Low-Carbon, Low-Cost, and Highly Flexible VPP: The New Engine for Energy Circulation in Smart Cities

The Taiwan Smart City Industry Alliance (TSSA) established its Virtual Power Plant Working Group (VPP SIG) at the end of 2024. Anchored in the principles of the circular economy, this initiative leverages Taiwan's strengths in smart energy technologies and industrial resources to create an energy circulation system that is low-carbon, low-cost, and exceptionally flexible.

In the wake of an accelerated global energy transition and rapid smart city development, the Taiwan Smart City Industry Alliance (TSSA) established its Virtual Power Plant Working Group (VPP SIG) at the end of 2024. Anchored in the principles of the circular economy, this initiative leverages Taiwan's strengths in smart energy technologies and industrial resources to create an energy circulation system that is low-carbon, low-cost, and exceptionally flexible. This innovative model overcomes the limitations of traditional long-distance power transmission by enabling local, real-time energy generation, storage, and dispatch—thus reducing operational costs and minimizing the overall carbon footprint.

Peter Chang Chairman of e-FORMULA Technology, also serves as the convener of the VPP SIG.

Taiwan's Energy Challenges and Circular Economy Solutions

Despite Taiwan's long-standing abundance in power generation, its centralized transmission and distribution framework has led to uneven energy allocation. This imbalance is particularly acute during peak demand periods when the ability to flexibly adjust power supply becomes critical. Peter, Chairman of e-Formula Technology, explained that this challenge is precisely what circular economy thinking seeks to resolve: the effective integration of scattered energy resources to realize a closed-loop system. By harnessing advanced information and communications technologies (ICT), virtual power plants (VPPs) seamlessly combine distributed renewable energy, energy storage devices, and end-user demand. This integration establishes a flexible, cost-effective, and low-carbon ecosystem that bridges traditional grid supply (front-of-the-meter) with user-managed consumption (behind-the-meter).

Peter further noted that although Taiwan Power Company's overall generation capacity exceeds current demand, the centralized distribution model hinders dynamic adjustments during peak hours. Moreover, renewable sources such as wind and solar—being non-baseload—are compounded by the fact that many enterprises and institutions lack adequate energy storage. As a result, challenges such as the surges following renewable energy integration remain unresolved.

Commenting on power management responsibilities, Peter stated, "Front-of-the-meter operations are under Taiwan Power Company's purview, while behind-the-meter management falls to the energy users." To address these issues, the Executive Yuan's Cabinet approved partial amendments to the Electricity Act on January 9, 2025. While preserving Taiwan Power Company's integrated approach to generation, transmission, distribution, and sales, the revised regulations actively introduce grid-connected energy storage and demand response resources. This regulatory evolution not only enhances grid resilience but also embodies the circular economy by fostering efficient energy recycling and regeneration through technological innovation.

The International Energy Agency's report, Empowering Cities to Achieve Net Zero Carbon Emissions, underscores that the integration of digitalization with distributed energy technologies is a key driver in meeting urban net-zero targets, with virtual power plants serving as a critical mechanism for implementing circular economy principles in practice.

Virtual Power Plants and the Circular Economy in Smart Cities

Smart grids and smart cities are inextricably linked. According to Taiwan Power Company's General Manager Wang Yao-Ting, digital technologies have extended the reach of smart grids from transmission networks to distribution systems, enabling real-time load balancing, predictive analytics, and rapid fault resolution. At the heart of this transformation lies the virtual power plant, which relies on modern ICT for dynamic control while creating localized energy circulation systems characterized by low carbon emissions, low costs, and high flexibility.

Cities—acting as concentrated hubs of energy demand and supply—provide an ideal environment for virtual power plants to excel. Unlike traditional long-distance transmission that incurs losses and delays, VPPs can adjust supply and demand locally, responding more swiftly to market fluctuations. The International Energy Agency's report, Empowering Cities to Achieve Net Zero Carbon Emissions, underscores that the integration of digitalization with distributed energy technologies is a key driver in meeting urban net-zero targets, with virtual power plants serving as a critical mechanism for implementing circular economy principles in practice.

Peter believes that while maintaining Taipower's integrated model for power generation, transmission, distribution, and sales, the active introduction of grid-connected energy storage and demand response will further foster an environment conducive to renewable energy development. This approach not only enhances grid resilience but also serves as a tangible manifestation of circular economy principles in power management—achieving efficient energy circulation and regeneration through technological innovation under constrained resource conditions.

Industry Collaboration Driving a New Model for Energy Circulation

To accelerate the adoption of virtual power plants and their underlying circular economy model, the Taiwan Smart City Alliance—led by Peter of e-Formula Technology—has convened experts and representatives from the fields of energy technology, software development, power management, and policy research. The newly formed VPP Working Group (Special Interest Group, SIG) includes prominent organizations such as Sandi Energy, Tatung Intelligent, National Central University, Zhonghua Systems Integration, Weather Risk Management Development, Delta Electronics, Yongyu Intelligent, TECO Electric, Perovskite Technology, Crowe Horwath, Dayun Optoelectronics, Xitel New Energy, Jia Cloud Networking, Shengqi Green Energy, Senyao Energy, Zhongbao Technology, and ASUS. Together, these industry leaders will explore innovative business models, advocate for supportive policies and regulations, formulate industry standards, and foster international cooperation to rapidly bring VPP technologies to market.

Peter also echoed the views of TSSA President Jian Zhi-Cheng, noting that virtual power plants not only balance grid loads and enhance energy efficiency but also inject vital momentum into the sustainable development of smart cities. He emphasized that Taiwan's robust high-tech industry base, exceptional software development capabilities, and extensive experience in smart energy applications uniquely position the nation to lead in this arena. Through the collaborative efforts of the VPP Working Group, resources from industry, academia, and government will be integrated to promote the testing and deployment of innovative technologies.

These collective efforts are expected to enable virtual power plants in urban settings to deliver flexible energy regulation across sectors—ranging from enterprise consumption and smart buildings to intelligent transportation—while establishing a closed-loop, sustainable circular economy ecosystem within the energy industry.

Peter also echoed the views of TSSA President Jian Zhi-Cheng, noting that virtual power plants not only balance grid loads and enhance energy efficiency but also inject vital momentum into the sustainable development of smart cities.

Looking Ahead: Urban Energy Circulation and Sustainable Development

At the 2025 Smart City Expo, a dedicated VPP Pavilion will showcase innovative solutions and real-world applications from member organizations. A major industry forum will also be held, bringing together leaders from government, business, and academia to discuss the pivotal role of virtual power plants in urban energy circulation. As Peter emphasized, the low-carbon, low-cost, and highly flexible characteristics of virtual power plants not only overcome the limitations of traditional long-distance transmission but also offer tremendous benefits in urban energy hubs—serving as a critical catalyst for digital transformation and the achievement of net-zero carbon goals.

Taiwan's formidable high-tech industry and world-class software development capabilities position it at the forefront of innovation in energy management and circular economy transformation. As virtual power plant technologies mature and their applications deepen, urban energy systems are set to become more flexible, efficient, and sustainable—injecting strong momentum into the ongoing evolution of smart cities.

Described as "light asset" systems, virtual power plants do not rely on traditional, large-scale power plants or heavy infrastructure. Instead, they leverage digital technologies, integrated information systems, and smart dispatch mechanisms to connect and aggregate the existing decentralized renewable energy systems, storage devices, and demand response resources. "For modern cities and enterprises, energy management is indispensable. Through ICT, VPPs help smooth out peak loads and optimize power management strategies. More importantly, in the behind-the-meter domain, they assist in planning generation, storage, and energy efficiency measures—making them a critical asset in the digital transformation and the pursuit of net-zero carbon emissions," Peter concluded.