The Virtual Power Plant: What Does It Lack?
Recently, the Xiaomi SU7 Ultra has gained significant attention, being available for over 500,000 yuan and boasting 1,500 horsepower with a 0 to 100 km/h acceleration time of under 2 seconds. (Source: WeChat Public Account “Yuyan Kan Dian Gai” by Yu Qing) Following this, news surfaced that during a recent energy storage exhibition, almost all major commercial energy storage companies, after discussing cell technology, performance, safety, and pricing, began to introduce their Virtual Power Plant platforms that can participate in ancillary service markets.
Isn’t this reminiscent of Lei Jun showcasing the SU7 Ultra’s 1,500 horsepower and carbon fiber hood? What does the 500,000 yuan SU7 Ultra, purchased by a car enthusiast, lack? In reality, it is missing two key elements: first, a specialized racing track, as the SU7 Ultra’s 1,500 horsepower is not designed for public roads; second, professional driving experience is necessary to handle the car’s power on the track.
So, what does a Virtual Power Plant lack? Firstly, it requires a specialized market. Over the past two years, the stagnation of virtual power plants in the domestic market is primarily due to the fact that China’s electricity market has not yet matured to a stage where trading prices fluctuate significantly and a variety of trading products exist. Relying solely on a few instances of demand response is insufficient to support the value of a virtual power plant. The participation of commercial storage in peak-valley arbitrage, alongside demand response, resembles a 1,500 horsepower vehicle attempting to engage in rideshare, occasionally reaching high speeds.
True racing experts excel in maneuvering curves, just as the AE86 driven by Takumi requires the famous Akina Mountain. A genuine virtual power plant thrives on volatility arbitrage, with volatility being the equivalent of Akina Mountain. Whether in peak-smoothing markets or frequency modulation markets, the value of a virtual power plant lies in discovering arbitrage opportunities through imbalances in supply and demand. As the frequency of electricity market transactions and the price fluctuations increase, arbitrage opportunities expand. The true test of a virtual power plant solution is found in the real-time market.
For instance, to engage in joint optimization of real-time positions, one must have the capability to adjust within 15 minutes, with this adjustment being predictable, manageable, and real-time. If such capabilities are not met, the market or trading rules will impose penalties. Therefore, no matter how well it is presented, it cannot replace the actual ‘track’.
Secondly, it requires professional operators. Many car enthusiasts believe that merely spending 500,000 yuan and pressing the accelerator on the highway makes them a driving expert. In contrast, truly skilled racers respect both the track and the horsepower, learning to communicate with the machine to master the 1,500 horsepower. They understand that controlling this power involves knowledge of numerous factors, such as the parameters of each curve, braking limits, tire characteristics, suspension tuning, driving differences in various weather conditions, and even the mental state required for driving.
Many companies mistakenly think that by simply investing in a virtual power plant platform, equipping it with technical specifications, and connecting a range of devices, they can enter the market. However, they lack mature drivers, or in this case, operators.
Consider the following scenarios:
- A charging station experiences a sudden power outage; how does this impact the trading positions for the next 15 minutes? What emergency measures can be taken?
- A user’s air conditioning system needs to support a launch event and cannot participate in adjustments tomorrow; is there backup capacity in the virtual resource pool?
- An industrial user receives a large order unexpectedly, leading to transformer overload; how can commercial energy storage manage charging and discharging?
- Several integrated solar-storage projects in a region are faced with unexpected thunderstorms over the next 30 minutes, causing significant output fluctuations; how does this impact the simulated generation curves of the virtual power plant and its trading strategies?
- A user suddenly requests a change in the profit-sharing ratio for the virtual power plant; what effect will this have on pricing in the market?
- With 15 minutes left and favorable pricing of 2 yuan per kilowatt-hour, how can the virtual power plant quickly mobilize all adjustable resources? Who will initiate this?
All these scenarios cannot be resolved by just a virtual power plant software platform and a collection of hardware. They require collaboration between the virtual power plant’s trading team and dispatch team, essentially its operational team.
Some friends ask me where to find such teams. I reply that qualified professionals with this expertise are not readily available. Most individuals familiar with this business are currently employed in various positions within power grid companies. Even the five major power generation groups find it challenging to attract talent from these companies. Thus, businesses must develop their own talent gradually, ideally in tandem with market development.
Currently, most virtual power plant platforms are designed more for presentation to management rather than for operational teams, as real transactions and operational activities are lacking, and there are no end users. So, how can one discuss the merits of functionalities? Just like a true racing car, which is customized and tuned for a specific driver or track, enabling it to achieve 120% of its 1,500 horsepower potential. Such racing cars do not require advertising, as their lap times speak volumes. Continuous monitoring, optimization, and tuning are essential, and these cars are not available on the market.
In the future, an excellent virtual power plant trading team will certainly have its customized trading and dispatch software tailored to its trading methods and resource capabilities. An immature market will cultivate immature customers, along with products that excessively boast their features. However, a mature market will automatically initiate a survival-of-the-fittest competition, with the strongest remaining.
Everything is possible in the virtual power plant electricity market.
