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2020

Virtual Power Plant Market

Virtual Power Plant Market Size, Share, Competitive Landscape and Trend Analysis Report by Technology and by End User : Global Opportunity Analysis and Industry Forecast, 2020-2027

EP : Storage and Distribution

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Author's: Eswara Prasad and Pratik Mandon | Eswara Prasad
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Virtual Power Plant Market Outlook - 2027

The global virtual power plant market size was valued at $1.3 billion in 2019, and is projected to reach $5.9 billion by 2027, growing at a CAGR of 21.3% from 2020 to 2027. Virtual power plant, an aggregated decentralized power plant, consisting of decentralized power systems with the purpose to integrate different distributed energy sources such as solar PV cells, wind turbines, and hydroelectric plants. Additionally, virtual power plant offers efficient power generation even at peak load periods with a scope to trade or sell power in trading market. Virtual power plant is medium scale power generating unit integrating different renewable energy sources for solar, wind and other flexible power consumers and storage systems. A virtual power plant consists of different mixed assets that are connected via central control system processing wide range of information, such as current prices at the power exchange, price and weather forecasts, and grid information of the system operators.

Growing penetration for renewable energy in power generation sector coupled with changes in dynamics of power grids from centralized to distributed is expected to drive the virtual power plant market growth. Further reduction in energy cost and easy accessibility of energy storage will boost the market demand. For instance, Tesla reported in their recent virtual power plant project 70% decrease in grid consumption, while bills have been reduced by up to 30%. Additionally, VPP is more efficient and flexible to deliver the peak load electricity in a short notice period compared to conventional power plant set up that will further drive the market growth. Flexibility in trading with virtual power plant due to price volatility attracted lot of new participants. Customers can sell excess energy at trade market as well as buy energy at lower price. Such features of virtual power plant is expected to further fuel the demand. However, high-frequency of electromagnetic and radio waves leads to health concerns in infants and old people, which may hamper this growth. Nonetheless, stringent government regulations regarding eco-friendly power generation will further enhance the market for renewable energy, thus fueling the demand for virtual power plant market.

Virtual-Power-Plant-Market-2020-2027

Renewable energy is derived from sources that are naturally replenished and have an infinite supply, such as sunlight and wind. These resources offer the potential for capturing economies of scale through innovative technologies, allowing for increased efficiency and cost-effectiveness over time.

While progress on renewable energy at the national legislative level may sometimes be slow, change can still occur on the state and local levels. In the absence of a national price on carbon emissions, a coalition of influential companies with significant power demands and environmental sustainability goals can serve as a market driver for Virtual Power Plants (VPPs).

A Virtual Power Plant is a collective of small energy producers, typically comprised of various renewable energy resources like wind turbines and solar panels. When combined, these distributed energy sources can provide the grid with a generation profile that is comparable in size and reliability to a conventional power plant. By forming a virtual power plant, these decentralized sources can operate within existing transmission constraints, and additional sources can be incorporated as capacity allows.

VPPs offer several benefits, including increased grid flexibility, improved integration of renewable energy, enhanced grid stability, and optimized energy management. They can act as a valuable asset for balancing electricity supply and demand, especially in situations where there may be intermittent generation from renewable sources.

Overall, VPPs demonstrate the potential for a decentralized and collaborative approach to energy production and grid management. By leveraging the collective capabilities of small-scale renewable energy resources, VPPs contribute to the ongoing transition towards a more sustainable and resilient energy system.

Furthermore, the need for flexibility in the energy system is driven by intermittent and fluctuating renewable energy sources such as wind and solar power. Unlike traditional energy sources, these renewable sources do not have variable production costs and do not produce emissions, making them environmentally friendly. However, their dependency on weather conditions poses challenges in managing and balancing the grid effectively.

To ensure a reliable and balanced energy supply, flexibility is required to address the gaps and fluctuations in renewable energy production. This flexibility can be achieved through various means, including energy storage systems, demand response programs, flexible power generation sources, and grid management technologies. These mechanisms help to integrate and optimize the intermittent renewable energy sources into the existing energy system.

Decentralization, although not a solution in itself, is a consequence of the necessary shift in production technologies. While there are no inherent issues with large, centralized power plants, there is a growing need to transition away from carbon-emitting plants to reduce environmental impact and combat climate change. Renewable energy sources, such as wind and solar, are often smaller and distributed in nature, leading to a trend of decentralization in the energy sector.

The process of decentralization is complex and challenging in several ways. It requires a shift from the traditional centralized model to a more distributed and interconnected system, necessitating changes in infrastructure, grid management, regulatory frameworks, and market structures. Additionally, integrating decentralized energy sources into the grid while ensuring reliability, stability, and efficient energy management poses technical and operational challenges.

Electric vehicles (EVs) and clean energy sources are expected to play a crucial role in global energy consumption in the future. It is projected that EVs will account for more than half of all new light-duty vehicle sales worldwide by 2040. This transition towards electric mobility is driven by the need to reduce greenhouse gas emissions and mitigate the environmental impact of transportation. As EV adoption increases, it will have a significant impact on global oil demand, which is currently around 95 million barrels per day and projected to reach 110 million barrels per day.

To support the growing demand for electric vehicles, there will be a need for increased electric generation capacity. This will involve expanding clean energy sources such as wind, solar, and hydropower to ensure a sustainable and low-carbon energy supply for EV charging.Thus results in surging demand for virtual Power plant market.

In line with the global goal of reducing CO2 emissions, the use of smart, intelligent, and networked devices for waste-free energy management is crucial. These devices enable efficient energy consumption and optimize the utilization of renewable energy sources. Smart meters, smart power grids, and advanced building energy management systems are examples of innovative technological solutions that contribute to improving the competitiveness of the global industry while reducing energy consumption.

Legislative actions have also been taken to increase building efficiency and promote energy savings. Energy efficiency standards and regulations for buildings help to drive the adoption of energy-saving technologies and practices, reducing overall energy consumption and carbon emissions.

By fully utilizing the potential of renewable energy sources and implementing energy-saving measures, we can make significant progress towards achieving global sustainability goals and improving energy services. The combination of electric vehicles, clean energy sources, and intelligent energy management systems plays a vital role in creating a more sustainable and efficient energy future.

The market is segmented into technology, end user, and region. Based on technology, the market is classified into distribution generation, demand response, and mixed asset. Based on end user, the market is divided into commercial, industrial, and residential. Based on region, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

Europe accounted for highest virtual power plant market share owing to the presence of large number of industry players and new government initiatives across different European countries on 100% green energy. Asia-Pacific possesses highest growth in the global virtual power plant market. This can be accounted to the rising energy demand in countries, such as China and India with rapid industrialization. For instance, by country of activity, China accounts for 36 percent of the steel industry’s annual contribution to global GDP. U.S. is expected to lead the market in North America and witness high demand for virtual power plants, owing to the increase in demand for renewable energy.

Major players have adopted product launch, business expansion to sustain the intense market competition. The key players profiled in the report include ABB Ltd., AGL Energy, AutoGrid Systems, Inc., Enbala Power Networks, Enel X Inc., General Electric Company, Siemens AG, Schneider Electric SE, Limejump Ltd., and others.

Global Virtual Power Plant Market, By Region

Europe accounted for highest market share owing to the presence of large number of industry players and new government initiatives across different European countries on 100% green energy. Asia-Pacific possesses highest growth in the global virtual power plant market. This can be accounted to the rising energy demand in countries, such as China and India with rapid industrialization. For instance, by country of activity, China accounts for 36 percent of the steel industry’s annual contribution to global GDP. U.S. is expected to lead the market in North America and witness high demand for virtual power plants, owing to the increase in demand for renewable energy.

Virtual Power Plant Market
By Region
2027
Europe 
North America
Asia-Pacific

Asia-Pacific exhibits CAGR of 26.5% during 2020-2027

Global Virtual Power Plant Market, By Technology

Demand response accounted for highest revenue share in the virtual power plant market. This can be attributed to grid modernization with emerging virtual power plant industry that will lead to increasing demand in demand response. Mixed asset is expected to witness highest market growth owing to greater application of smart devices to control customer-sited loads.

Virtual Power Plant Market
By Technology
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Mixed Asset is projected as the most lucrative segment

Global Virtual Power Plant Market, By End User

Industrial segment accounted for highest revenue share. Growing application of small and medium sized VPP in industrial areas will drive the market growth. High reliability and energy efficiency during peak load time periods made VPP suitable for industrial application. Residential segment is expected witness highest growth in forecast timeframe.

Virtual Power Plant Market
By End User
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Residential sub-segment is projected as the most lucrative segment

Key strategies

In Feb 2018, Enel got a contract tendered by four Japanese utilities for demand response of 165 MW growing from 60 MW. This will expand company’s market size by three times attracting new customers.

In March 2018, ABB Ltd. launched its virtual power plant business in Japan enabled by ABB solutions. This expanded company’s market presence in Asia pacific.

In April 2019,Dubai Electric and Water Authority made a partnership with Enbala to build first virtual powerplant in Dubai. This will enhance company’s market growth in middle east region penetrating new market segments

In May 2019, Siemens expanded its business in virtual power plant segment with Vibeco (Virtual Buildings Ecosystem) to provide decentralized energy system This will provide ecological benefits to society as well as new revenue streams expanding the market growth.

Key Benefits For Stakeholders

  • The global Virtual Power Plant market analysis covers in-depth information of major industry participants.

  • Porter’s five forces analysis helps to analyze the potential of buyers & suppliers and the competitive scenario of the industry for strategy building.

  • Major countries have been mapped according to their individual revenue contribution to the regional market.

  • The report provides an in-depth analysis of the global Virtual Power Plant market forecast for the period 2020–2027.

  • The report outlines the current virtual power plant market trends and future estimations of the market from 2019 to 2027 to understand the prevailing opportunities and potential investment pockets. 

  • The key drivers, restraints, and virtual power plant market opportunity and their detailed impact analysis is elucidated in the study.

Virtual Power Plant Market Report Highlights

Aspects Details
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By Technology
  • Distribution Generation
  • Demand Response
  • Mixed Asset
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By End User
  • Industrial
  • Commercial
  • Residential
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By Region
  • North America  (U.S., Canada, Mexico)
  • Europe  (Germany, UK, France, Italy, Rest of Europe)
  • Asia-Pacific  (China, Japan, India, Australia, Rest of Asia-Pacific)
  • LAMEA  (Brazil, Saudi Arabia, South Africa, Rest of LAMEA)
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Key Market Players

Enel x, INC., SUNVERGE ENERGY INC., AGL ENERGY LIMITED, Limejump Energy Ltd., SCHNEIDER ELECTRIC SE, SIEMENS AG, ENBALA POWER NETWORKS, ABB LTD., AUTOGRID SYSTEMS, INC., General Electric Company

Analyst Review

Virtual power plant (VPP) as a power grid management system links several types of distributed generation as one power plant, and operates the one power plant on demand response and ancillary service in power grid. VPP is a technology to efficiently manage different resources related to generation, storage, and demand by using software. It strengthens the flexibility of power grid operation based on Information Communication Technology (ICT), totally managing both supply and demand side resources.

The use of renewable energy sources and energy storage systems is on an increase while fostering new policies for energy industries. Changes in power systems from centralized power systems to distributed power systems include sustainable and renewable energy sources, emergency generators, and energy conversion & savings. However, distributed energy resources can cause instability and unreliability of power grids, and there is a lack of business models permitting general consumers to participate in the wholesale and retail markets for profit.
 

Author Name(s) : Eswara Prasad and Pratik Mandon | Eswara Prasad
Frequently Asked Questions?

Market value of virtual power plant market was $1.3 billion in 2019.

Demand response market holds the maximum share of the virtual power plant market.

To get latest version of virtual power plant market report.

Growth of virtual power plant market in 2027 will be 26.62%.

Virtual power plant market is in expansion phase. Rising number of new virtual power plant projects, collaboration between plant manufacturers and technology providers, and new product launches are the key trends in the virtual power plant market.

On the basis of top growing big corporation we select top 10 players.

Business expansion, new product launch and partnerships are the key growth strategies of virtual power plant industry players.

Mixed asset segment is the most influencing segment in the virtual power plant market report.

Asia-pacific will provide more business opportunities for virtual power plant market in coming years.

Commercial areas such as restaurants, hotels, cafeteria, different medium and small scale industries, and residential areas are potential customers of virtual power plant industry.

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Virtual Power Plant Market

Global Opportunity Analysis and Industry Forecast, 2020-2027