Will The Virtual Power Plant Business Model Become Mainstream

1. Development background of virtual power plant
2. Virtual power plants are both flexible and economical
3. Industrial chain of virtual power plants
4. Development trend of virtual power plants
   
   1. Aggregated resources are promoted
   2. Participate in the interaction of large power grids
5. Virtual power plant business scenarios
6. Virtual power plant potential company

Definition of virtual power plant: A virtual power plant is an Internet of Things technology that aggregates resources such as adjustable loads in different spaces, energy storage side and power supply side, to achieve autonomous coordination and optimal control, and to aggregate and participate in power system operation and power market transactions.

The core function of a virtual power plant is to regulate distributed power sources, energy storage and controllable loads.

• Regulating distributed power sources: Distributed power sources are small in scale, widely distributed, and have many types. Virtual power plants organize distributed power sources through energy storage to smooth output fluctuations and conduct unified regulation.
• Adjust flexible loads, energy storage, electric vehicles, etc.

Development background of virtual power plant

By 2025, electricity will account for about 30% of final energy consumption. According to the data, the proportion of electricity in final energy consumption is expected to increase to 70% by 2060. The electricity consumption of the whole society continued to increase, and the peak load of electricity consumption increased.

In 2021, the electricity consumption of the whole society will reach 8.3 trillion kWh, a year-on-year increase of 11%. The maximum electricity load of China’s main power grids reached 1.19 billion kilowatts, an increase of 11% year-on-year.

Virtual power plants are both flexible and economical

• Demand side: The scale of peak loads continues to increase, but the single duration is short, the frequency of occurrence is low, and the cumulative duration is short. More than 95% of the peak loads per year do not exceed 50 hours.
• Supply side: If we blindly expand power plants to meet the demand for electricity during peak hours, huge waste will be generated during the trough period of electricity consumption. The new power system urgently needs to tap the load-side adjustment capacity to deal with the real-time balance of power generation and power consumption.

The technology of virtual power plant is gradually mature. Virtual power plants can mobilize load-side resources, which are both flexible and economical. It is estimated that if 5% of the peak load demand of its operating area is met through the construction of coal-fired power units, it will require an investment of about 400 billion RMB in power plants and supporting power grids.

If a virtual power plant is built, the scale of funds for construction, operation and maintenance and incentives is only 40-57 billion RMB, and the cost is only 1/7 to 1/10.

Industrial chain of virtual power plants

According to different functions, virtual power plants can be divided into technical virtual power plants and commercial virtual power plants.

From the perspective of the industrial chain of commercial virtual power plants: the upstream of virtual power plants are distributed power sources, energy storage resources and controllable loads, and the midstream is IT resource providers such as communications, information technology, and intelligent equipment, as well as resource aggregators ( virtual power plant operator), downstream are grid companies and other electricity sales companies and users participating in the electricity market.

The basic business model of a virtual power plant is: resource aggregators obtain revenue through the power trading market or ancillary services, and then share revenue with upstream distributed resource owners.

Development trend of virtual power plants

Aggregated resources are promoted

Energy storage will serve as an important flexibility resource in virtual power plants. In battery, there is also energy storage BMS to help battery to store energy. Here is a list of top 10 energy storage BMS manufacturers in China. You can click it and read it.

User load has limitations in its own load characteristics and its adjustability, and individual virtual power plant operators are prone to deviations in the direct power transaction and ancillary service markets, which may directly lead to economic losses.

As an important flexible resource, energy storage is a necessary means to deal with this deviation. In addition, energy storage can help virtual power plants better participate in peak-valley electricity price spread arbitrage, etc., and enhance the profitability of virtual power plants.

Participate in the interaction of large power grids

China’s virtual power plants are currently in the pilot and demonstration stage. At present, the most distinctive provinces to carry out virtual power plant pilots include Shanghai, Hebei, Guangdong, Shandong and so on. The virtual power plant operation platform will be a long-term evolution and iterative process, following the continuous maturity of the virtual power plant format, from the operation platform to the comprehensive business support platform to the energy Internet.

Virtual power plant business scenarios

The main business scenarios of virtual power plants include auxiliary services, demand response, market-based transactions, and energy efficiency management. At this stage, virtual power plants provide more demand response and ancillary services by dispatching flexible resources.

With the gradual improvement of the electricity market mechanism and the construction of the electricity sales market, electricity sales companies with virtual power plants as the core will gradually participate in electricity market-oriented transactions.

Virtual power plants can participate in market-oriented transactions through the virtual power plant management platform, obtain agency service fees or revenue sharing, and can also conduct electricity sales and settlement for internal loads.

Virtual power plant potential company

• Dongfang Electronics: The company has already implemented a number of virtual power plant projects, among which the “Guangdong Energy Investment” virtual power plant management project is the first virtual power plant designed based on market transaction rules in China Southern.
• Guoneng Rixin: The company has launched virtual power plant business since 2020, and virtual power plants are also inseparable from the ability to accurately forecast resources such as distributed photovoltaics. Photovoltaic is commonly used in energy storage industry and photovoltaic cell is also popular. The top 10 photovoltaic cell manufacturers in China article will tell you the developing trend.
• Longshine Technology: The company has been deeply engaged in the user side for 20 years and has relevant reserve capabilities. Currently, it is actively considering and planning the business development of power auxiliary services such as virtual power plants and demand response.

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