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• Time:2024-07-09

What is a virtual power plant?

A virtual power plant is a power coordination management system that uses advanced information and communication technology and software systems to achieve the aggregation and coordinated optimization of DER (distributed energy resources) such as DG (distributed power sources), energy storage systems, controllable loads, and electric vehicles, so as to participate in the power market and power grid operation as a special power plant. Virtual power plants can be divided into two categories: "load-type" virtual power plants and "source-grid-load-storage integration" virtual power plants.

1. Policy situation

In recent years, virtual power plant industry policies have been intensively released. The National Development and Reform Commission and the National Energy Administration have clearly supported the development of virtual power plants in policies such as new energy storage, power market system, power spot market, demand-side management, and new power systems, and participated in demand-side response in the form of virtual power plants. In November 2023, the National Development and Reform Commission and the National Energy Administration issued the "Notice on Further Accelerating the Construction of the Electricity Spot Market", proposing to form time-of-use price signals through market-oriented methods, promote new entities such as energy storage, virtual power plants, and load aggregators to play an active role in peak shaving and valley filling, optimizing power quality, and explore new methods such as "new energy + energy storage". In January 2024, the National Development and Reform Commission, the National Energy Administration and other four departments issued the "Implementation Opinions on Strengthening the Integration and Interaction of New Energy Vehicles and Power Grids", proposing that the National Energy Administration's dispatched agencies should establish and improve the user and third-party auxiliary service market mechanism including charging piles, charging and swapping stations, virtual power plants, and load aggregators. As an important link in promoting the consumption of new energy and an important form of innovation in the power business model, the support of subsequent policies is expected to continue to increase.

2. Development History

The concept of virtual power plant was first proposed abroad. After more than 20 years of history, its technology can be summarized into three generations: the first generation invitation type, the second generation transaction type, and the third generation autonomous type. At present, most virtual power plants in my country are in the transition stage from the first generation invitation type to the second generation transaction type. The virtual power plant projects carried out by various provinces are mainly pilot projects, guiding users to achieve peak shaving and valley filling through demand response and test demand response capabilities.

3. Industry chain analysis

The upstream of the virtual power plant industry chain is mainly basic resources, including controllable loads, distributed energy and energy storage. Among them, controllable loads include industrial loads, commercial and building loads and residential loads; distributed energy includes solar photovoltaic battery power generation, wind turbine power generation and hydropower generation; energy storage includes mechanical energy storage, electromagnetic energy storage, chemical energy storage and phase change energy storage. The midstream of the industry chain is virtual power plant operation, and the downstream of the industry chain is mainly the virtual power plant power demand market, including power grid companies, power sales companies, industrial enterprises and commercial users.

4. Industry status

Virtual power plants are an important construction direction for the current country to carry out the construction of new power systems and achieve the "dual carbon" goals. From the perspective of the regulation of power by virtual power plants in my country, the proportion of regulated power by virtual power plants in my country in 2022 will reach 0.5% of the total social power consumption. At present, in the short term, the main way for my country's virtual power plants to make profits is to participate in grid dispatching. In the future, with the development of new power systems, virtual power plants, as regulating power sources, will be expected to achieve profits through auxiliary services and power trading.

V. Development factors

1. Favorable factors

(1) Prominent environmental advantages

Traditional power plants use coal and oil as energy sources, and the emissions of smoke, sulfur dioxide, nitrogen oxides and other harmful substances have caused serious pollution to the environment. Virtual power plants are mainly based on renewable energy, such as solar energy and wind energy, and have almost no pollutant emissions. They not only help reduce environmental pollution, but also reduce carbon emissions, thereby helping to cope with climate change. In the future, with the advancement of technology and the promotion of policies, virtual power plants are expected to play a more important role in the energy market and make positive contributions to promoting energy transformation and sustainable development.

(2) Support from favorable policies

At present, my country has fully recognized the importance of clean energy and sustainable development, and has introduced policies to encourage and support the development of virtual power plants. Including "Several Opinions on Accelerating the Development of Energy Digitalization and Intelligence", "Guiding Opinions on Strengthening the Stability of the Power System under the New Situation", "Implementation Opinions on Strengthening the Integration and Interaction of New Energy Vehicles and Power Grids", etc. With the in-depth implementation and continuous improvement of policies, the virtual power plant industry will usher in a broader development space and opportunities.

(3) Market demand growth drives the development of virtual power plants

With the transformation of the global energy structure and the advancement of sustainable development goals, the market demand for clean and efficient energy services has shown a growing trend. Traditional energy supply methods can no longer meet the needs of modern society. Virtual power plants aggregate distributed energy resources, effectively integrate various renewable energy, energy storage facilities and traditional energy, and form an intelligent and efficient energy supply system, which can provide users with reliable, economical and environmentally friendly energy solutions to meet market demand.

2. Unfavorable factors

(1) Virtual power plants are still in the early stages of exploration

my country's virtual power plants are still in the early stages of exploration, with a relatively vague development path and a lack of top-level construction. At present, the construction subject, operation subject, supervision subject, participation subject, system design, pricing mechanism, technical standards and profit sharing of virtual power plants have not been clarified, which will lead to great resistance to the development of the virtual power plant industry. At the same time, the current pilot projects in China vary greatly, and no regional or national unified paradigm has been formed, which is not conducive to the development of virtual power plant software and hardware technology.

(2) The scale of aggregated resources of virtual power plants is small

At present, traditional dispatching agencies have not formed the habit of dispatching load-side resources. Due to historical and technical reasons, the operation of traditional power systems pays more attention to system safety and still relies mainly on source-side resources with higher reliability. As an emerging load-side resource, the scale of aggregated resources of virtual power plants is relatively small and scattered, which increases the complexity of dispatching. In addition, virtual power plants use wireless public networks for communication control, which improves flexibility but also brings new risks and challenges.

(3) The business model of virtual power plants has not yet been determined

The market reform of electricity is a complex and long process involving multiple factors, including policies, technology, and economy. As an emerging business model, virtual power plants also need to continue to explore and develop in such a market environment. However, at present, my country's power market reform is still immature, and the business model of virtual power plants has not yet been determined. my country's current power market is not a completely market-oriented transaction. Under the constraints of the "planned electricity price", virtual power plants are difficult to make profits and commercial operations are difficult. The business model still needs to be explored and verified.

VI. Development Trends

With the continuous advancement of science and technology, the technology of virtual power plants will continue to innovate. For example, by adopting advanced control algorithms and energy management systems, virtual power plants can manage energy more effectively and improve energy utilization efficiency. In the future, with the continuous development of technologies such as 5G, the Internet of Things, and big data, the technological innovation of virtual power plants will be more active, driving the industry to a higher level. In addition, the virtual power plant industry will show a diversified development trend in the future. In addition to traditional power supply, virtual power plants can also be integrated with new energy vehicles, energy storage systems and other fields to provide more abundant energy services. At the same time, with the contin