Virtual Power Plants and the Circular Economy: Enhancing Grid Resilience and Power Decarbonization

By George Hsu (Director of TAEDT), Xin-En Wu (Director of EnergyOMNI)

We are extremely honored to present the second edition of our special issue on Virtual Power Plants (VPPs), now incorporating the theme of the circular economy.

《Since its inaugural issue in September 2024, the VPPs special issue has garnered enthusiastic acclaim and recognition from various sectors. This resounding support—from industry, government, academia, and research alike—underscores the growing consensus that distributed VPPs offer significant advantages over traditional centralized power generation models. In today's era of AI and IoT, such recognition highlights the pivotal role of the circular economy in driving decarbonization, enhancing grid resilience, and catalyzing transformative changes in both lifestyles and society.

Unlike our inaugural issue—where space constraints limited the breadth of discussion—this edition delves deeper into the multifaceted transformation of VPPs, integrating fresh perspectives on the circular economy and light-asset operational models. As Peter Chang Chairman of e-Formula Technologies and convener of the VPP Special Interest Group (VPP SIG) under the Taiwan Smart City Industry Alliance (TSSA), emphasized, VPPs embody a "light-asset" philosophy that not only drives technological and managerial innovation but also represents a significant endeavor to reinterpret asset value and application in the era of smart cities.

Continuing the spirit of dialogue established in previous issues, this edition brings together three public-sector representatives and six private-sector leaders, including Chi-Ming Peng, Taiwan's Minister of Environment,; Professor Faa-Jeng Lin, Distinguished Lecturer at the Department of Electrical Engineering, National Central University, and Vice Minister of the National Science Council; Chin-Chung Wu, Vice President and Chief Digital Officer of Taipower Company; Rocky Chien, Chairman of SunShine Electric; Peter Chang, Chairman of e-Formula Technologies; Stone Tseng, Founder and Chairman of Tai Da Table Restaurant; Brian Tseng, CEO of Everdura; Steve Huang, CEO of Kiwi Energy; and Calvin Chen, CEO of ARES International Certification Co., Ltd. Together, they have established a cross-sector dialogue platform to foster robust public-private partnerships. Within this platform, we not only showcase the economies of scale and centralized control advantages of centralized VPPs (FTM, Front the meter) but also delve into the unique merits of distributed VPPs (BTM, Behind the meter). These include reduced line losses and the ability to rapidly mobilize existing end-user assets to provide capacity, energy, and ancillary services. As noted in our interview with Chin-Chung Wu, while centralized VPPs excel in frequency regulation and large-scale coordinated operations, the gradual approach of Taiwan Power's system to its capacity threshold necessitates agile control through distributed assets—making them an indispensable complement to the current power infrastructure.

On the topic of the circular economy, we particularly highlight insights from Minister Peng. Serving as the Executive Secretary of the Presidential Office's Climate Change Task Force, Peng not only pinpointed the crucial role of the circular economy in the energy transformation but also resonated with this issue's emphasis on a light-asset operational model. Under this paradigm, emerging companies with energy IoT capabilities are seizing opportunities to transition from traditional cable television into smart home applications, and from the food and AI industries into green circular practices—thereby unlocking unprecedented potential for industrial intelligence and decarbonization.

Faced with the intermittency of renewable energy sources such as solar and wind—and the increasing penetration of inverter-based resources (IBR) that introduce fluctuations in voltage, frequency, active power, and reactive power—the grid must rely on resources endowed with both flexibility and resilience. Moreover, by leveraging market mechanisms and integrated resource planning (IRP) to harmonize supply and demand, sufficient ancillary services can be provided to ensure overall system stability. In this context, VPPs play an ever-more critical role in regulation and coordination.

The principles of the circular economy are of paramount importance in the energy transition. Establishing systems for resource recycling and closed-loop management not only ensures that green energy installations—such as solar panels, wind turbines, and battery storage systems—are effectively recycled and reused at the end of their life cycles, but also significantly enhances the overall resource efficiency and environmental benefits of the energy system. Through the integration of distributed energy, smart grids, and digital management, the circular economy revitalizes the green industrial chain—achieving low-carbon emissions and resource sustainability at every stage, from raw material procurement and manufacturing to operation and recycling—thus further strengthening grid resilience and supply security.

Although Taiwan has long enjoyed ample power generation capacity, its reliance on a centralized transmission and distribution infrastructure has led to uneven energy distribution, particularly during peak demand periods. This presents a significant challenge in flexibly managing power supply—a challenge that circular economy thinking aims to address by effectively integrating dispersed energy resources and achieving closed-loop utilization to maximize the benefits of limited assets.

Currently, Taiwan is embarking on its second energy transformation, as proposed by President Lai Ching-te. This initiative not only strives for a stable power supply but also emphasizes deep energy conservation and intelligent grid regulation. By capitalizing on existing assets and incorporating smart devices such as heat pump systems, intelligent lighting, and non-critical loads, distributed VPPs can provide additional capacity and energy support to complement Taiwan Power's ancillary service requirements when needed. This approach not only enhances dispatch flexibility but also renders the entire societal infrastructure far more resilient than what a purely centralized power generation model could achieve.

Electricity is national strength. As Taiwan strives toward net-zero emissions by 2050, it must integrate the dual strategies of energy transformation and the circular economy. By consolidating existing resources and realizing the closed-loop utilization of limited assets, VPPs play a pivotal role in energy generation, demand response, and energy storage recycling—laying a robust foundation for future energy security and national competitiveness.

Taiwan Industry-Academia Technology Alliance for Energy Digital Transformation (TAEDT)
Taiwan Industry-Academia Technology Alliance for Energy Digital Transformation (TAEDT) was established in February 2022 at Chung Hua University, funded by the National Science and Technology Council of the Executive Yuan. This alliance brings together industry, government, academia, research, and society, spanning 11 universities and featuring 17 renowned professors as co-chairs and 14 industry leaders as directors, creating a think tank-style virtual platform.
Aligned with Taiwan's 2050 net-zero transition strategy, which emphasizes energy transformation, the alliance focuses on the technical services and business models within three key ecosystems: "Distributed Energy Resources," "Virtual Power Plants," and "Smart Microgrids."
As of now, the alliance has 120 group members, including public and private sector organizations, publicly listed companies, and startups. These members represent over 30 different industries, including state-owned power enterprises, green energy providers, aggregators, electricity retailers, energy storage companies, electric vehicle operators, and aggregators, forming a diverse cross-industry collaboration. The alliance also invites experts and scholars specializing in net-zero sustainability and energy transition to serve as keynote speakers on focus topics. It has hosted over 100 online and offline events, with more than 8,000 participants.