Source: National Energy Administration
Facilitating a leap in the value of virtual power plants and unlocking the potential of flexible resources on the demand side.
— Interpretation of the “15th Five-Year Plan” for Building a New-Type Power System
China’s installed capacity of new energy continues to expand, yet the inherent randomness and volatility of wind and solar power generation have resulted in insufficient flexibility in system peak‑shaving, frequency regulation, and reserve resources. Traditional ancillary services rely heavily on coal‑power flexibility upgrades and centralized energy storage, which entail long construction timelines, stringent land‑use constraints, and relatively high overall capital costs. Meanwhile, the vast potential of demand‑side adjustable resources remains severely underappreciated and urgently needs to be unlocked. With rising levels of end‑use electrification, distributed photovoltaics, electric vehicles, user‑side energy storage, and data centers are expanding rapidly. Coupled with interruptible industrial loads and commercial‑building air‑conditioning, these resources exhibit key attributes: short‑term adjustability, wide geographic distribution, and lightweight aggregation through coordinated deployment. The “15th Five-Year Plan for Building a New Power System” (hereinafter referred to as the “Plan”) for the first time designates virtual power plants as a critical platform for coordinated interaction on the demand side, setting clear target scales for development by 2030. This will strongly catalyze the emergence of new models and business forms for virtual power plants in China, seamlessly integrating the entire value chain—from aggregating dispersed demand‑side resources and enabling market‑based trading to realizing diversified benefits. It will also facilitate the evolution of virtual power plants from emergency‑response tools into multifunctional market participants that simultaneously ensure supply security, accommodate renewable integration, participate in market operations, and serve public welfare, thereby driving the power system’s transition from unidirectional supply‑side regulation toward two‑way supply‑demand interaction and coordinated balance.
I. The role of virtual power plants has been elevated, making them a key enabler for demand-side coordination.
The strategic positioning of virtual power plants has undergone a fundamental elevation in the Plan. In terms of role, the Plan explicitly designates them as one of the key mechanisms for fostering coordinated development on the demand side, serving as a central lever to drive the transition from “passive compliance” to “proactive coordination,” and assuming a more foundational, system‑wide function within the new‑type power system. Regarding market functions, the Plan clearly calls for the regular, large‑scale participation of virtual power plants in electricity market transactions. “Regularization” signifies that virtual power plants will be deeply integrated into the day‑to‑day operation of the power system, evolving from emergency‑response tools into core participants capable of sustained engagement across multiple product categories, including medium‑ and long‑term contracts, spot markets, and ancillary services. “Scaling up” requires the establishment of stable, predictable regulation capacity, enabling virtual power plants to truly emerge as indispensable players in the electricity market. In terms of specific scale, the Plan sets a target: by 2030, the maximum adjustable capacity of virtual power plants will exceed 50 million kilowatts, making them a crucial platform for coordinated interaction on the demand side.
II. Foster and strengthen market entities, and guide retail electricity companies to transform into virtual power plant operators.
The large-scale development of virtual power plants hinges on the support of high-quality market participants. As key players in the electricity market, retail power companies possess inherent advantages for engaging in virtual power plant operations. In particular, those that have completed market registration already hold the necessary qualifications to participate in both medium‑long‑term and spot‑market electricity trading, enabling them to bypass many of the market‑access steps—such as applying for retail‑power‑supply credentials—that other virtual‑power‑plant operators must navigate. Nevertheless, most retail power companies have long focused primarily on buying and selling electricity, leaving them with significant gaps in technical capabilities such as resource aggregation, load forecasting, and smart dispatch. Consequently, their transition into resource aggregators faces substantial barriers related to both technological expertise and operational capacity.
The Plan explicitly supports qualified power‑sales companies in developing virtual power plant (VPP) operations, thereby charting a clear course for VPP development from the perspective of market participants. On the one hand, it outlines a well-defined pathway for power‑sales companies to transition from traditional, single‑purpose electricity‑volume intermediaries to resource aggregators and integrated energy service providers that combine technological expertise with responsive capabilities. On the other hand, by establishing differentiated entry criteria, the Plan encourages the power‑sales sector to move away from the conventional low‑margin, price‑arbitrage‑driven competitive model and toward the cultivation of more sophisticated core competencies—such as load forecasting, resource aggregation, and intelligent dispatch. This shift enables power‑sales companies to expand their offerings beyond simple electricity trading into comprehensive energy services, broadening both their business scope and profit margins while providing robust institutional support for the large‑scale deployment of virtual power plants.
III. Innovate Business Models to Energize the Virtual Power Plant Market
At present, virtual power plants have progressed from pilot projects to large-scale deployment. While they can aggregate diverse flexibility resources and provide the power system with a range of services—including peak shaving, frequency regulation, and reserve—their market value remains unrealized due to an immature business model, and a sustainable profit‑driving feedback loop has yet to emerge. The existing electricity pricing framework lacks adequate mechanisms for valuing flexibility resources; compensation rates in ancillary services markets are too low, and the price differentials between peak and off‑peak periods offer limited incentives. As a result, the marginal revenue generated by virtual power plants’ participation in system balancing often fails to cover the costs of aggregation.
In response to this issue, the Plan explicitly calls for innovating business models and accelerating the development of virtual power plants, signaling that, during the 15th Five-Year Plan period, the growth trajectory of virtual power plants will shift from policy‑driven to market‑driven. Looking ahead to the 15th Five-Year Plan, the revenue streams of virtual power plants will evolve from a single‑track demand‑response compensation model to a diversified structure encompassing spot‑market revenues, ancillary‑service earnings, capacity payments, and value‑added services. At the same time, the distinct characteristics of distributed resources necessitate the establishment of multi‑faceted business models. With the rapid emergence of new electricity‑use scenarios—such as vehicle‑to‑grid integration, computational‑electricity coordination, and green‑power consumption—the business model of virtual power plants will expand beyond traditional regulation services to embrace cross‑scenario convergence and multi‑market synergy.
During the 15th Five-Year Plan period, fully unlocking the commercial value of distributed resources in emerging business areas will become a key pathway for virtual power plants to enhance their market competitiveness. The large-scale development of these diverse new services will also open up fresh possibilities for this diversified revenue model. The Plan explicitly states that by 2030, a charging infrastructure network capable of supporting the mobility needs of more than 110 million electric vehicles will be in place, with the aggregated controllable charging capacity under vehicle‑to‑grid (V2G) coordination reaching 50 million kilowatts. Electric vehicles serve both as aggregatable resources and as revenue-generating assets: they can feed power back into the grid during peak demand to participate in peak‑shaving and earn compensation, while at times of abundant renewable generation they can charge at lower rates, absorbing green electricity and reducing energy costs. This “two‑way arbitrage” capability makes electric vehicles one of the most promising controllable resources within the virtual power plant’s closed-loop business model.
IV. Enhance Institutional Mechanisms and the Standards Framework to Solidify the Regulatory Foundation for the Standardized Development of Virtual Power Plants
For virtual power plants to transition from flexible resource management to reliable and efficient regulation, a robust institutional framework is an indispensable safeguard. At present, in some regions, virtual power plants still face bottlenecks—including inconsistent market access thresholds, poor inter‑provincial and inter‑regional coordination, insufficient standardization of grid‑connection response procedures, and inadequate compensation mechanisms for dispatch—these constraints are hindering the full realization of their market‑based responsiveness.
The Plan systematically proposes to refine virtual power plant trading rules, the technical standards framework, the construction and operation management mechanism, and the access-and‑dispatching mechanism, thereby establishing an institutional framework for virtual power plants across four dimensions. Each dimension has its own focus yet mutually reinforces the others: trading rules address the institutional pathways for market participation; technical standards and access‑and‑dispatching mechanisms tackle the technical specifications for interconnecting distributed resources; construction and operation management provides operational guidance for implementing virtual power plant projects. Complementing and reinforcing one another, these four dimensions together form a closed-loop institutional system that spans the entire value chain—from market access and technical standards to project development and operation, and finally to dispatch and grid integration—offering comprehensive institutional support to propel virtual power plants from pilot initiatives toward large-scale deployment.
Overall, the 15th Five-Year Plan period represents a pivotal five-year phase during which virtual power plants will transition from pilot projects and demonstrations to large-scale deployment. By aligning closely with the requirements set forth in the Plan—fostering market dynamism through business-model innovation, strengthening the development foundation via institutional and mechanistic improvements, solidifying operational resilience by enhancing aggregation capabilities, and guiding strategic direction with ambitious scaling targets—virtual power plants are poised to assume an even more prominent role within the new‑generation power system, providing robust support for integrating renewable energy and ensuring secure, reliable electricity supply.
