Virtual Power Plant Market is Expected to Reach $4,502.5 Million by 2024

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Over the last decade, the utility sector has transformed drastically, primarily characterized by major technological disruptions. Power utilities have also faced constant pressures from regulatory bodies to reduce their carbon footprint and augment customer flexibility. In order to accommodate the growing requirements and meet the shareholder expectations, utilities have initiated several strategies such as rollout of dynamic pricing for reducing peak-load, large-scale investments in distributed generation systems, and improvements in grid balancing through demand response management. Although these offer great opportunities, they are also accompanied by certain restraints which include real-time data acquisition, inclusion of distributed energy resources into an utility’s operational portfolio, and execution of localized demand response. The expansive market penetration of distributed energy resources has given rise to the development of innovative technologies and strategies. One such technology is that of a virtual power plant, which is an aggregation of distributed generation units, controllable loads, and storage devices connected together to manage the energy flow within the cluster and the grid network.

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Energy generation from conventional sources adversely affects the environment due to greenhouse gas emission. As a result, there has been increasing demand for energy generation from renewable sources of energy. To control the variability of renewable energy generation sources, the energy storage systems play a crucial role. The energy storage systems include batteries which ensure flexible, reliable and continuous power supply to the grid network, thereby fulfilling the electricity demand of the end users. Moreover, these systems are used to maintain the power quality and continuity of power flow in the grid network to meet the electricity demand.

The technology is an automated grid control mechanism which aims to maintain the grid stability by changing the normal pattern of electricity consumption by end users during peak hours. The virtual power plants, when integrated with demand-response mechanism using information and communication technology, effectively curtail the demand supply gap and prevent power outages. Vehicle electrification and HVAC systems are mainly responsible for excessive load on the grid. To mitigate the issue on load hike due to vehicle electrification, smart charging mechanism using demand response technologies are used to shift the load on the grid during off peak hours. Some of the leading players such as Siemens AG provide demand response management system which, when integrated with virtual power plants will be an efficient solution to optimize the grid network.

North America is expected to remain the dominant market for virtual power plant in the forecast period, with the U.S. being the manufacturing hub for the virtual power plant. During the forecast period, Asia-Pacific region is expected to flourish as one of the most lucrative markets for virtual power plant manufacturers. Rising urban population and energy demand have resulted in huge demand supply gap which, in turn, has encouraged the need for decentralized power generation. However, the introduction of decentralized power generators in the ecosystem has certain drawbacks such as small scale generation capacity and discontinuous power supply. As a result, the adoption of virtual power plants has been triggered. Asia-Pacific region is also expected to exhibit significant growth opportunities for virtual power plant market due to the increased optimism of power generation through renewable energy sources in these countries.

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The driving factors for the growth of decentralized power generation are the increasing demand for the supply of electricity and the focus towards generating electricity through renewable sources of energy Decentralised power generation is defined as generation of electricity from renewable sources through substantial amount of small megawatt capacity units at local level which are connected to the grid network. Another looming concern over the stability of grid distribution network is low capacity utilization factor of the renewable energy sources which has led to the increase in energy demand for end users. As a result of the declining power quality and discontinuity in power supply, adoption of virtual power plants has been triggered in order to deliver uninterrupted power supply and reduce power outages. Increase in demand for decentralised power generation from industrial and commercial end users have further aggravated the need of virtual power plants. The public utilities and leading players in virtual power plant market are investing to facilitate the transition towards decentralized energy system.

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