How Long Until Virtual Power Plants Become Viable? (AI Translation)
Listen to the full version


文|财新周刊 赵煊
By Caixin Weekly‘s Zhao Xuan
“如果每天给你四五千块钱,晚上少用电、中午多用电,你是否愿意?”
"If you were given four or five thousand yuan every day, would you be willing to use less electricity at night and more at noon?"
山西一家零部件铸造冶炼企业选择尝试:通过参与虚拟电厂,在电力市场中峰谷错位用电,2023年8月至2024年8月期间累计收益140多万元,日均收益大约4000元。
A parts casting and smelting enterprise in Shanxi chose to experiment with participating in a virtual power plant. By leveraging peak and off-peak electricity usage in the power market, the company accrued a total revenue of over RMB 1.4 million from August 2023 to August 2024, with average daily earnings of approximately RMB 4,000.
“此外,这家企业的日常用电一年还能节省电费约400万元——度电大约节省四分钱,年用电量约一亿度。”山西风行测控虚拟电厂事业部总监南豆对财新称。上述冶炼企业是这家虚拟电厂运营商的签约用户。
"In addition, the company's daily electricity usage can save about 4 million yuan in electricity bills annually — roughly 0.04 yuan saved per kilowatt-hour, with an annual electricity consumption of about 100 million kilowatt-hours," said Nan Dou, Director of the Virtual Power Plant Business Unit at Shanxi Fengxing Measurement and Control, to Caixin. The aforementioned smelting company is a contracted user of this virtual power plant operator.

- DIGEST HUB
- A parts casting and smelting enterprise in Shanxi earned over RMB 1.4 million in one year by participating in a virtual power plant, optimizing electricity usage.
- Virtual power plants aggregate and manage distributed power loads and energy resources without constructing physical plants, participating in electricity market transactions.
- China's virtual power plant market is growing, projected to reach RMB 10.2 billion by 2025, but faces profitability challenges due to policy dependencies and market maturity.
A parts casting and smelting enterprise in Shanxi has successfully implemented a virtual power plant strategy, earning over RMB 1.4 million from August 2023 to August 2024 and saving around RMB 4 million annually on electricity bills through optimized electricity usage patterns.[para. 1][para. 3] Virtual power plants (VPPs) are digital systems that manage and aggregate distributed energy resources like power loads, energy storage, and charging stations to participate in electricity market transactions.[para. 3][para. 5] Unlike traditional power plants, VPPs require minimal physical infrastructure, relying instead on controllers and sensors to form an intelligent system.[para. 5]
The motivation for VPPs stems from the need to manage the increasing proportion of intermittent renewable energy sources, such as photovoltaic and wind power, in the power grid.[para. 6] VPPs help balance supply and demand, relieve peak loads, and enhance new energy consumption.[para. 6] Recent policy initiatives, such as the "Action Plan for Accelerating the Construction of a New Power System (2024-2027)" by China's National Development and Reform Commission, aim to advance VPP development to achieve "dual carbon" goals by aligning local sources, loads, and storage resources.[para. 11]
Interest in VPPs is rising both in financial markets and among tech companies. Companies like Nvidia see significant commercial potential in smart grids enabled by AI and intelligent meters.[para. 19] Predictions by Huatai Securities estimate the VPP market in China will reach RMB 10.2 billion by 2025, potentially expanding to hundreds of billions by 2030.[para. 28] Multiple VPP projects have been launched in cities across China, including Chengdu, Qingdao, and Chongqing, as well as Shenzhen, which boasts an adjustable load capacity of 3.1 million kilowatts — equivalent to three large thermal power units.[para. 30][para. 31]
VPPs can be broadly categorized into three developmental stages: closed-type demand response, early marketization, and mature market-oriented stages.[para. 45][para. 46][para. 54] In the initial stages, VPP profitability largely depends on government subsidies for demand response, but this revenue model is not sustainable for long-term viability.[para. 59][para. 61] For example, a Shenzhen VPP operator earns an annual income of less than RMB 500,000, insufficient to cover initial software and hardware investments.[para. 61] As the VPP market evolves, operators hope to clarify their market roles, rights, and responsibilities, which will be crucial for profitability.[para. 80][para. 88]
Standardization efforts are underway, with "Virtual Power Plant Management Specifications" and "Technical Specifications for Resource Allocation and Evaluation of Virtual Power Plants" set to be implemented by February 2025.[para. 92] Technical capabilities and effective market participation are essential for VPPs to thrive. Companies like CGN New Energy, which have piloted VPPs aggregating capacities equivalent to large thermal power units, emphasize the need for robust trading capabilities and flexible aggregation technologies.[para. 98][para. 106]
User participation is critical for the success of VPPs. Industrial users, who accounted for 65.9% of China's electricity consumption in 2023, must become more engaged in the electricity market.[para. 137][para. 138] Companies like BASF have begun participating in demand-side response programs through VPPs, guided by price signals and sustainability goals.[para. 144][para. 148] The development of electricity spot markets will further enhance VPP functionality by creating more dynamic pricing environments, encouraging active market participation from both producers and consumers.[para. 157][para. 163]
In summary, while the VPP sector shows promising potential for balancing renewable energy supply and demand, significant challenges remain in achieving profitability, user engagement, and market maturation. Initial successes, like those seen in Shanxi and Shenzhen, offer a glimpse into the future of a more distributed and intelligent power system, but further market reforms and technological advances are necessary for wider adoption and financial viability.[para. 65][para. 70][para. 76]
- Shanxi Fengxing Measurement and Control Company
山西风行测控公司 - Shanxi Fengxing Measurement and Control Company operates as a virtual power plant in the spot market, aggregating 240,000 kilowatt hours annually with user energy savings of 0.01 yuan per kilowatt hour. It entered the spot market in August 2023, transmitting price signals to users for optimized production scheduling. In Shanxi, 14 VPPs are connected, with four participating in the spot market.
- Atte Smart Power
奥特迅 - Atte Smart Power is a company that has been actively involved in the virtual power plant sector. In mid-September, it achieved two consecutive daily limit increases in the stock market by integrating its resources into Shenzhen's virtual power plant, reflecting heightened interest from the capital market.
- Sanhui Electric
三晖电气 - Sanhui Electric (002857.SZ) specializes in smart electric meters. It has seen a significant rise in its stock, with five consecutive trading limit-ups in early July, driven by the increasing interest in virtual power plants and related technologies in the capital market.
- Beijing Creative Distribution Automation
北京科锐 - Beijing Creative Distribution Automation (002350.SZ) specializes in manufacturing distribution equipment. From June to August 2023, its stock experienced significant gains, achieving "six consecutive increases" and "eight consecutive increases," driven by the growing interest in virtual power plants in the market.
- China General Nuclear Power Group (CGN)
中广核 - China General Nuclear Power Group (CGN) is involved in virtual power plant (VPP) projects across multiple Chinese regions, like Shandong, Shanghai, and Guangdong. With a total aggregated capacity of 128 MW, CGN operates VPPs integrating resources such as distributed photovoltaics, storage, and charging infrastructure. Their VPPs help alleviate new energy grid integration issues, exemplified by their full-green-power VPP in Ningbo.
- NVIDIA
英伟达 - NVIDIA CEO Jensen Huang mentioned that future grids could operate like an "energy store," with AI optimizing energy supply and demand. NVIDIA is developing smart meters that could facilitate an "internet-like grid," allowing resource and user connections akin to Uber. The company sees significant potential for AI in enhancing grid management, possibly making energy applications one of AI's most profitable sectors.
- Wanbang Digital Energy
万帮数字能源 - Wanbang Digital Energy's General Manager, Niu Lei, stated that 2023 has seen increased capital attention on virtual power plants. He believes that light-asset businesses in the energy market have the potential to become "unicorn" companies.
- December 2018:
- The Shanxi power spot market began its trial operation.
- August 2022:
- Shenzhen established the country's first virtual power plant management center.
- By 2023:
- Shenzhen subsidized the virtual power plant initiative with 4.5 million yuan.
- August 2023:
- Fengxing Control's virtual power plant entered the power spot market.
- August 2023 to August 2024:
- A parts casting and smelting enterprise in Shanxi participated in a virtual power plant and accrued a total revenue of over RMB 1.4 million.
- End of 2023:
- The Shanxi power spot market transitioned to official operation.
- 2024:
- The capital market's enthusiasm for virtual power plants has been persistently rising since the beginning of the year.
- June 2024:
- Beijing Kereal (002350.SZ) recorded six consecutive rises.
- Early July 2024:
- Sanhui Electric (002857.SZ) experienced five consecutive limit-up sessions.
- July 2024:
- China General Nuclear Power Group (CGN) launched an all-green virtual power plant project in Ningbo.
- August 6, 2024:
- The National Development and Reform Commission issued the 'Action Plan for Accelerating the Construction of a New Power System (2024-2027)'.
- August 2024:
- Beijing Kereal (002350.SZ) recorded eight consecutive rises.
- Expected by 2024:
- Shenzhen is expected to provide a subsidy of 14 million yuan for the virtual power plant.
- PODCAST
- MOST POPULAR