Modern power system is revolving around three major studies: virtual power plants, power system reliability, and distributed energy resources. The three concepts are interlinked in such a manner, that one can affect the other in either positive or negative way. The involvement of wind and solar systems at distribution level aid to power system generation, but cause a major issue of changes in the conventional protection method of power system. These resources, on the other hand, aid virtual power plants, which give relaxation to the system operators for solving energy and ancillary issues with protection being one of them. In other words, these virtual power plants are both the problem creators, and problem solvers. Literature mostly discusses the reliability issues in power system with the use of virtual power plants. The paper discusses the way these virtual power plants can be utilized for improving the reliability issues due to the high involvement of distributed energy resources on the grid. The paper proposes a model of virtual power plant for the indication and isolation of faults in the power grid, and some test cases in practical scenarios. The model is finally validated using different case studies with the objective of enhancing the TSO and DSO visibility to the faults.