Why China’s EV ambitions need virtual power plants

This story first appeared in China Report, MIT Technology Review’s newsletter about technology in China. Sign up to receive it in your inbox every Tuesday.

The first time I heard the term “virtual power plants,” I was reporting on how extreme heat waves in 2022 had overwhelmed the Chinese grid and led the government to restrict electric-vehicle charging as an emergency solution. I was told at the time that virtual power plants (VPPs) could make grid breakdowns like that less likely to happen again, but I didn’t have a chance to delve in to learn what that meant.

If you, like me, are unsure how a power plant can be virtual, my colleague June Kim just published an insightful article explaining the technology and how it works. For this week’s newsletter, I took the chance to ask her some more questions about VPPs. It turns out the technology has a particularly good synergy with the EV industry, which is why the Chinese government has started to invest in VPPs.

“VPPs are basically just aggregations of distributed energy resources that can balance electricity on the grid,” June says—resources including electric-vehicle chargers, heat pumps, rooftop solar panels, and home battery packs for power backups. “They’re working in coordination to replace the function of a centralized coal plant or gas plant … but also add a whole host of other functionalities that are beneficial for the grid,” she says.

To really make the most of these resources, VPPs introduce another layer: a central smart system that coordinates energy consumption and supply.

This system allows utility companies to handle times of higher energy demand by making adjustments like shifting EV charge time to 2 a.m. to avoid peak hours.

The US government is working to triple VPP capacity by 2030, June says. That capacity is equivalent to 80 to 160 fossil-fuel plants that don’t have to be built. “They expect that EV batteries and the EV charging infrastructure are going to be the biggest factor in building up this additional VPP capacity,” she says.

Considering the significant impact that EVs have on the grid, it’s no surprise that China, where an EV revolution is taking place faster than in any other country, has also turned its attention to VPPs.

By the end of 2023, there were over 20 million EVs in China, almost half the global total. Together, these cars can consume monstrous amounts of energy—but their batteries can also be an emergency backup source. The power shortage that happens in China almost every summer is an urgent reminder that the country needs to figure out how to incorporate these millions of EVs into the existing grid.

Luckily, there are already some moves in this area, both from the Chinese government and from Chinese EV companies.

In January 2024, China’s National Development and Reform Commission, the top economic planning authority, released a blueprint for integrating EV charging infrastructure into the grid. The country plans to start pilot programs with dynamic electricity pricing in a few cities: lower prices late at night can incentivize EV owners to charge their vehicles when the grid is not stressed. The goal is that no more than 40% of EV charging will take place outside these “trough hours.” There will also be a batch of bidirectional charging stations in public and private spaces. At these chargers, batteries can either draw electricity from the grid or send it back.

Meanwhile, NIO, a leading Chinese EV company, is transforming its own charging networks. Last month, 10 NIO charging stations opened in Shanghai that allow vehicles to feed energy back into the grid. The company also has over 2,000 battery-swapping stations across the country. These are ideal energy storage resources for the VPP network. Some of them have already been connected to VPP pilot programs in eastern China, the company said in July 2023.

One of the key obstacles to adoption of VPPs is getting people to sign up to participate. But there’s a compelling reward on offer: money.

If the reverse-charging infrastructure grows larger, millions of Chinese EV owners could make a little income by charging at the right times and selling electricity at others.

We don’t know how much earning potential there is, since these pilot programs are still in their very early stages in China. But existing VPP projects in the US can offer some reference. Over the course of one summer, a Massachusetts home can make an estimated $550; participants in a separate VPP project in Texas can earn an estimated $150 per year. “It’s not huge, but it’s not nothing,” June says.

Obviously, it will take a long time to transform our electric grids. But developing VPPs along with the EV charging network seems like a win-win situation for China: it helps the country maintain its lead in the EV industry, and it also makes the grid more resilient and less dependent on coal power plants. I won’t be surprised if Chinese local governments and companies work together to roll out virtual power plants in earnest over the next few years.

Do you think China will catch up quickly on adopting virtual power plants? Tell me your thoughts at [email protected].

Catch up with China

1. The economic shadows of the pandemic have finally receded. This Lunar New Year, the number of travelers and the amount of spending in China finally surpassed pre-pandemic levels. (Bloomberg $)

2. The European Union is probing China’s state-owned train manufacturer for government subsidies that could give it an unfair advantage when bidding for overseas procurements. (Politico)

• Last year, the European Commission started another anti-subsidy investigation over imports of Chinese electric vehicles. (MIT Technology Review)

3. Burgeoning sci-fi literature circles in China attracted the prestigious Hugo Awards to be held there last year. But leaked emails show that the awards’ administration team actively censored authors who could upset the Chinese government. (The Guardian)

4. A Volkswagen supplier found a component that might have been produced in Xinjiang, where the use of forced labor has been documented. Now thousands of Porsche, Bentley, and Audi cars are being held at US ports waiting for replacement parts. (Financial Times $)

5. The leading Chinese EV maker BYD is considering building a factory in Mexico. If that happens, we might be able to buy BYD vehicles in the US soon. (Nikkei Asia $)

• Exports of BYD cars have grown so much in recent years that the company is now buying and hiring massive ships to help deliver them. (MIT Technology Review)

6. A new report by OpenAI and Microsoft says hackers from China, Russia, North Korea, and Iran have used their large language models, but mostly for mundane tasks like drafting emails. (New York Times $)

7. China’s first domestically made passenger airplane made its first overseas trip to Singapore. (Reuters $)

8. New Chinese restaurant chains that combine traditional cuisine with fast food are blowing up in China. When are they going to open one in the US? (Time)

Lost in translation

Huaqiangbei is a neighborhood in Shenzhen known as a hub of domestic innovation and imitation. It has always played a pivotal role in introducing expensive products (like iPhones and AirPods) to Chinese users, either through smuggling or by producing knockoff versions. And the launch of Apple’s Vision Pro has again reminded people of Huaqiangbei’s influence on consumer trends, according to Chinese tech columnist Wang Qingrui.

One Shenzhen-based company, EmdoorVR, has already launched a VR headset that looks almost identical to the Vision Pro. This imitator, which is much more limited in function, is named VisionSE and sells for less than 1/10 the price. However, many Huaqiangbei brands have yet to follow suit, since they are not confident about the future of VR headsets. Their hesitation could be another signal that it will be hard for the Vision Pro to find as much acceptance as Apple’s previous successes.

One more thing

For many Chinese families, playing mah-jongg is an essential New Year tradition. But machines are transforming how the game is played: a viral video on social media shows a mah-jongg machine without the usual tiles. Instead, it displays everything on five different screens. It also automatically voices the moves and calculates the results. Not many people in the comments are impressed. Mah-jongg is “99% about feeling the tiles,” says one.