The global virtual power plant (VPP) market was valued at $1,975.1 million in 2017 and is projected to reach $5,510.2 million by 2023, progressing at a CAGR of 18.6% during the forecast period (2018–2023). The demand response category held the largest revenue share, by technology, in the market, during the historical period (2013–2017).
The virtual power plant market is expected to witness the fastest growth in the category of mixed asset, during the forecast period. This can be attributed to energy efficient systems that work together to reduce electricity consumption and also, ensure supply of clean power in a targeted manner.
Growing Investments in Setting Up Virtual Power Plants a Key Market Trend
The inflow of investments is a major trend in the virtual power plant market. For instance, in 2018, Tesla Inc. announced plans to set up a 250 MW VPP in Adelaide, South Australia. VPPs offer a centralized control system, which governs the functioning of the power generating and transmitting units, and they also require lesser capital to set up. On the other hand, conventional power plants require huge capital for construction as well as management.
Growing Capacity of Renewable Power Projects the Major Driver
The major factor driving the virtual power plant market is the growing capacity of renewable power plants. It has been claimed that renewable sources of energy would account for 20% of the power generated, globally, by the end of 2035. Renewable power projects create the need for a centralized infrastructure, to support the continuous flow of electricity. For instance, India aims to generate 150 GW of renewable power by the end of 2022. This would accelerate the development of VPPs, in an attempt to integrate the newly developed renewable energy projects with the centralized electricity distribution infrastructure.
Segmentation Analysis of Virtual Power Plant Market
Demand response was the largest revenue category, in the virtual power plant market, by technology, in 2017. This can be attributed to the lower cost of development and higher operational performance of the VPPs based on this technology. Owing to this, the demand for these VPPs is extremely high in North America, which is also the largest market for VPPs in the world.
The electric vehicle category is projected to witness the fastest growth in the virtual power plant market, in terms of revenue, during the forecast period, on the basis of consumer. This can be attributed to the rise in the deployment of electric vehicle charging infrastructure, to cater to the growing number of electric vehicles on the road, as a result of the concerns regarding the pollution caused by petrol and diesel-based vehicles.
Geographical Analysis of Virtual Power Plant Market
North America and Europe are expected to account for over 70.0% share in the global virtual power plant market by 2023. This can be mainly attributed to the integration of new renewable power projects, deployment of electric vehicle charging infrastructure, and the need for reliable power supply from distributed energy resources.
APAC, LATAM, and MEA also hold considerable shares in the virtual power plant market, on account of the adoption of smart energy management solutions and development of new renewable power projects in the regions.
China is expected to lead the APAC market, generating revenue of over $224.1 million, in 2023. This can be mainly attributed to the development of renewable power projects, along with the large industrial sector of the country.
Mexico is expected to be the fastest-growing virtual power plant marketing the LATAM region. The rising need for effective management of the power generated from distributed energy resources is the major factor contributing to the growth of the market in Mexico.
Despite being heavily dependent upon oil and gas to meet its primary energy requirement, Saudi Arabia has initiated a large number of renewable energy projects. Owing to this, it is expected to hold a considerable share in the MEA region in the forecast period.
Competitive Landscape of Virtual Power Plant Market
In February 2017, ABB Inc. announced its investment in Enbala Power Networks Inc., through its venture capital unit, ABB Technology Ventures. Under the partnership, the two companies will jointly develop distributed energy resource management systems (DERMS), in order to help electricity providers and grid operators manage energy lifecycle from distributed energy units effectively.
Some other important players operating in the virtual power plant market are Enbala Power Networks Inc., AutoGrid Systems Inc., AGL Energy Limited (AGL), EnerNoc Inc., ENGIE Storage Services NA LLC, and Siemens AG.