Virtual Power Plant Market Overview
The global virtual power plant market is estimated to account for $1,975.1 million in 2017, and is projected to witness a CAGR of 18.6% during the forecast period. Increasing capacity of renewable power projects across major countries of the globe is driving the growth of the market.
GLOBAL VIRTUAL POWER PLANT MARKET, BY TECHNOLOGY, MW (2013-2023)
Based on technology, the virtual power plant market is categorized into demand response, supply side, and mixed asset. Demand response VPPs are estimated to hold the largest share in the global market, with a revenue contribution of more than 40.0% in 2017. The largest market size of the technology is due to its higher adoption in North America, particularly the U.S., which is also the largest market for virtual power plants in the world.
In terms of consumer, the virtual power plant market is segmented into industrial, commercial, residential, and electric vehicles. The revenue generated from the sales of electricity to industrial customers through VPPs accounted for an estimated share of more than 40% in 2017, fuelled by rapid industrialization in developing countries such as China, India, Brazil, and Indonesia.
Globally, North America has been holding the largest share in virtual power plant market till now, with an estimated contribution of more than 35% in terms of capacity, in 2017. The U.S., in particular, is the most advanced as well as the largest market for VPPs in the world. This is mainly due to the expanding capacity of renewable power projects in the country along with the development of smart grid network equipped with VPP technology.
Virtual Power Plant Market Dynamics
The growing integration of renewable energy projects such as solar power plants and wind power projects in the overall power infrastructure, has resulted in new technical challenges for power transmission networks or power grids. Due to the intermittent nature of renewable power projects, the power generated from these sources is highly unpredictable, making it less viable for conventional power grid network. VPP addresses this problem as it ensures a balance between the demand and supply of electricity. Such benefits are boosting the growth of the virtual power market across the globe.
All through these years, conventional power plants were being set up which required huge capital for construction as well as management. However, there has been a shift toward VPPs, which require lesser capital and can integrate various distributed energy resources. Countries such as China, the U.S., and Germany have initiated commercially-viable VPP pilot projects. By 2025, the global investment in the implementation of these plants is expected to reach $2.1 billion. Global players such as Tesla Inc. have announced large scale investment plans in setting up virtual power plants. This trend is benefiting the virtual power plant market.
Tremendous growth in renewable power projects is attributed to the ambitious renewable energy targets envisioned by emerging countries such as China and India. For instance, China aims to generate 150-200 GW of solar power by the end of 2020. The development of renewable power projects will generate large pool of distributed energy which will require well-developed power evacuation infrastructure in order to support reliable flow of electricity. The technological advancement is expected to increase the installation rate of VPPs in different countries, which in turn is expected to drive the growth of the global virtual power plant market.
In majority of advanced countries, power transmission network is obsolete and not capable of accommodating the intermittent flow of electricity supplied by renewable power projects. Moreover, frequent network failure, and high transmission and distribution losses result in revenue loss to power utilities. The above-mentioned challenges faced by power transmission network offer growth opportunities for VPPs. Through accurate estimation of electricity demand and supply, VPPs can regulate the power generated by renewable power projects and ensure consistent flow of electricity to the power transmission network. Such advantages of using VPPs are expected to drive the growth of virtual power plant market.
VPP is an advanced technological solution with its applications limited to the developed regions of North America and Europe. A large number of people worldwide still rely upon grid-connected power supply and are hesitant in installing VPP related solutions in their property. This is due to the lack of knowledge, budget constraints, and unwillingness of consumers to opt for these plants. Thus, the above-mentioned factors are restraining the growth of the global virtual power plant market.
Virtual Power Plant Market Competitive Landscape
Some of the major players operating in the global virtual power plant market are Enbala Power Networks, AutoGrid Systems Inc., Sunverge Energy Inc., AGL Energy Limited (AGL), Limejump Ltd, EnerNoc Inc., ENGIE Storage Services NA LLC, ABB Ltd., Schneider Electric SE, and Siemens AG.