Virtual power plants to reach $5.3 billion in annual revenue by 2023

Total annual virtual power plants vendor revenue will grow from $1.1 billion in 2014 to $5.3 billion in 2023, according to Navigant Research.

Several developments in the power sector, including the increasing penetration of smart meters and growth in variable renewable energy, have created an environment conducive to virtual power plants. Virtual power plants combine a rich diversity of independent resources into a network via sophisticated planning, scheduling, and bidding of distributed generation-based services.

“Virtual power plants represent a prime example of transactive energy, whereby new technologies such as demand response, solar photovoltaic systems, and advanced energy storage enable consumers to take a more active role in managing the energy they use,” says Peter Asmus, principal research analyst with Navigant Research. “VPPs harness software and IT innovations to achieve the greatest possible profit for asset owners while at the same time maintaining the proper balance of the electricity grid.”

Navigant Research breaks down the virtual power plants market into three primary segments: demand response, supply-side and mixed asset virtual power plants. While supply-side systems are the most straightforward virtual power plants in concept, according to the report, demand response is the largest commercial virtual power plant segment in the U.S.

The ultimate goal is embodied in a mixed asset virtual power plant, which combines distributed generation, demand response and other resources to provide a synergistic sharing of grid resources to create more value and reduce capital costs.

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