grant that would have funded the effort.
The project, with Xcel Energy expected to play a leading role and supported by up to $12.7 million in funding from the U.S. Department of Energy, was first announced in 2024 as part of the city’s goal to reach net-zero emissions by 2035. Xcel has failed to meet its 2022 and 2024 emissions goals for the city, which were set in its franchise agreement after voters ended Boulder’s push to form a municipal utility.
Xcel was still in negotiations with the Department of Energy when the grant was canceled in October 2025, according to Carolyn Elam, senior sustainability manager for the city, and work on the project had not yet begun. The cut came amid broader Trump administration rollbacks of renewable energy and energy efficiency initiatives.
“Xcel hasn’t made a commitment, one way or the other, but losing $12.7 million certainly reduces their ability to move forward with it at this point in time,” Elam told Boulder Reporting Lab.
Virtual power plants, as the name implies, don’t operate from a single, physical, centralized site like a coal or natural gas plant that generates power and sends it out through transmission lines and pipelines.
Instead, they are networks of distributed energy resources — including rooftop solar, EV chargers, smart thermostats and battery storage — that can be coordinated through software. Operators can then release stored power when demand rises, making better use of existing electricity and easing pressure on the grid.
Having multiple energy sources nearby, rather than relying on a few, faraway power plants, would give the grid more flexibility and resilience while also cutting dependence on fossil fuels.
“The idea of a virtual power plant is to use alternative resources — so things located at my house, your house, the business down the street — to effectively replace the need to build more utility-scale power,” Elam said.
The flexibility is especially critical for hot summer days. With a virtual power plant, or VPP, Elam said Xcel would have been able to prepare batteries to discharge at peak hours to meet high customer demand. The utility also could have adjusted thermostats to help cool buildings ahead of peak hours.
“All of that together becomes the power plant to meet that hot summer day,” Elam said. “It makes the system more reliable, because you can call on these resources closer to where they’re necessary.”
Elam added that virtual power plants could potentially help customers weather public safety power shutoffs, but only if they had on-site battery storage they could call on.
Participants in the pilot, likely including CU Boulder and other recruited customers, would have received financial compensation for offering their energy resources.
Elam said virtual power plants could make rooftop solar more appealing to residents by changing how it works with the utility. Right now, when someone installs solar panels, they buy less electricity from Xcel, which can lower their bills. But the utility is still responsible for maintaining the grid and paying for power plants and infrastructure. If many customers buy less electricity while those costs remain, the savings have to be made up somewhere. Over time, that can mean lower credits or less favorable terms for rooftop solar.
A virtual power plant is designed to change that dynamic. Instead of rooftop solar simply replacing utility power, it would become part of a coordinated network. Homeowners could be paid not just for generating electricity, but for allowing their solar panels, batteries or smart thermostats to help stabilize the grid during high-demand hours. In that model, residents and the utility would both benefit from more renewable energy.
“It creates different types of transactional relationships between customers and utility for solar and storage and smart devices in this new paradigm of a largely renewable utility grid,” said Elam.
Boulder was selected for a virtual power plant pilot program in part because of its concentration of federal research labs, CU Boulder and technology companies, according to a 2024 Department of Energy webpage. Several federal labs in and around Boulder, including NOAA, NIST, NCAR and NREL, have faced funding and staffing cuts since then under the Trump administration.
Once operational, NREL, the National Renewable Energy Laboratory, had planned to examine how the model could expand access and affordability. One of the goals of the project was to provide a scalable solution that could have been applied throughout Xcel’s systems nationwide.
The Colorado Public Utilities Commission has since approved a similar Xcel project known as virtual power plant aggregators, which makes use of private-sector partnerships, including one with Tesla. The City of Boulder is not a participant.
“The idea here is to take advantage of private investment in resources,” Elam said of that effort. The city is interested in supporting the aggregator program, but it is not something staff are actively pursuing.
While resources have been lost, the project hasn’t been directly canceled, and Elam believes there is still hope. “I think it’s still a possibility,” she said.