How is Increasing Capacity of Renewable Power Projects Driving Virtual Power Plant Market?


The capacity of renewable power projects is growing around the world. In fact, the renewable sources of energy are the fastest-growing energy resources and grew at a rate of 7.6%, in terms of capacity, in 2017 as compared to 2016. Furthermore, the share of renewable sources of energy in power generation is projected to reach 20% by the end of 2035. This expansion in renewable energy projects is ascribed to the ambitious renewable energy targets set by emerging economies including India and China. The development of renewable power projects is expected to generate a large amount of distributed energy that will need well developed energy evacuation infrastructure for supporting reliable flow of electricity.



It is due to factors like this that the requirement for virtual power plants is growing, as they ensure the integration of newly developed renewable energy projects with the power evacuation infrastructure. Virtual power plant is an integrated system consisting of centralized control system which is connected to power distribution, generation, and transmission units that optimize, regulate, and manage the supply of electricity from distributed power generation sources to consumers. As per a study conducted by P&S Intelligence, in 2017, the global virtual power plant market generated $1,975.1 million and is predicted to advance at a 18.6% CAGR during the forecast period (2018–2023). 

Virtual power plants are based on 3 types of technologies, namely supply side, mixed asset, and demand response. Out of these, the demand response technology was the most in demand during 2013–2017 and the situation is projected to remain the same during the forecast period as well, in terms of revenue generation. Under this model, incentives such as low tariff are offered to the consumers of electricity by power generation utilities for reducing their power consumption during peak hours. This is aids the effective management of demand-supply scenario of power at grid level, at a certain point of time.   

A major driving factor the demand for virtual power plants is the aging and inadequate power evacuation infrastructure. Power evacuation infrastructure is characterized by distribution network and power transmission; however, in most of the countries, power transmission network is obsolete and not capable of accommodating the intermittent flow of electricity which is supplied by renewable power projects. Furthermore, high transmission and distribution losses and frequent network failure lead to revenue loss for power utilities. The power transmission network is highly inadequate especially in developing countries and is not capable of catering to the growing need for energy, which is resulting in the rising requirement for virtual power plants.   

A key trend being observed in the virtual power plant market is the transition from centralized to decentralized power systems. The increasing integration of renewable energy projects, such as wind power projects and solar power plants, in the overall power infrastructure have posed new technical challenges for power grids or power transmission networks. Because of the intermittent nature of renewable power projects, the energy produced from these sources is highly unpredictable, making it less viable for traditional power grid network. Virtual power plant has the capability to address this problem as it ensures a balance between demand and supply of electricity. 

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