Virtual Power Plant Market - Forecasts from 2023 to 2028

The virtual power plant market is projected to grow at a CAGR of 20.11% over the forecast period, increasing from US$742.5 million in 2021 to a total market size of US$2,678.012 million by 2028.

A Virtual Power Plant harnesses the combined capacity of various distributed energy resources (DERs) spread throughout the network, creating a unique operational portfolio tailored to the specific characteristics of these DERs. Virtual power plants find applicability in several areas, including EV chargers, home appliances, HVAC equipment, and batteries. The escalating growth of the virtual power plant industry is largely propelled by the expanding renewable energy, improved EV charging infrastructure, and emerging energy storage technologies.

Increasing renewable energy drives virtual power plant market growth.

Virtual Power Plants are used in integrating renewable energy sources such as solar panels and wind turbines into the power grid through advanced software. The rising demand for renewable energy due to growing global concern about climate change and the need to reduce greenhouse gas emissions has provided a positive outlook to the market demand for virtual power plants. According to the International Renewable Energy Agency, in 2022, global wind energy capacity experienced a boost of 75 GW, marking a growth of 9%. Solar photovoltaic power also saw a significant expansion, with an addition of 191 GW.

Increasing EV charging infrastructure bolsters the virtual power plant market growth.

Virtual Power Plants are used in the electric vehicle charging infrastructure by managing and balancing the electricity load. Due to the increasing EV adoption, the demand for power during peak charging times can stress the electrical grid. Virtual power plants, through their integrated control of diverse distributed energy resources, help to stabilize the grid, ensuring that power is effectively allocated during these high-demand periods. According to the International Energy Agency, in 2022, the United States witnessed the installation of approximately 6,300 fast charging stations and by the close of the year, the cumulative number of fast charging stations hit 28,000.

Emerging energy storage systems drive the virtual power plant market expansion.

 Virtual Power Plants are instrumental in energy storage systems because they can efficiently manage when and how much stored energy to release into the grid, optimizing the use of energy storage systems based on real-time demand and supply conditions. This facilitates a more stable and reliable grid, particularly important given the intermittency of renewable energy sources like wind and solar. The growth of energy storage systems is driven by increasing renewable energy deployment and investments which is driving the virtual power plant market’s growth. According to the International Energy Agency, in 2022, worldwide investments in battery energy storage surpassed USD 20 billion, showcasing robust growth. The momentum is set to continue, with projected investments for 2023 reaching a record of over USD 35 billion.

North America is projected to dominate the virtual power market.

North America will hold a significant share of the virtual power plant market due to the region's significant investment and collaborative efforts. Substantial financial commitments are being made by various companies, utilities, and government bodies to scale up VPP projects in North America. For instance, in 2020, Sidewalk Infrastructure Partners disclosed their pledge of $100 million towards OhmConnect to scale its operations. This substantial investment is earmarked for the establishment of Resi-Station, which is set to become North America's most extensive virtual power plant.

High initial cost restrains the virtual power plant market growth.

The growth of the virtual power plant (VPP) industry can be hindered by the significant initial investment necessary to establish these systems. The development of a VPP involves the integration of a wide array of energy resources, each with its costs, and the installation of sophisticated control and communication infrastructures. These components when combined constitute a sizable initial expenditure, which can prove challenging for some companies or regions, particularly those with budget constraints or in poor areas. This high financial barrier to entry can therefore curtail the widespread adoption of VPPs, acting as a notable deterrent in the overall expansion of the VPP industry.

Key Developments

• June 2023: Tesla launched an initiative to debut its Virtual Power Plants (VPPs) in Texas that will provide Powerwall owners with the opportunity to monetize their systems. By enabling them to supply excess power back to the local grid during emergencies, this innovative approach not only aids in stabilizing the power supply but also creates a new income stream for Powerwall owners, all while bolstering grid resilience.
• April 2023: SunPower, a prominent provider of solar technology and energy services, joined forces with OhmConnect, a leader in residential energy flexibility, to roll out a new Virtual Power Plant (VPP) service. This innovative offering is now available to SunPower's customers throughout California, marking a significant step in expanding the state's renewable energy infrastructure.
• April 2023: Gogoro Inc partnered with Enel X, a worldwide innovator in energy services including Virtual Power Plants (VPPs). As part of their collaboration, 2,500 battery swapping stations will be commercially launched across 1,000 sites, integrated into Enel X's Virtual Power Plant. This strategic initiative is poised to bolster Taiwan's transition to renewable energy, showcasing an effective combination of advanced battery technology and virtual power plant systems.
• November 2021: SunPower Corp. unveiled its Virtual Power Plant (VPP) solution. This innovative initiative allows SunVault energy storage customers to generate earnings by permitting utilities to draw upon their stored energy during periods of peak demand. Not only does this provide a financial incentive for customers, but it also aids in establishing a more reliable power grid within their local communities.
• November 2020: Siemens broadened the application of virtual power plants in the industrial sector with a new contract at the Finnish brewery Sinebrychoff. Siemens crafted a unique business model geared towards propelling the brewery to the next tier of energy optimization. The model comprises a virtual power plant (VPP) and cutting-edge energy storage technology, supported by comprehensive financing solutions. This strategic implementation, set to take place at Sinebrychoff’s facility in the greater Helsinki area, will mark one of the first instances of power flexibility within an industrial site. 

Segmentation

By Energy Type

• Biomass & Biogas
• Hydro
• Wind
• Solar     

By Application

• EV Chargers
• Home Appliances
• HVAC Equipment
• Batteries
• Others
• By End-User
• Residential
• Commercial
• Industrial

By Geography

• North America
• USA
• Canada
• Mexico
• South America
• Brazil
• Argentina
• Others
• Europe
• Germany
• UK
• France
• Spain
• Others
• Middle East and Africa
• Saudi Arabia
• UAE
• Others
• Asia Pacific
• China
• Japan
• South Korea
• India
• Australia
• Other