With the rapid increase in the penetration rate of new energy on both the supply and demand sides, the difficulty of real-time balance regulation of the power grid has increased. The "double high" and "double random" characteristics of the power system are obvious, and it is urgent to explore new regulation resources to provide support for the new power system. Virtual power plants, as a highly economical regulation method, have a cost only 12% to 15% of thermal power, and have received high attention from the state, local governments, and the market. In October 2021, the State Council issued the "Action Plan for Peak Carbon Emissions by 2030", which proposed the goal of achieving a demand response of at least 5% of peak load before 2030. On January 29, 2022, the National Development and Reform Commission and the National Energy Administration released the "14th Five Year Plan for Modern Energy System", which encourages the demonstration of virtual power plants that aggregate various resources such as industrial adjustable loads, building air conditioning loads, big data center loads, user side energy storage, and energy interaction between new energy vehicles and the power grid (V2G). In addition, more than ten provinces and regions across the country have issued clear guidelines for the operation of virtual power plants or demand response. Relevant institutions predict that the investment scale of virtual power plants will reach 71.8 billion yuan and 99.8 billion yuan respectively in 2025 and 2030, and the operating market scale will reach 93.219 billion yuan and 128.31 billion yuan respectively.

The value of virtual power plants

Virtual power plants have high comprehensive value for the entire power system. The important pillars of the new power system include new energy, energy Internet of Things, distributed energy, V2G, and hydrocarbons. Virtual power plants can effectively connect them through intelligent communication and aggregation, including providing auxiliary services such as peak shaving, frequency regulation, and backup on the grid side, alleviating grid congestion, delaying equipment upgrades, and serving stable operation of the grid; On the power generation side, promote the consumption of new energy, strengthen distributed energy management, and coordinate regional energy optimization; On the user side, assist users in participating in the electricity market and making profits, provide energy efficiency management services, emergency power services, distributed energy services, etc; In other aspects, accelerate the diversified transformation and competition of the electricity market, help ensure the safe and stable operation of the power system, facilitate the supervision of the power system, and promote the development of digital economy such as 5G, blockchain, and cloud computing.

Current Status of Virtual Power Plant Pilot Projects

Typical virtual power plant projects have been implemented in southern, northern, eastern, and central regions of China, but overall they are still in the pilot stage. At present, the main profit models of virtual power plants include participating in demand response, auxiliary service trading, and spot markets. In addition, a comprehensive virtual power plant in a broad sense can make profits by participating in various businesses and providing comprehensive energy services such as energy efficiency management. At present, the mainstream profit model of virtual power plants in China is invitation based demand response and peak shaving. The overall situation is as follows:

At the market level, the virtual power plant market is relatively fragmented, which is not conducive to the large-scale development of virtual power plants. Specifically, demand response, auxiliary services, and spot markets belong to different management systems, which objectively leads to a single function of virtual power plants, limited channels for users to participate in virtual power plants, weak profitability of virtual power plants, and low user participation; Secondly, the virtual power plant market is usually relatively isolated from other electricity markets, and cannot participate in new energy consumption, auxiliary services, and share subsidy costs with other power plants on the same platform. In addition, virtual power plants mainly rely on recent invitations, with prices mostly fixed or tiered, making it difficult for operators to flexibly optimize incentive compensation methods and leverage pricing. Finally, the key nodes of virtual power plants, such as power dispatching, forecasting, communication, and metering, are all controlled by power grid enterprises. Therefore, the upper level design, demand release, and macro operation of virtual power plants are currently dominated by the two networks, setting a good benchmark and demonstration for the industry. However, there is also a situation where the power grid is both a referee and an athlete, objectively hindering the marketization process of virtual power plants.

At the policy level, there is currently no specific policy for virtual power plants at the national level. The positioning, development path, and boundaries of virtual power plants are relatively vague, and most pilot projects require joint support from the government and the power grid; There are significant differences in the admission rules and operation methods of virtual power plants in different regions, which leads to a high degree of customization in the construction of virtual power plants and difficulties in large-scale construction and operation. Even if the pilot is successful, its promotion and application are difficult; There are numerous levels of business management in virtual power plants, and users accessing virtual power plants need to interact with multiple operation, control, and trading platforms, which objectively increases the difficulty of construction and operating costs; The lack of a secure and effective mechanism for sharing and utilizing smart meter data has led to the need for builders of virtual power plants to repeatedly install expensive smart metering and communication facilities on the user side, resulting in significant waste of resources and blocking many small and medium-sized users from entering the virtual power plant; The construction of a unified electricity market is in its early stages, which is compounded by the fragmented policies of virtual power plants in various regions, making it difficult to achieve cross regional scheduling of virtual power plants.

On a technical level, the virtual power plant platform is the center of the virtual power plant, but distributed resources are the true foothold of the virtual power plant. Otherwise, even the best digital means and capabilities would be castles in the air. However, at this stage, the research and construction of domestic virtual power plants are usually carried out in a top-down manner, usually focusing on virtual power plant platforms and optimal scheduling algorithms. The access of distributed resources depends on customized schemes, and there is generally a lack of research and practice on accurate control, convenient access, edge computing and other aspects of distributed resources. In addition, the interface standards and communication protocols of terminal devices, energy aggregators, virtual power plant control platforms and other systems in different regions are not unified, which increases the difficulty of accessing distributed resources and raises the construction cost of virtual power plants. Finally, advanced communication, metering, and control technologies have been successfully piloted, but the complete set of technologies and operational models are not mature, resulting in virtual power plants still being dominated by non directly controlled virtual power plants.