Source: Pike Research
The concept of virtual power plants (VPPs) most often refers to the aggregation of supply-side resources, usually renewable energy resources. However, in Europe for example, the term “VPP” can also refer to the ability of commercial consumers to purchase capacity at the wholesale level via an auction from base-load fossil fuel facilities for short periods of time. However they are defined, VPPs can provide extraordinary value and services to transmission and distribution (T&D) grid infrastructure as well as to myriad stakeholders engaged in the provision of electric power.
According to a recent report from Pike Research, an explosion of interest in VPPs for demand response (DR) mechanisms is transforming the overall VPP market landscape and driving strong growth in the sector. VPP capacity will increase by 65% between 2011 and 2017, rising from 55.6 gigawatts (GW) to 91.7 GW worldwide during that period. That will translate into $5.3 billion in annual revenue in 2017, the cleantech market intelligence firm forecasts.
Under a more aggressive forecast scenario, worldwide revenue for VPPs could reach $6.5 billion in 2017.
“The list of companies looking for VPP opportunities continues to grow, and increasingly overlaps with microgrid technology providers,” says senior analyst Peter Asmus. “Many of these companies are familiar names – Cisco, GE, Siemens, Schneider Electric, and IBM – but the market also includes some new names – Blue Pillar, Calico Energy, Xtreme Power, and Princeton Power Systems.”
In contrast to the microgrid sector, utilities will have to play a major role in the evolution of the VPP market, by nature of their ownership of the transmission and distribution grid infrastructure and their control over smart grid investments. Many potential VPP market participants, however, feel that the risk-adverse culture of utilities, particularly investor-owned utilities (IOUs), may limit the creativity associated with new business models, such as the VPP. It is quite possible that smaller, municipally-owned utilities may actually be more innovative in the short term, since the interests of their customers are aligned with the interests of the utility. To date, however, most high-profile supply-side VPPs have been launched in Europe, with Siemens recently announcing a planned expansion of an existing hydro-based VPP from less than 10 megawatts (MW) to 200 MW of renewable supply by 2015.
Pike Research: Revenue from virtual power plants will reach $5.3B by 2017
Source: Pike Research