In 1990, 17.067% of the energy consumed across the
world was generated from renewable resources, and this share rose to 18.054% in
2015, the World Bank claims. Further, it is being estimated that renewable
energy would account for almost 20% of electricity consumption by 2030. This
clearly shows an increase in the production of renewable energy, on account of
the concerns associated with the burning of fossil fuels. For instance, China
has had plans to produce almost 200 gigawatts (GW) of solar power by 2020 end, while
India is pursuing the production of 150 GW clean power by 2022 end.
Therefore, with the increase in the generation of
renewable energy, the virtual power plant market is predicted to grow,
from $1,975.1 million in 2017, to $5,510.2 million by 2023, at an 18.6% CAGR,
during 2018–2023 (forecast period). A virtual power plant (VPP) is essentially
a control system, which coordinates among different renewable energy plants to
supply the optimum amount of energy as per requirement. As the electricity
generated from renewable sources is not always reliable, utility firms often
face challenges in its distribution.
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Here, VPPs are being used, as they help in the better
management of the power supply, according to demand, by taking power from
different sources.
Primary and secondary balancing power sources and
minute reserve sources are used to manage this demand–supply gap, which is why
centralized grids are being transformed into decentralized ones, which can
quickly adapt to the varying electricity demand and source power from wherever
available and feasible.
Apart from the unreliability of renewable electricity,
the power transmission infrastructure in most places around the world is either
outdated or aging. In numerous places, the grid is not advanced enough to
support the intermittent flow of power from alternative-energy plants. Further,
such infrastructure regularly suffers malfunction and transmission losses,
which cost utility companies a lot of money. VPPs solve the problem to quite an
extent, by calculating the actual demand and rerouting the power from several
sources to the grid, to meet it.
Such power distribution systems work on the supply side,
demand response, or mixed assets technology, among which those based on demand
response have been the most productive during 2013–2017. This is because of
their large-scale usage in North America, which accounts for a significant
share of the global energy consumption. In such a model, utility companies
offer customers incentives or electricity at lower tariff, to encourage them to
reduce their power consumption during periods of peak requirement, to better
bridge the demand–supply gap.
Around the world, the largest usage of VPPs is seen in
North America, where the electricity production from clean sources is
increasing and smart grids are being developed. Within the region, the virtual
power plants market in the U.S., where these two trends are the most
visible, is larger. According to the U.S. Energy Information Administration,
the country’s power generation capacity grew by 25 GW in 2017, with half of
that accounted for by renewable sources. Additionally, that year, small-scale
solar plants, capable of producing 3.5 GW energy, were commissioned in the
nation.
Hence, as the share of renewable energy in the total electricity
production increases, so would the installation of VPPs to managing the supply.
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