context: As industrial upgrading and electrification accelerate, electricity demand in the PRC continues to rise, placing pressure on power grids. VPPs (virtual power plants)—aggregating distributed energy resources, controllable loads, storage and other assets—offer a flexible mechanism to balance supply and demand, enhance grid reliability and support renewables integration. Pilot projects have seen the technology grow in popularity, but experts have advised caution. National top-down coordination is now essential for scaling up. VPPs were previously mentioned in Guiding Opinions on helping new power sector businesses.
In response to growing electricity demand and the need for flexible power systems, the National Development and Reform Commission and the National Energy Administration released Guiding Opinions on accelerating the development of VPPs (virtual power plants) on 15 April 2025.
The document outlines development goals, policy directions and 18 specific tasks to guide VPP growth through the 15th 5-year plan. Experts from CEC (China Electricity Council) Power Development Research Institute issued an interpretation of the policy with recommendations for implementation.
The Opinions set clear development targets for 2030, aiming to expand the VPP resource base and improve demand response capabilities. It emphasises localised development plans, encouraging provinces to tailor strategies and support diverse types of VPP operators. New business models and integrated energy services are also encouraged.
The commercialisation of VPPs has faced barriers such as inadequate market pricing mechanisms and high entry thresholds for user-side participation. The Opinions address these by enabling VPPs to participate in medium- and long-term power markets, spot markets and ancillary services. Market reforms include broader price limits, fairer bidding rules and demand response compensation tied to performance. The policy also supports inter-provincial VPP trading to improve nationwide coordination.
Technological and management challenges also limit VPP scalability. Diverse resource types, lack of unified access standards, fragmented data protocols and cybersecurity concerns hamper efficiency. The Opinions call for a comprehensive standard system encompassing grid integration, smart metering, data exchange and cybersecurity. To achieve this, a tiered access system is proposed
- simpler entry for VPPs providing only demand response
- stricter requirements for those participating in market transactions
- stronger digital capabilities, aggregation tools and data systems to transition from pilot to scaled operations
To fully implement the improvements outlined in the Opinions, CEC recommends
- ensuring power system stability while accelerating innovation
- evolving VPPs from passive responders to active value creators empowered by digital tech
- developing new smart aggregation tools
- exploring value-added service models and leveraging platform effects