Explainer | What is a virtual power plant, and how will it help China achieve its carbon-neutral goal?

Investors, power companies, and governments have been turning to virtual power plants (VPPs) as a way of meeting future electricity demand

Compared with traditional demand-side management, VPPs can realise two-way interaction between user and power grid

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The central government has introduced several policies promoting the development of VPPs. Photo: Xinhua

Published: 11:00am, 27 Dec 2022

As China ramps up the development of its renewable energy sector to achieve carbon neutrality by 2060, investors, power companies, and governments have been turning to virtual power plants (VPPs) as a way of meeting future electricity demand.

The central government has introduced several policies promoting the development of VPPs. More than 10 Chinese provincial and municipal governments, including Beijing and Shanghai, have included them in their five-year development plans for the energy sector.

So what exactly is a VPP? And how will it help steer China’s power system towards net zero emissions?

VPP is considered one of the important tools to realise clean energy aggregation, form interactions between power supply and demand, and promote power market reform.

China aims to have renewable energy sources make up 80 per cent of its energy mix by 2060, the year it hopes to reach nationwide carbon neutrality. However, power generated from renewable energy sources such as wind and solar is intermittent because of its dependence on the right weather conditions.

With limited flexible resources available on the power generation side, an energy system with variable renewable capacity cannot effectively handle real-time load balancing. Therefore, it is necessary to tap the potential of flexible resources on the demand side.