Zhou Jie: Development status and market prospects of virtual power plants in Japan

1. Verified the reliability of virtual power plant technology of more than 50 MW. Communication technology specifications and related interface standards such as OpenADR 2.0b (load integrator and user) and ECHONET Lite (user and machine) have been formulated. Currently, commonly used communication protocols include the widely popular Internet HTTPS protocol, the MQTT protocol used in the Internet of Things, and the Modbus protocol used in the industrial field. New energy-saving LPWA wireless communication protocols are being promoted.

2. Technology development to speed up DR response time. The demonstration project plan sets various demand response time targets. Rapid response must be completed within 5 minutes, balanced demand response must be completed within 15 to 30 minutes, and backup demand response must be completed within 1 to 3 hours. At present, Japan has completed the reliability test of DR's hour-level and minute-level demand-side response, and is currently testing the second-level demand-side response.

3. Develop control technology for on-board battery groups of electric vehicles. V2G is a technology that uses vehicle battery charging and discharging to meet the needs of the power system. It is one of the most promising technologies for VPP. In 2019, Tokyo Electric Power Company aggregated 59 EV/PHEVs and successfully realized the technical application of how the electric vehicle battery group can be integrated with the power grid through charging and discharging. A dynamic pricing charging system based on price linkage in the wholesale power market is currently being developed to achieve orderly charging of electric vehicles and the peak-shaving and valley-filling effect.

4. Aggregate large-scale energy storage devices and actively develop power-to-gas technology (P2G) to expand photovoltaic and wind power consumption. In 2019, Kansai Electric Power Company aggregated 10,000 batteries and successfully achieved remote and precise control of charge and discharge in seconds, testing the effectiveness of large-scale battery groups participating in renewable energy frequency regulation for the first time.

5. Develop aggregation optimization and control technology for distributed power sources such as household fuel cell cogeneration systems. In 2020, Osaka Gas Company gathered 1,500 household fuel cell cogeneration systems equipped with IoT systems to participate in VPP technology development experiments, while Tokyo Gas Company integrated "photovoltaic + gas + battery" to verify how to accurately remotely control distributed power sources and the VPP system Projects such as safety reliability and measurement methods for reverse flow.

(3) Economics is the primary reason affecting the large-scale development of VPP/DR

With the deepening of the liberalization reform of the power market, starting from 2017, system operators will implement an open bidding system for purchasing regulated power supplies. The regulated bidding market is the main platform for VPPs to participate in bidding. As shown in Figure 2, Japanese regulated power supplies are divided into three categories: Power Supply I is a regulated power supply used by system operators for real-time balancing. The power supply side charges both installed capacity fees and kilowatt-hour electricity fees. Among them, the response time of power supply I-a is limited to 5 minutes and must have frequency modulation function; the response time of power supply I-b is within 15 minutes and is a non-frequency modulated power supply; power supply I' is a peak load backup power supply in winter and summer (peak-shaving DR) ; Power supply II is a regulated power supply that can be dispatched online by electricity sales companies, and the power supply side only charges for metering; Power supply III is a regulated power supply that cannot be dispatched online by system operators.

In 2017, the system operator regulated the power supply for the first time through public bidding. The total winning bid capacity of Power Supply I' was 1.32 million kilowatts, of which the winning bid capacity of DR resources was 958,000 kilowatts, which was much higher than the winning bid capacity of power plants of 361,000 kilowatts. The average winning bid price of DR resources It is 3,609 yen/kilowatt, which is much lower than the 5,210 yen/kilowatt of the power plant. The total price of the DR agreement is 3.593 billion yen. As shown in Figure 3, the total transaction volume of power supply I in 2018 was 129.793 billion yen, of which I-a accounted for 85%, I-b accounted for 11%, and I' only accounted for 4%. Due to the speed of response, DR resources are currently unable to participate in the competition in the I-a market. The winning bid price for I-a is 10,971 yen/kilowatt, while the winning bid price for I' is less than half, only 4,085 yen/kilowatt. Power Supply I' won the bidding capacity of DR resources of 961,000 kilowatts, accounting for about 70% of the total, and the total agreement price was approximately 3.6 billion yen. Judging from the latest completed bidding situation in 2020, although DR participated in Power Supply I' and won the bid capacity of 1.289 million kilowatts, DR's average winning bid price rose to 5,916 yen/kilowatt, and the total agreement price doubled to 6.6 billion yen, but DR's The share has dropped significantly. Generally speaking, DR resources account for more than half of Power Source I's bid capacity on average, and the average bid price of DR is about 30% lower than that of power plants.

The VPP/DR transaction price determines the activity of the market. Judging from the electricity wholesale market in the past ten years, the national average electricity price has been below 20 yen/kilowatt hour. Even during the planned power outage period after the Fukushima nuclear accident, the market transaction price did not exceed 40 yen/kilowatt hour.  According to calculations by the "Power Generation Cost Accounting Working Group" of Japan's Ministry of Economy, Trade and Industry in 2015, the cost of fuel-fired power generation is the highest among the cost calculations of different fuel power generation costs, reaching only 40 yen/kilowatt hour. Therefore, the power price of VPP aggregation must be controlled below 40 yen/kW·h, otherwise there will be no competitiveness. However, when converted into unit price of electricity based on the number of responses and actual duration, it was found that the price is still higher than the average price of the electricity wholesale market. From the perspective of transaction prices, VPP currently does not have many economic advantages. It is difficult to survive without large-scale and high-frequency transactions. However, the economics of VPP cannot only be compared with the wholesale market or thermal power peaking prices. At present, it is more important to attract more users to participate in power transactions in order to develop and expand this market.

(4) Establishing and improving market mechanisms is the key to the sustainable development of VPP/DR

In Japan, the construction and operation and maintenance costs of backup power stations, which are only activated 1% of the time in a year, account for 10% of the entire power system operation and maintenance costs. Therefore, the "4th Basic Energy Plan" in June 2014 proposed that in order to promote effective energy conservation on the user side, it is necessary to actively create conditions to introduce a new "demand response" model and maintain a reasonable scale of power generation capacity through user-side demand management. , to achieve stable power supply. The "Japan Revitalization Strategy (2016)" proposes that by 2030, the negative watt transaction volume should reach the same level as that of the United States and reach the goal of 6% of the maximum power demand. Japan's maximum peak power demand is about 160 GW, which is 10 GW based on 6%, which is equivalent to 10 million-kilowatt thermal power units. The DR response power was listed and traded on the Wholesale Electric Power Market (JEPX), creating a precedent for the Japanese power market. Therefore, 2017 is called Japan's "first year of DR". In April 2017, Japan’s negative wattage market was officially launched.

Negative wattage market practice in recent years shows that reducing loads has the same utility and value as increasing kilowatt-hours of electricity. As a result, Japan's electricity market reform began to reassess the interests and values ​​of all parties in the market. The capacity value necessary to ensure power supply and the real-time balance value of regulating supply and demand balance and maintaining power quality should be made explicit, that is, independent from the energy value of the electric energy itself. To this end, Japan launched the capacity market in 2020. This market will become the main battlefield for DR. The basic requirements for DR resources are: the minimum unit participating in the transaction is 1,000 kilowatts, the response time is 3 hours, the duration is 3 hours, and every year Initiated 12 times.

Japan will also open a supply and demand adjustment market in 2021. System operators' public bidding for regulated power supplies will be moved to this market. The basic requirements for primary, secondary and tertiary adjustment service products are currently being improved. The service products designed in the demand adjustment market have their own uses based on response speed and duration. The creation of new markets provides the possibility for VPP/DR resources to directly participate in transactions. The primary adjustment requirement is that the response time is within 10 seconds and the duration is more than 5 minutes, which is suitable for the participation of power generation equipment and batteries; the secondary adjustment requirement is that the response time is within 5 minutes and the duration is more than 15 minutes, and it is suitable for the participation of power generation equipment, DR, and batteries; The third adjustment requires a response time of 15 to 45 minutes and a duration of more than 3 hours. It is suitable for power generation equipment, DR and individual users to participate in the remaining power.

The improvement of the market mechanism enables VPP/DR to form scheduling and bidding in different market environments, thus having wider applicability and multiple benefits in the wholesale market, capacity market, and supply and demand adjustment market. Therefore, at the beginning of the market, how to make good use of VPP resources that do not require high response speed and have relatively large transaction volume is of great significance to cultivating the market. VPP/DR will start participating in tertiary adjustments that require low response speed, and will gradually expand to primary and secondary adjustment services that require high response speed in the future to demonstrate its economy.

3. VPP future market outlook

The current global DR market only accounts for about 1% of electricity consumption. According to IEA predictions, it will reach 18% of electricity consumption by 2040. The domestic ERAB market size in Japan in 2019 is approximately 4.4 billion yen. With the opening of the capacity market and supply and demand adjustment market, the ERAB market will enter a great development track. The total VPP/DR revenue in 2021, 2025 and 2030 is expected to reach 75 billion respectively. billion, 36.5 billion and 73 billion yen.

To accelerate the commercialization of VPP, we must first further expand the scale of power aggregation optimization and control from the current hundreds of thousands of kilowatts to millions of kilowatts; secondly, we must strengthen capital investment in the development of VPP-related technologies and reduce the costs of batteries and electric vehicles. , to expand the scale of adjustable resources; again, it is necessary to improve the speed, security and reliability of the VPP trading platform, and gain high recognition and trust from users in order to attract more users to participate; finally, it is necessary to improve the infrastructure of various markets such as demand adjustment, Reform the existing one-way flow pricing system to optimize the market environment for VPP/DR access transactions. With the development of digitalization and power technology innovation, the market will also produce a variety of VPP business models based on the characteristics of VPP itself. The key market areas that Japan can expect in the future include:

First, provide aggregate value-added services to photovoltaic users whose FIT expires. In November 2019, the first batch of household photovoltaic subsidies expired, and non-FIT photovoltaic resources of 2 to 3 million kilowatts appeared. After that, there will be an increase of one million kilowatts every year, and it is expected to reach 6.7 million kilowatts by 2023. For photovoltaic users who have entered the zero-subsidy era, in order to maximize photovoltaic income, ordinary residential users will purchase household fixed batteries with declining costs or use them as vehicle-mounted batteries. The VPP model of "photovoltaic + battery" is still the main one. form. In the future, as subsidies for commercial photovoltaic and wind power projects expire, this type of business model will further expand.

Second, batteries have become the most important distributed power source for VPP/DR. The popularization and utilization of batteries is directly related to the expansion of the ERAB market, especially for electric vehicles equipped with batteries. The use of V2X (V2H, V2B, V2G) technology can expand the application scenarios of VPP/DR. By 2030, the popularization target of electric vehicles is to account for 20% to 30% of new cars. Therefore, the capacity of electric vehicle batteries will far exceed that of household stationary batteries. In addition, self-provided generators, large trucks, construction machinery, agricultural machinery, ships and other power fuels basically use diesel. If these equipment and vehicles are replaced by batteries, the VPP market potential will be even greater.

Third, activate backup power resources. Japan currently has 6,193 disaster prevention backup generators nationwide, with an installed capacity of approximately 1 gigawatt. There are approximately 17,000 units of cogeneration equipment, including 12,900 units for civil use and 4,673 units for industrial use, with an installed capacity of approximately 10.6 GW. Public facilities and buildings are also equipped with a large number of special batteries for disaster prevention. Putting these idle resources into market transactions will greatly expand the scale of the VPP market. In particular, natural gas combined heat and power systems of more than 100 kilowatts have an installed capacity of 8 GW. It may become the main force in the VPP market in the future.

Fourth, a new model of P2P direct transactions between users is implemented. In order to enhance the fairness, security and accuracy of VPP transactions, the VPP platform characterized by P2P direct transactions is mainly developed based on blockchain technology. The VPP platform can automatically regulate reverse trends and use blockchain technology to achieve distributed power output. Revolutionary applications such as accurate verification and peer-to-peer power transaction matching allow power producers, electricity sales departments and consumers to achieve "direct connection". In the future, individual users' photovoltaic power generation can be directly traded on the Internet without going through the power company. This move It will significantly reduce electricity transaction costs and improve transaction efficiency.

Fifth, provide value-added services on the VPP platform. Just like smartphones, the VPP platform can be used to provide a variety of services outside the energy fields such as security, medical care, and health care, creating new value for customers. Distributed energy has the characteristics of multiple sources, multiple points and close interaction with the demand side. It is an open energy system and is particularly suitable for building a business ecosystem with the economic characteristics of the Energy Internet. Therefore, the distributed energy Internet market will surely produce more new business model.

The original article was first published in "Electricity Decision-Making and Public Opinion Reference", Issues 29 and 30, July 31, 2020