"Oranges grown south of the Huai River are sweet oranges, while those grown north of the Huai River are bitter oranges. Their leaves may look similar, but their tastes are different."
The same principle applies to virtual power plants; their business models vary depending on the electricity market they are driven by.
The electricity supply chain can be segmented into producers, sellers, and commanders.
Producers refer to power plants such as hydropower, wind power, thermal power, and photovoltaic power plants, which are power generation resources.
A seller refers to an electricity operator that sells electricity to electricity users such as manufacturing plants, public institutions, and households.
The commander refers to virtual power plants, which utilize energy storage power plants and other technologies to integrate and regulate the regional layout of producers and sellers, ensuring that electricity resources can be distributed to various end users in a timely manner.
In other words, the core role of virtual power plants is to integrate producers, sellers, energy storage facilities, and electricity users in the power supply chain, maximizing their role and ensuring a stable power supply.
The saying "oranges grown in the south become trifoliate oranges when grown in the north" applies to the classification of virtual power plants.
Based on the working principle of virtual power plants, and considering the different levels of development of different parts of the power supply chain in different regions, where producers are dispersed in some places and sellers are dispersed in others, the virtual power plant business models in the market are currently mainly divided into the following two types.
First, virtual power plants on the power supply side.
In regions where producers are dispersed, power generation resources such as photovoltaics and wind power are scattered, and the power supply fluctuates greatly. Virtual power plants need to smooth out these fluctuations at the power supply end.
Once the virtual power plant operator on the power supply side integrates sufficient resources and can predict in advance the factors affecting the stable supply of electricity resources, it can help sellers avoid error costs and provide accurate and timely electricity to the producers' customers—transmission and transportation suppliers.
Currently, virtual power plants play a role on the power supply side mainly in European countries such as Belgium, France, Italy, and the Netherlands. The representative company is Next Kraftwerke, which is one of the largest virtual power plant operators in Europe.
Second, virtual power plants on the load side.
In regions where sellers are dispersed and power market operators are not centralized, load fluctuations are severe and electricity prices fluctuate significantly. Virtual power plants are needed to smooth out these load fluctuations.
Once the integration of virtual power plant resources on the load side reaches a certain level, it will help to promptly fill the power gap that occurs during peak daytime electricity demand in the region.
Virtual power plants play a role on the load side primarily in countries like the United States, with Tesla being a representative company.
The Direction of Virtual Power Plants in my country: Adapting to Local Conditions
Currently, my country's virtual power plant market is in its initial development stage, and most of the first batch of virtual power plants in China are load-side virtual power plants.
As a product of policy guidance, my country's virtual power plant market was further formed and improved after the government encouraged users to respond through subsidies and incentives.
As the virtual power plant market gradually matures, my country's virtual power plants may gradually transition from being primarily policy-driven to being primarily market-driven, forming a business model that takes into account both the power supply and load sides, playing a role on both the power supply and load sides simultaneously.
After all, my country's power generation structure is similar to that of Europe, and the industrial and commercial market on the load side is huge, both of which provide fertile ground for virtual power plants to take root and flourish.
Three key technologies are fundamental to entering the virtual power plant market.
Virtual power plants organically combine power generation, grid, load, and energy storage. Market entry points mainly include the power source side, grid side, load side, and energy storage side.
Representatives of power source entry include energy giants such as power generation groups; representatives of grid entry include grid companies and related enterprises; representatives of load entry include power suppliers that directly connect with end-users; and representatives of energy storage entry include pumped hydro storage, electrochemical energy storage, molten salt thermal energy storage, and other energy storage systems.
Once a company enters the virtual power plant market, the level of its three core technologies will determine its success or failure.
First, for virtual power plant operators on the power supply side, power prediction technology is crucial.
Virtual power plants need a deep and detailed understanding of the power grid architecture and operating rules. Based on this understanding, they can make real-time, accurate, and efficient predictions of factors affecting power plants to ensure the stability of power supply.
Secondly, the load forecasting technology of virtual power plant operators on the load side determines their development within the industry.
The peak electricity consumption periods for large manufacturing enterprises and residents differ, potentially occurring completely separately or overlapping at certain times. Load-side virtual power plant operators need to clearly define their user profiles and make targeted adjustments.
Finally, after the power supply forecast on the power source side and the power load forecast on the load side are completed, the scheduling algorithm technology that connects the two to ensure the smooth operation of power supply also has very high requirements.
In summary, for companies entering the virtual power plant market, the three key technologies for success or failure are: power supply forecasting technology on the power source side, power load forecasting technology on the load side, and scheduling algorithm technology that connects the two sides smoothly after forecasting.
Resource integration, the nutrients for developing virtual power plants
Once a company enters the virtual power plant market, its initial resource integration capabilities and subsequent service levels are the core factors restricting its development.
In terms of early-stage resource integration capabilities, a virtual power plant operator that integrates power plants with various types of resources such as wind power, hydropower, thermal power, and photovoltaic power will have a resource complementarity advantage that is difficult for the latter to match compared to operators that only integrate one or a few types of power plants.
Once virtual power plants have matured, the technology and resources provided by different operators will be comparable. At this point, the success of development will depend on the level of service provided by the companies in the later stages.
After all, when a virtual power plant operator helps you obtain demand response subsidies, connects with your existing energy storage products, and helps you gain "non-business revenue," no one would dislike it.
Poisonous medicines: Hidden worries behind stunning scenery
The future of virtual power plants looks promising, but beneath the eye-catching glamour lie hidden concerns, such as regional barriers, local isolation, and policy risks in my country.
Regarding regional barriers, different regions have different levels of development, and the policies for the establishment of virtual power plants vary. Different regions have different policies, and once a virtual power plant operator has matured in a certain place, cross-regional expansion will be a problem.
Regarding regional isolation, virtual power plants serve the local power grid system, and the two have been firmly bound together from the beginning. In the short term, it is local market competition, but in the long term, after relevant policy documents are completed, it remains to be seen how national market competition will develop.
Regarding policy risks, the development of virtual power plants is currently driven by policy, and the market has not yet played a leading role. What the future holds remains to be seen.
Currently, companies related to virtual power plants in my country include Juhua Technology (300360), Guoneng Rixin (301162), Wanliyang (002434), Hengshi Technology (300513), Dongtu Technology (300353), Guodian Nanzhi (600268), Linyang Energy (601222), Nandu Power (300068), Keda Intelligent (300222), and Kelun Electronics (002121).
