Annual worldwide revenue from virtual power plants (VPPs) will grow from less than $1 billion this year to $3.6 billion in 2020, according to a report from Navigant Research. Driven by the integration of variable-generation resources – especially from wind and solar – a viable VPP market is emerging and will see substantial growth from a relatively small base, the report says.
Using software systems, VPPs can combine diverse, distributed resources into a unified network via sophisticated planning, scheduling and bidding of distributed energy resource-based services.
‘The growth in distributed, renewable power generation sources requires additional supply and demand flexibility to accommodate fast ramping periods and corresponding supply forecast error,’ says Peter Asmus, principal research analyst with Navigant Research. ‘VPPs represent an ideal optimization platform for the coming transformation of the power grid.’
Under a more aggressive forecast scenario, VPP vendor revenue could reach $4.3 billion by 2020, Navigant notes. On the other hand, the report says rate-basing utility prerogatives still offer deployment barriers for both VPPs and the complementary market for microgrids. Although recent regulatory reforms are moving in the direction of a greater reliance on distributed energy resources, Navigant says centralized fossil fuel power plants will still dominate electricity markets for quite some time.