Shanghai develops framework to regulate virtual power plants

As China is banking on virtual power plants (VPPs) as a crucial tool to enhance the flexibility of its power grids, local grid companies across the country are stepping up efforts to develop VPPs to accelerate the integration of renewable energy sources.

In a pioneering move for Shanghai's energy management, Shanghai's Songjiang district has implemented the Measures for the Precise Response Management of Virtual Power Plants in Songjiang District, Shanghai (Trial), marking the city's first district-level regulatory framework for VPPs.

The rules, effective since April, were drafted by the State Grid Shanghai Songjiang Power Supply Company and approved by the Songjiang District Economic Commission, aiming to establish a 100 megawatt demand-side flexible peak-shaving VPP by the end of 2025—capable of stabilizing 5 percent of the annual maximum load.

This initiative seeks to narrow power peak-valley differences, smooth renewable energy fluctuations, and enhance the security of Songjiang's power grid.

A virtual power plant is a network of decentralized energy resources that are controlled via software to function as a single, flexible power source. It allows these dispersed resources to mimic the behavior of a traditional power plant, providing electricity to the grid or responding to changes in demand.

As the world's largest market for low-carbon energy investment, China is aggressively pursuing VPPs to bolster its grid flexibility and renewable energy integration, setting ambitious targets to reach 20 gigawatts of virtual power plant capacity by 2027 and 50 GW by 2030, according to new guidelines jointly issued by the National Development and Reform Commission and the National Energy Administration recently.

In the next phase of VPP precision response initiatives, the Songjiang District Economic Commission will step up as the regulatory cornerstone, supervising response effectiveness evaluations and settlement processes while ensuring timely fund disbursement, it said.