Virtual Power Plants: A Cost-Effective Solution for High Grid Demand in New Orleans

It is no secret that the power grid in New Orleans is not only actively aging; it is susceptible to failure. These issues became glaringly evident in August 2021 during Hurricane Ida. The current grid system is fragile and can quickly be knocked offline for weeks. In an effort to combat this vulnerability, on Dec. 18, 2025, the New Orleans City Council unanimously voted to order local utility Entergy New Orleans to design a $28 million solar-tied battery incentive program for homes, businesses, and nonprofits (plus $2 million for administration/implementation), for a total of $30 million in funding, which has been supplied by settlement funds from Entergy to the City. The program has become colloquially known as the “Neighborhood Power Plan”, and proposed by Together New Orleans (TNO).  Mayor Helena Moreno announced it as the city’s first Distributed Energy Resource (DER) Program to create grid reliability, sustainability, and community resilience. This $30-million initiative will transform New Orleans into the largest Virtual Power Plant (VPP) city along the Gulf Coast. By decentralizing the grid, the City will work toward turning individual residential rooftops and certain commercial spaces (for instance, community centers and clinics) into a unified, resilient energy network.

By way of background, virtual power plants are based on the concept of aggregating energy devices in homes and businesses and using them like a traditional power plant for the good of the community. A VPP is not a single building like a power plant with a smokestack. Instead, it is a digital network of hundreds of individual solar-and-battery systems spread across a city. Under the soon to be unveiled Entergy program, there will be about 1,500 homes and 150–250 community institutions that will be outfitted with high-capacity batteries tied to solar panels. When the grid is stressed–during a summer heatwave or storm event–these batteries can feed power back into the system or reduce their draw, acting as a giant “virtual” power station.

Some of the community benefits to be expected from Entergy’s program will include:

1. Proposed Financial Incentives: The program would provide significant financial offsets to help residents and users of commercial space to cover the cost of battery storage systems.
2. Credits to Lower Energy Bills: Participating homeowners would likely receive credits for the “grid services” their batteries provide, which would lower their overall monthly electric bills.
3. Instant Grid Back-up: If the main power grid fails, participating homes and businesses would have an immediate, automatic backstop. For seniors and medically vulnerable residents, the initiative could be lifesaving.
4. Prioritizing Low-Income Households: A specific “carve-out” in the 2026 funding ensures that low-to-moderate-income families—who are often the most burdened by high energy costs—have first access to the battery subsidies.
5. Expand Clean Energy: Additionally, New Orleans is working to leverage federal grants to provide $5,000 subsidies for solar installations, which could be stacked with the VPP battery incentives to make a 2026 home upgrade more affordable.

By placing these community power hubs and VPP-ready homes in every ward in Orleans Parish, the city is reducing single points of failure. If one line goes down during a weather or other event, the neighborhood would have its own internal power source to bridge the power gap. Dubbed “Lighthouses”—solar-powered community centers—could also serve as charging stations and cooling centers during extended outages. Additional benefits would include: (1) it would address the issue of utilities wanting to always invest in potentially more expensive solutions; (2) it would resolve the problem of a regulator having to constantly oversee every utility investment to ensure it is worthwhile; (3) it would offer consumers a way to potentially reduce their electricity bills; and (4) it would provide a considerable number of low-income customers an opportunity to participate.

VPPs are not without their challenges, however. The following includes the most notable list of legal challenges facing any VPP program and for which the market will be watching how Entergy New Orleans addresses them in their implementation plan for the program, which is expected to launch later this year.  The appropriate legal advice relating to these issues will be key to rolling out such a program and ensuring its sustainability.

• Regulatory Integration
• Cybersecurity Risks
• Infrastructure Requirements (Communication Infrastructure / Physical Barriers)
• Coordination of Participants (Municipal, Commercial and Residential)

Due to these challenges, most VPPs in the United States focus on either residential or commercial sites and rarely combine the two types of uses into one system. However, there are utilities in London, Australia and Germany that are aggregating residential and commercial sites together on limited utility scale systems. Success of the Entergy New Orleans program would set the stage for advancement of VPPs and increased adoption around the country. There is not a system that would not benefit from the increased reliability and sustainability of a VPP. The key is how to make it a reality, and all eyes are on New Orleans.

For more information on how to properly navigate the regulatory and legal challenges of VPP programs, please contact Clark Hill attorneys Amy Akers (Senior Attorney, Energy & Renewables) and Colleen C. Jarrott (Senior Counsel, Energy & Renewables).

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