As global temperatures continue to rise, "the world is burning. We need a renewables revolution," said UN Secretary-General Antonio Guterres, calling for developing clean energy. However, the unbalanced energy supply and demand caused by extreme weather has led to frequent power shortages.

A virtual power plant (VPP) is a solution to power shortages and the unstable supply of new energy power, and China is testing out its capacity in VPP with its first VPP management center opened in Shenzhen on August 26.

Similar to the idea of Internet of Things (IoT) and cloud computing, VPP functions like a brain that can re-distribute electricity surplus from small electric power stations to balance the load on power grids during peak hours.

A power station unit can be as small as a solar panel on the rooftop of a household, or an electric vehicle.

"When there is an abundance of power supply, especially when new and green energy is developed, the virtual power plant can quickly respond to instructions to provide auxiliary services and enhance the stability of the power grid operation," manager at CSG Shenzhen Power Supply, Shi Jun told CGTN.

VPP as a solution to energy crisis

Modern cities used to rely on large-scale power plants that takes up land and usually non-renewable energy to generate electricity. A virtual power plant, in comparison, is made by dispatching distributed energy resources to aggregate flexible capacity and help balance the grid. 

EV giant Tesla launched a pilot VPP program last year in California, the U.S., by pulling power from its Powerwall owners for the grid without compensation. Powerwall is an electricity storage unit for energy generated by solar panels installed on users' rooftops. They are usually as large as a door.

China has set up pilot projects to build virtual power plants in places like Shanghai, Hebei, Shanxi and Shandong to distribute electricity more efficiently.

The newly launched VPP in Shenzhen can pull together a capacity of 870,000 kilowatts, the equivalent installed capacity of a large-sized coal plant. It is planned to increase the capacity to one million kilowatts by 2025, which is expected to save tens of thousands of tonnes of standard coal, carbon dioxide and sulfur dioxide, contributing to a greener planet. 

However, challenges lie ahead in the large scale implementation of VPP in China.

"First, special policies at the national level are urgently needed to clarify the definition, scope, role, development orientation, development goals and implementation strategy. Second, the business model of the virtual power plant is still not clear enough, and the participation consciousness of market needs to be cultivated," Shi said.

The country's 14th Five-Year Plan promotes flexible management of energy resources through energy storage facilities and virtual power plants. If rolled out smoothly, VPP will play an important role in China's goal to peak its carbon emissions by 2030 and reach carbon neutrality by 2060.

The global Virtual Power Plant market size was valued at $286.75 million in 2021 and is expected to expand at a compound annual growth rate of 21.21 percent during the forecast period, reaching $909.46 million by 2027, according to an industry report by Market Watch.

According to Shi, the industry in China is set to have rapid development with policy support.