Keeping current

Shenzhen launches ‘virtual’ power plant in hunt for energy gains


Solar panels in Shenzhen

When electricity is in short supply, it’s even more important to optimise the usage of what you have. That, in a nutshell, is what virtual power plants (VPPs) can do – tracking the electricity supply from various sources and matching it to spikes in demand.

“Virtual power plants are not really for generating electricity, but are systems for managing energy,” Yang Kun, executive president of the China Electricity Council, explained to China Daily last month. “Without affecting normal operations, they help maintain the balance of electrical supply and demand through accurate power management.”

VPPs are also described as networks of distributed energy resources like rooftop solar, battery charging stations and smart appliances – each of which is aggregated through software into a consolidated energy market.

This month Shenzhen launched its first VPP, connecting the cloud-based aggregator to 14 supply sources, including the city’s subway system with its huge numbers of solar panels.

The new VPP has capacity of roughly the same size as a large coal-fired power station.

The problem with the traditional approach of building more power plants to address periods of energy shortage is that the extra capacity can be idle for extended periods when electricity is in low demand. A VPP aims to replace some of that redundancy and reduce wastage across the network by funnelling unused power into storage in times of quieter demand and bringing it into the system in periods of peak need.

VPPs as cloud-based demand aggregators also have the ability to redirect power consumption across some areas of the grid in situations when demand outstrips supply.

In other parts of the world, they allocate higher charges for peaks in consumption, for instance, which encourages users to shift energy consumption away from the highest-use periods.

China has endured a series of power shortages this summer as unusually high temperatures have caused rivers to run dry, thus depriving hydropower plants of the means of generating electricity.

At the same time, the heat wave has meant additional demand for energy to cool homes and offices.

Virtual power plants are particularly useful if a grid has many inputs, as it increasingly does in China. The government has committed to achieving peak carbon emissions by 2030 and carbon neutrality by 2060, meaning that it is continually adding new sources of renewable energy. VPPs are being encouraged as a way of managing the potentially erratic supply that comes from having multiple inputs of different types of power, be it solar, coal, wind, hydro, biomass or nuclear.

Qi Haishen, president of Beijing Solar Tech, told the China Times that VPPs are like “ride hailing apps” that “efficiently optimise the power supply and demand”.

The current five-year plan (the 14th) makes mention of VPPs four times and calls for more of them to be created as additional sources of renewable energy come on line. Other regions already preparing to roll them out include Shanxi, Hebei, Jiangsu, Zhejiang and Shandong.

At a national level China currently has an installed capacity of 1 billion kilowatts of renewable power generation, with more coming. The central government has pledged that by 2060, 80% of the county’s energy mix will come from renewables.

In Shenzhen there are already plans for a much bigger footprint for VPPs: by 2025 the city wants them to handle 5% of the city’s annual load.

Of course, this is all good news for the companies that specialise in building them – Guoneng Rixin, Jinzhi Tech and Kehua included.

By 2025 investment in virtual power plants will exceed Rmb30 billion, West China Securities has predicted, and operating income across the market is expected to reach Rmb450 billion by 2030.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.