Virtual Power Plant Market: The Decarbonization Portrait

Addressing decarbonization challenges involves overcoming policy stalemates, regulatory restrictions, and budgetary constraints. Accordingly, there is a pressing need for more robust legislative requirements. This extends beyond the overarching Net-Zero 2050 goal, demanding additional concrete and measurable milestones. Simultaneously, a transformative disruption driven by technology is crucial to reshaping the foundational aspects of the utility business. At the forefront of this transformative approach is the Virtual Power Plant (VPP), an interconnected network comprising distributed generators (DGs) and energy storage systems (ESSs). As per Inkwood Research, the global virtual power plant market is expected to record a CAGR of 24.35% during 2024-32 and register a revenue of $9530.06 million by 2032.

Empowered by information and communication technology (ICT), users with distributed energy resources (DERs) within a VPP can function as both energy consumers and generators.

Virtual Power Plant Market - Inkwood Research

How Can Virtual Power Plants (VPPs) Reduce Carbon Emissions?

According to the World Nuclear Association, electricity generation constitutes more than 40% of the total energy-related emissions. Conversely, changes in the urban environment have reciprocal impacts on VPPs. By aggregating distributed renewable resources, VPPs contribute to reduced dependence on fossil fuels, leading to lower carbon emissions.

Furthermore, VPPs can mitigate the impact of urban density on the performance of distributed renewable systems. This can be facilitated by access to additional information about the urban environment, such as local climate and geographical data. Moreover, through optimized management, VPPs can decrease negative environmental effects and enhance the safety of renewable energy across distributed units.

This blog examines the VPPs’ contribution to efficiently navigating the decarbonization landscape.

Two Crucial Ways VPPs Can Support Decarbonization

  • Reduced Utilization of Fossil Fuel Power Plants

By minimizing the operation of fossil-fuel power plants, Virtual Power Plants (VPPs) contribute to a reduction in carbon emissions within the power sector. For instance, VPPs facilitate the transition of energy consumption to periods when renewable sources are plentiful, such as optimizing for solar energy during daylight hours.

Furthermore, in densely populated cities, electricity demand often peaks during specific hours due to increased industrial and residential activities. VPPs can strategically distribute energy usage, ensuring that more power is drawn from renewable sources during these critical periods. This reduces the carbon footprint associated with traditional power plants alongside enhancing the overall grid reliability by avoiding congestion during peak demand.

  • Facilitating Electrification  

Virtual Power Plants (VPPs) play a crucial role in supporting the transition toward an increasingly electrified economy. The electrification of various loads and end-uses, such as electrified transportation, has the potential to strain distribution circuits, substations, and transformers responsible for delivering power to end-users, resulting in considerable costs. 

However, by strategically shifting demand to periods with lower demand, virtual power plants can effectively mitigate stress on these distribution systems. This also enables a more cost-effective electrification process, particularly for carbon-based end-uses like transportation or heating. 

Whereas in scenarios where resilience is crucial, such as during natural disasters or emergencies, VPPs can facilitate the creation of microgrids. These independent energy systems, powered by a combination of renewable sources and storage, ensure continued power supply to critical facilities like hospitals and emergency shelters.

For example:

  • AutoGrid and Zum‘s strategy to implement a 1-Gigawatt Virtual Power Plant (VPP), comprising over 10,000 school buses throughout the United States by 2025, is anticipated to stand out as one of the most extensive VPPs globally. This initiative aims to mitigate the environmental impact of the existing 500,000 diesel school buses in operation.
  • A Vehicle-to-Grid (V2G) initiative involving Mitsubishi Outlander Plug-in Hybrid Electric Vehicles (PHEVs) in Thailand. This initiative is an integral component of the Electricity

Generating Authority of Thailand‘s comprehensive VPP feasibility study. The Mitsubishi Outlander PHEVs are equipped with bidirectional charging technology, enabling them to function as backup power sources while also feeding surplus power back into the grid.

(Source: National Renewable Energy Laboratory)

Stay up-to-date with what’s trending in the Global Virtual Power Plant Market

Global Virtual Power Plant Market Potential: What Can Be Expected in the Future? 

The Inflation Reduction Act (IRA) offers consumer incentives aimed at electrifying residences and businesses. Leveraging these incentives has the potential to expedite novel Distributed Energy Resources (DERs) adoption. Integrating novel Distributed Energy Resources

(DERs) into Virtual Power Plants (VPPs) creates an opportunity to seamlessly navigate these resources, enhancing their collective value to the grid.

Furthermore, to maximize the economic and emissions impact of VPPs, utilities and grid

operators play a pivotal role. Empowering VPPs to offer frequent and flexible services can significantly contribute to their effectiveness. Similarly, policymakers can design inclusive policies, programs, and market rules, minimizing barriers for VPPs to provide a diverse array of services.

Therefore, treating VPPs as viable resources will ensure their consideration as a valuable asset. This approach aligns with both grid-scale and distribution system planning, recognizing the intrinsic value that VPPs bring to the table. Such aspects will further supplement the global virtual power plant market growth trajectory.

By Akhil Nair

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    Virtual power plants optimize the use of renewable energy sources by strategically managing electricity demand. By shifting consumption away from peak hours and integrating clean energy alternatives like solar and wind power, VPPs significantly reduce reliance on high-emission power plants.

    By incorporating renewable energy sources and energy storage, businesses can take advantage of more affordable and sustainable power, contributing to long-term cost savings and resilience against fluctuating energy prices.