China Energy Storage Network News: In order to achieve the "dual carbon" goal, China is accelerating the adjustment of its energy structure and increasing the proportion of renewable energy. The total installed capacity of wind and solar power in China is planned to reach over 1.2 billion kilowatts by 2030, forming an energy system dominated by renewable energy. The high proportion of renewable energy connected to the grid, the improvement of energy consumption terminal electrification level, power electronicization, and large-scale distributed new energy integration into the grid will pose huge challenges to the balance, regulation, and support capabilities of the power system. Improving the flexibility of the power system is an important means to achieve clean and low-carbon development of energy and electricity.
During the 13th Five Year Plan period, the reality that China's power system lacks flexibility and regulation capabilities has made it difficult for the power system to fully adapt to the explosive growth of new energy. The power system is facing numerous problems such as insufficient capacity for new energy consumption due to limited flexibility resources, decreased system reliability, increased energy consumption risks for users, and continuously rising system costs.
To access a high proportion of renewable energy and enhance the regulation capacity of the power system, it is necessary to introduce more flexible resources, such as accelerating the construction of virtual power plants.
Virtual Power Plants (VPPs) aggregate one or more resources such as adjustable (interruptible) loads, energy storage, microgrids, electric vehicles, distributed power sources, etc. from different spaces to achieve autonomous coordination and optimization control, participate in power system operation and power market transactions. The new business model of virtual power plants can serve as both a "positive power plant" to supply power to the system for peak shaving, and a "negative power plant" to increase load consumption and cooperate with the system for valley filling.
Compared to the traditional power energy ecosystem, the biggest change in the ecosystem under virtual power plants is that the boundaries of power generation, transmission, and distribution in the traditional power energy ecosystem are clear, and the operation mode of "source follows load" is transformed into the intersection of power generation, transmission, distribution, and consumption boundaries, while also playing the roles of producers and consumers. The operation mode is manifested as "source load interaction", and each part inside is a small energy system, which belongs to the expansion of smart grids.
Virtual power plants can be divided into three categories: (1) Load based virtual power plants: Refers to virtual power plant operators aggregating their bound market-oriented power users with load regulation capabilities (including electric vehicles, adjustable loads, interruptible loads, etc.) as a whole (presented as a load state) to form a virtual power plant, providing flexible load side response and regulation services to the outside world. (2) Power side virtual power plant: Build a virtual power plant on the distributed power generation side. (3) Source grid load storage integrated virtual power plant: a centralized power plant that integrates power generation sources and load users, participates in the electricity market as an independent market entity, and generally does not occupy the system's peak shaving capacity.
Since 2021, the national and local governments have successively introduced policies related to virtual power plants, and some provinces and cities have also introduced clear implementation plans or subsidy standards.
From the perspective of policy environment, the virtual power plant demonstration project initiated by the two major power grid companies mainly relies on demand side response as the profit model. Local governments have successively introduced auxiliary service market policies to guide virtual power plants to participate in power system peak shaving and frequency regulation. With the continuous promotion of the electricity spot market, more demonstration projects may innovate feasible business models.
From the current development status of the virtual power plant industry, the European and American power markets are relatively mature, and virtual power plants have been commercialized. However, China is still in the early pilot stage of virtual power plants, and the business model is not clear enough. Virtual power plant pilot sites have appeared in Jiangsu, Zhejiang, Shenzhen, Shanghai and other places.
Most domestic virtual power plants are in the pilot demonstration stage, with unclear business models and few actual profitable projects. Why is the development of overseas virtual power plants mature while China is still in the pilot stage?
We may refer to the successful experience of Next Kraftwerke, the largest virtual power plant in Europe.
Kraftwerke is an energy trader certified by the European Electricity Exchange (EPEX) and participates in spot market trading of energy.
Next Kraftwerke has created astonishing growth rates and outstanding business performance through its superior resource aggregation capabilities and innovative business models. Its main profit model includes: (1) participating in electricity market transactions. (2) Demand response, peak shaving and valley filling. (3) Participate in grid auxiliary services.
The successful experience of European virtual power plants tells us that a mature electricity spot market is a sufficient condition for virtual power plants to achieve economic viability, and the large-scale development of distributed power sources and distribution networks is a necessary condition for the development of virtual power plants.
If European virtual power plants focus more on the power generation side, with the integration of distributed power sources and energy storage resources as the direction, and the main goal of new energy consumption, then American virtual power plants focus on user side resources, with the profit model of obtaining auxiliary service compensation.
The United States has abundant solar energy resources, and driven by government subsidies and incentive policies, household photovoltaic energy storage systems have gradually become an alternative choice for residents to reduce electricity prices, thereby achieving spontaneous self use of electricity. Tesla is laying out home energy storage Powerwalls and collaborating with public utility companies to launch virtual power plant plans. Tesla has successively launched virtual power plant projects with public utility companies and power retailers such as EnergyLocals, Green Mountain Power, PG&E. These projects have helped Tesla rapidly expand the installation of energy storage systems. At the same time, power retailers can obtain partial usage rights of these distributed battery electricity by signing agreements with Powerwall users, achieving the aggregation of demand side resources and the commercial expansion of virtual power plants.
The successful experience of virtual power plants in the United States tells us that fully leveraging the regulating role of energy storage in distributed energy can transform terminal energy consumption from the original "rigid load" of the power grid to "flexible load", contributing to achieving "carbon neutrality" with zero emissions from comprehensive electrification.
Compared with European and American countries, China's virtual power plants started late, and the development of the electricity spot market is not mature. They take into account multiple resources such as power generation, energy storage, and user side, and have a more complex structure. Due to the "dual carbon" driven energy structure transformation, it poses great challenges to the flexibility regulation of the power system. Virtual power plants can become a "switch" to enhance the flexibility of the power system.
Looking ahead to the future, external policies combined with internal demand of the power grid can enable the rapid development of virtual power plants.
