Competition is heating up in the race to install home battery systems, with heavy hitters like Tesla facing off against nimble startups such as Base Power. Tesla has recently introduced a new Powerwall battery leasing plan that slashes monthly prices by more than two-thirds, responding to the increasing competition.

The price cut is only possible due to declining battery costs and a technology known as the virtual power plant (VPP). A VPP aggregates and coordinates distributed energy resources like batteries to behave on the grid like a single large power plant. This allows utilities to call on these resources during periods of high demand, offering a cheaper alternative to traditional peaker plants.

As electricity demand rises, utilities are embracing VPPs with newfound fervor, as they can be built in months compared to the years it takes to construct a traditional power plant. Additionally, because VPPs rely on assets like batteries that are spread out across the grid, utilities don’t have to spend as much building new infrastructure.

Despite Tesla’s significant market share, newcomers like Base Power are pushing them to change their approach. Base Power has been installing 8 megawatt-hours’ worth of batteries every day and hopes to double this rate by the end of the year. Software gives VPPs another edge, as utility-scale batteries have to connect directly to the grid, which means dealing with congestion.

As more data centers look for ways to connect to the grid faster, VPP programs are likely to spread nationwide in the coming years. Nicole Tomasin from Energy Access Innovations believes that we will see more such programs accelerated as demand increases, with hyperscalers and data centers buying interconnect speed at a premium.