In recent years, the concept of virtual power plants (VPPs) has gained substantial traction, becoming a focal point for innovation and investment in the energy sectorA notable early mover in this domain is Wang Yu (a pseudonym), who made a courageous leap from a stable job at a state-owned power plant in Shenzhen after 15 years to embark on an entrepreneurial journey in the flourishing VPP businessThis decision came amidst widespread changes in China's energy landscape, driven mainly by the ongoing marketization reforms.

The evolving energy market presents tremendous opportunities for professionals and businesses aware enough to exploit themWang Yu reflected, "The power plant where I used to work was stable, and the benefits were decentBut the transition to a market-based model was much too slowThe overarching direction of reform is toward marketization, which is where the opportunity lies." This sentiment is not only shared by Wang but resonates with numerous industry players who, witnessing the market dynamics, seek to capitalise on emerging trends.

At its core, a virtual power plant leverages energy internet technology to integrate dispersed energy resources like charging stations, air conditioning units, and battery storage systems into a coordinated management system with adjustable power resourcesUnlike traditional power plants, which produce electricity, VPPs act as a sophisticated "manager" of energy, capable of optimizing supply in real-time to ensure both grid stability and efficiency.

Shenzhen has positioned itself as a front-runner in the national virtual power plant landscapeFollowing the launch of the VPP Management Cloud Platform in 2021, the city's VPP management center was officially established in 2022 at the Southern Grid Shenzhen Power Supply Bureau, marking a new chapter for the sectorThis center claims to be the first of its kind in the country, establishing protocols and infrastructure for the efficient operation of VPPs.

As the city gears up for 2024, significant updates are on the horizon, including the release of VPP Management Cloud Platform 3.0. This upgraded platform aims to enhance smart control features for air conditioning loads and implement low-carbon scheduling functions

Advertisements

Currently, it encompasses an impressive 55,000 adjustable load resources across various categories, such as charging stations, air conditioners, and photovoltaic systems, with a total capacity exceeding 3.1 million kilowattsWith further integrations into the city’s energy ecosystem, the management center anticipates reaching 380 megawatts of adjustable capacity by the end of this year.

From the data collected, it appears that around 40% of all controllable loads in Shenzhen come from air conditioning, highlighting its significant potential for demand-side managementThe digitized grid infrastructure allows the VPP management center to make real-time adjustments to residential and commercial air conditioning systems, thus alleviating pressure on the grid during peak times.

In discussing future prospects, a representative from the Southern Grid Shenzhen Power Supply Bureau offered insights into expanding VPP operations through various distributed energy resources, such as rooftop solar and vehicle-to-grid technologyThese strategies not only aim at creating a robust local energy market but also enable enhanced participation in green energy trading, ensuring that renewable resources are effectively integrated into the energy mix.

Wang Yu observed, "This represents a massive opportunity for both electricity sellers and buyersCurrently, many renewable energy plants operate on fixed-price contractsThe future will see these plants entering the marketplace to secure their client bases." He further elucidated the potential of virtual power plants to innovate traditional electricity selling practices, facilitating a more dynamic and competitive energy market.

The burgeoning VPP market is already witnessing rapid growthFor instance, Energy Chain Intelligence, headquartered in Zhejiang, announced its entry into Shenzhen's VPP space in 2023. The company successfully passed performance tests and now holds VPP aggregator qualificationsThe firm’s product manager noted that their virtual plant offerings center around charging stations, merging disparate electric vehicles, storage facilities, and solar energy outputs into cohesive, manageable units that can efficiently respond to grid demands.

Research estimates indicate that from 2022 to 2030, private ownership of electric vehicles in China could surge from 13.1 million to an astonishing 145 million

Advertisements

This growth trajectory is expected to increase public charging needs exponentially, amplifying demands on the gridWang highlighted the critical role VPPs will play in smoothing these challenges, facilitating better coordination between supply and demand, thus driving the stability and efficiency of the power grid while helping meet carbon reduction targets.

Interest in this market isn’t limited to local playersInternational virtual power plant operators, such as Australia’s GTL Group, are also eyeing the Greater Bay Area's promising marketWith over ten years of operational experience in Australia and a market share of 28% in South Australia, GTL representatives expressed confidence in the rapid expansion potential in China, especially in economically vibrant zones like the Greater Bay Area.

Despite the optimism surrounding virtual power plants, concerted efforts are still required to broaden application scenariosCharging stations remain the most visible use case, capturing substantial interest from capital markets; yet the consensus on their widespread application varies among market participants.

Ruan Zhijun, a representative from the Storage Leader Alliance, pointed out that whilst charging stations represent a successful application, replicating this success across larger sectors, including factories and electricity sales firms, remains a critical hurdleUnderstanding the electric utilities' intricacies allows for potential expansionStill, many industries grapple with outdated systems or insufficient technological capabilities, complicating widespread adoption.

With a strong historical dependence on traditional energy producers, large consumers of electricity, particularly in industrial parks, will evolve as key customers for emerging virtual power plant providersHowever, the challenge lies in persuading these entities to transition from conventional methods to innovative solutionsWang acknowledged that how well new companies can engage these consumers will determine their growth trajectory in an increasingly competitive landscape.

While the road ahead may present challenges, the future of virtual power plants looks bright

Advertisements

Advertisements

Advertisements