Virtual power plants are poised for big growth to address challenges posed by increased grid-connected renewable energy systems, and contribute to China's decarbonization goals, according to a recent report.

VPPs encompass networks of small energy-generating or storage devices, such as rooftop solar panels and batteries that are aggregated to connect to the electricity grid.

VPPs, by bundling together controllable loads and distributed energy storage sources, can supply immense power when demand for electricity exceeds supply. They play a critical role in reducing the power industry's dependence on fossil fuels and ensuring energy supply when more power is generated from intermittent wind and solar sources.

According to a report by the Natural Resources Defense Council, a global environmental protection organization, China's green commitment and rapidly developing new energy industry are fast-tracking the development of VPPs.

"With a higher proportion of power generated from new energy sources connecting to the grid, there is increasing demand for the power system's adjustment capacity and safe operation, which needs clean, flexible and economically viable new entities to navigate these challenges," said You Mengna, deputy director of NRDC China. "VPPs are highly anticipated in this regard."

Sinolink Securities has forecast that the scale of investment in VPPs will touch 80 billion yuan ($11.24 billion) by 2025.

The industry has seen stronger policy support.

In 2021, an action plan by the State Council, China's Cabinet, outlined that further efforts will guide VPPs to join the new type of power system, or the government's initiative to promote the green and high-quality transition of the country's energy system.

Last January, a plan co-released by the National Development and Reform Commission and the National Energy Administration called for actions to set up trial VPPs that integrate various types of energy sources.

Hu Changbin, director of the experiment center of the School of Electrical and Control Engineering, the North China University of Technology, said it is important to enhance basic control technologies for VPPs, develop VPP products with independent intellectual property rights, and improve communication technologies for efficient energy management.

The report also outlined a possible development path of VPPs. Till 2030, VPPs' storage resources can combine with renewable energy sources for peak shaving and valley filling, which is an effective way to adjust the power load of the grid, it said.

From 2030 to 2045, it predicted that with VPPs aggregating a wider variety of power generation and storage resources, they can join both the centralized and distributed energy trading markets, as well as the power service market with higher capability of price negotiation.

From 2045 to 2060, as the grids' capacity to integrate distributed energy sources improves, VPPs will engage in the power trading market or adopt localized consumption and regulation. Their energy storage sources will expand to a wider range of sectors such as hydrogen, it said.

Li Lili, a researcher at the Sichuan Energy Internet Research Institute of Tsinghua University, highlighted the enormous potential of the transportation sector as a flexible energy regulation resource.

"Differentiated management for different participants in VPPs is needed. For instance, public charging facilities for electric vehicles can serve as a power station and be included in VPPs, while private charging piles may have different approaches and management methods in VPPs," Li said.

Chen Songsong, a researcher at the China Electric Power Research Institute, said that the construction sector can also serve as an important part of VPPs. The sector's flexible resources include air conditioning, building rooftop photovoltaics, power storage and EVs.