Virtual power plant enabling technologies led by software, finds Navigant Research

by Brianna Crandall — October 31, 2016 — A new report from Navigant Research examines the global market for virtual power plant (VPP) enabling technologies, providing an analysis of the market issues associated with VPPs, and forecasts for capacity and implementation spending, through 2025.

In a time of greater reliance on distributed energy resources (DER), whether those resources generate, consume, or store electricity, VPPs represent one strategy helping to manage the increasing prevalence of two-way power flows. The concept is that intelligent aggregation and optimization of DER can provide the same essential services as a traditional 24/7 centralized power plant, with transactive energy technologies such as demand-response (DR), solar photovoltaic (PV) systems, advanced batteries, electric vehicles (EVs) and VPPs transforming formerly passive consumers into active prosumers.

According to the report, the goal of a virtual power plant is to achieve the greatest possible profit for asset owners while maintaining the proper balance of the electricity grid, at the lowest possible economic and environmental cost. VPPs can stretch supplies from existing generators and utility demand reduction programs (and other forms of DER).

Virtual power plant technology relies on software and the smart grid, working remotely and automatically to combine a diversity of independent resources into a network via sophisticated planning, scheduling, and bidding of DER-based services. According to the report, global VPP implementation spending (excluding energy storage) is expected to reach $2.1 billion annually by 2025.

Peter Asmus, principal research analyst with Navigant Research, stated:

The mixed-asset VPP has achieved dramatic growth in the last couple of years and is the preferred platform in today’s market, particularly as the role of energy storage grows. Mixed-asset VPPs can also include everything from diesel generators to heat pumps and electric vehicles (EVs), and some are more focused on thermal energy than electricity.

When it comes to vital enabling technologies to create any type of virtual power plant, software is by far the largest revenue opportunity across all VPP segments, and is expected to reach more than $1.8 billion annually in 2025, according to the report. However, energy storage as an enabling technology dominates overall investment in the total VPP market, and is expected to reach $12.4 billion annually in 2025 in the mixed-asset segment.

The report, Virtual Power Plant Enabling Technologies, analyzes the global market for VPPs and enabling technologies in three primary segments: demand-response (DR), supply-side, and mixed-asset. The study provides an analysis of the market issues, including drivers, barriers, and business cases, associated with VPPs. Global market forecasts for capacity and implementation spending, broken out by segment, region, and technology, extend through 2025.

Along with the three technology categories (metering and telemetry, device controls, and software), this report sizes the capacity growth of energy storage devices in emerging markets for mixed-asset VPPs. The report also examines technology issues related to VPPs, as well as the competitive landscape. An Executive Summary of the report is available for free download on the Navigant Research Web site.