With the demand
for electricity rising at an exponential rate, 4.0% in 2018 as per the
International Energy Agency (IEA), the requirement for fuels to generate this
power is also increasing. The increased burning of fossil fuels, such as coal
and crude oil, which are still the major sources of electricity generation, pushed
the carbon emissions up by 2.5% that year, the IEA reported. As the electricity
demand and carbon emissions continue to rise owing to rapid industrialization
and urbanization, the need to save the environment is becoming more dire than
ever. This has given birth to the novel concept of virtual power plants (VPP),
which refers to an inter-connected network of power plants, not connected to
the government grid, and power consumers. The power plants are generally small
solar or wind farms with a maximum capacity of 10 MW. Such a model
automatically distributes power across small distances, depending on the
demand.
P&S
Intelligence said in a study that the worldwide virtual power plant market
valued $1,975.1 million in 2017 and that it would grow rapidly at an 18.6% CAGR
to ultimately reach $5,510.2 million. Supply side, demand response and mixed
assets are the three technologies on which VPPs work. Among these, demand
response VPPs supplied the most amount of electricity in 2017 as they are
preferred by consumers. Such power plants offer several incentives to
consumers, such as lower tariff, to encourage them to reduce their electricity
consumption during periods of peak demand. This ensures that as many consumers
who need electricity can get it, and the demand–supply gap doesn’t worsen. This
is why such power plants will continue being the largest distributor of
electricity among all VPPs in the years to come.
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With the rising need
for electricity and saving the environment at the same time, the investments in
VPPs are also increasing. Another reason for the rising popularity of such
power generation facilities is the huge capital involved in constructing and
maintaining conventional power stations. Commercially viable VPPs have already
been constructed or are under construction in the U.S., Germany, and China.
Now, with increasing funding, the size and power generation capacities of such
facilities are also increasing. For instance, energy giant, Tesla, is
constructing a 250 MW virtual power plant in Adelaide, Australia at a cost of $250.0
million, which is expected to start distributing electricity to 50,000 houses
in 2022.
Another factor
helping VPPs become more popular is the growing capacities of renewable power
stations. It is being predicted that compared to 7.0% in 2015, almost 20.0% of
the total power generated in 2035 will be from renewable sources. Countries
such as India and China are strongly pursuing their goal of generating as much
electricity as possible from clean sources. For instance, India has plans to have
150 GW of renewable energy installed capacity by 2022-end, whereas China aims
to generate almost 200 GW of power from solar farms alone by 2020. It is owing
to government initiatives such as these that among all regions, the virtual
power plant market would grow the fastest in Asia-Pacific in the near
future, outpacing even North America, which is currently the most lucrative
region for VPP firms.
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