Virtual Power Plants: Helping Operators Transition from Passive Energy Consumption to Active Flexibility Provision

Details: Staff Writer; Category: Energy & Sustainability; 12 November 2026; 464 views

Networks consume a lot of energy, and it’s easy to view this as an ever-growing expense for operators. However, the huge footprint of networks, their connection to the grid, and innovations in site power have seen virtual power plants (VPPs) emerge as a huge opportunity for operators to not only reduce their energy costs, but also to gain revenue through a new approach to managing network energy.

Li Shaolong (furthest right), President of Site Power Facility Domain, Huawei, will discuss the technical architecture around VPP, as well as security, reliability, ITU standards, site-level solutions, and value transformation for operators.

Gautham Gnanajothi (second from left), Global Senior Vice President of Research, Frost & Sullivan, will focus on macro trends, market data, industry cases, business feasibility, policy coordination, and the overall ecosystem.

Adele Nardo (second from right), Business Development Manager, Hive Power, will discuss European market implementation, aggregation operations, value stacking, business models, policy, and interface coordination.

Virtual power plants are gaining global momentum. Why is VPP emerging now, and what does the future hold?

Gautham Gnanajothi: The economics of network dependence and of powering the network are becoming inseparable. The resilience gap is about digital and network dependencies increasing; the paradox is that the energy certainty is declining because of price volatility.

The value capture gap is down to a tremendous increase in data traffic - the amount of infrastructure investment and power requirement is increasing, but the revenue is not matching pace. Telecom operators have to think about converting these challenges into a strategic advantage. We have three macro imperatives - protecting the existing asset in terms of reliability, decoupling the relationship between the cost of hosting the data traffic versus the cost of operations, meaning an increase in the OPEX, and creating additional new value with existing asset.

That’s where VPP comes in. It's a high growth market; US$5.5-$5.7 billion market, and we're expecting it to reach close to $29-$30 billion by 2035. VPP solutions have a CAGR (compounded annual growth rate) of 20-22% which is significant. In terms of regional potentials, Europe is one of the most sophisticated markets, expected to display a strong growth over the forecast period. The highest growth potential is in Asia Pacific; we expect more than 30% in CAGR over the next maybe five to eight years.

Li Shaolong: Three years ago, almost no telecom operators were participating in the VPP business. Normally, when telecom operators buy batteries, it’s only for supplying power to their main equipment - they don't think of batteries as something that can generate revenue. But now, in Europe a growing number of telecom operators are focusing on VPP - they have advantage because they have thousands of sites, and therefore batteries. Normally these are dormant at the sites - it's a significant underutilization of assets, especially in Europe where the grid is very stable. Telecom players want to minimise OPEX because competition is really tight in Europe. They need to find ways of increasing their revenues, and VPP is a good option. Three years ago, at the ICT summit in Bordeaux, France, I met telecom operators who didn’t know the benefits VPP could deliver for them. Many are now much more knowledgeable– not only European operators, but global ones.

Adele Nardo: The three main factors driving new technologies are the market, infrastructure, and regulation. There is market demand; in Europe 30.8% of electricity production comes from renewables, i.e. wind and solar, and these work well, but they are volatile in terms of the grid and therefore also consumption. VPP enables modulating consumption, but at the same time, volatility in pricing is becoming daily; the morning is different from the afternoon. Dynamic pricing can be very difficult to coordinate, and a VPP service or VPP orchestrator can help utilise the resources.

On infrastructure, we have grid bottlenecks in Europe to different extents, in different markets. A grid upgrade to get new assets can take 4-10 years - it's a very long time for new installations to be brought to the market. VPP solutions come into play if you want to use existing installations that have already been point secured, and you can deploy quickly since it's already there.

On regulation, Europe is mainly driven from a regulatory environment. Looking at regulatory frameworks since 2019, the European Union has set a clear direction towards deployment of distributed energy resources and being able to include those in standard energy markets. The electricity market directive makes the market more liquid and more flexible by clarifying which resources can be integrated into the market and when. What we still see as the main issue on the global deployment of VPP is harmonisation across different countries.

Traditional backup batteries at telecom sites are only used for backup during power outages. What is the biggest technical challenge in transforming these batteries into VPP-dispatchable resources, and how does Huawei address it, and what concerns do operators and aggregators have?

Li Shaolong: If we look at the network, it's complicated: they have 2G, 3G, 4G, 5G, and 6G is on the horizon. Sites consume more and more power, so they are focused on resilience, plus a lot of telecom operators are deploying solar and participating in VPP. Batteries are traditionally only required as backup, so telecom operators don't want to spend a lot of money on them. However, if they require the battery for VPP, it needs to be significantly higher quality. At Huawei, we use one battery to support all scenarios: backup, solar, and VPP. It looks simple, but it’s actually quite difficult. You need a lot of technical knowledge to resolve the conflict.

In conversations with telecom operators, I’ve advised leveraging their batteries for VPP to add a revenue stream, but operators are focused on whether doing so will guarantee the safety and reliability of their site, because their primary business is to provide reliable communication. Huawei installs one battery, one IoT module, and one platform, so we can add the VPP business with no impact on the original business.

For example, if a battery has a capacity of 100Ah (ampere hours), we can prioritise 60Ah for backup while retaining 40Ah for VPP. Our solution does the calculations to find the optimal capacity for VPP to maximise revenue. Huawei’s NetEco platform can serve a maximum of 10,000 sites together. By pooling all of these sites for VPP, the aggregated capacity becomes material: around 200 sites can reach one megawatt, and at 2,000 sites the portfolio is large enough to provide grid services.

Adele Nardo: As a technical aggregator, the main problem is getting standard and scalable access to a wide number of sites. The NetEco platform performs a pre-aggregation, which shows us a high number of sites connected with a single interface. It’s not always the case; some customers may have heterogeneous installations with very different types of management solutions.

One of the barriers is tracking the balance between the wear of the battery and the profit from the market. When you apply an asset to the market, it will influence and modify the utilisation profile of the asset. Telecom operators are conservative companies, so we make sure that once that the backup capacity is ring fenced by NetEco, we start the available capacity but we apply parameters that take into consideration battery health as well as degradation models that we develop in-house to make sure that trading doesn’t outlast battery lifetime.

When it comes to telemetry and metering requirements, the regulatory environment is different in different countries. Even in the same country, distribution system operators may have different requirements when it comes to the metering concept of the site. This makes it more difficult because you may have also an operator with sites across the whole country, but then you have to develop a phased approach to tackle the areas where that DSO is more favourable.

Revenue uncertainty is the main worry. This can be tackled with commercial models for operators in the market; you can go purely merchant, exposing them to the risk of the market, structural floor agreement with a fixed revenue, or even a tolling agreement. We can help them with forecasting models; configure a commercial model that makes them feel safe, knowing that once they have their backup capacity, they can still use it for the market, and they are not completely exposed to the volatility of the market.

After deployment, what measurable changes has VPP brought to network reliability, OPEX, and new revenue? Can you share some concrete results and industry recognition?

Gautham Gnanajothi: The three pillars are reliability, OPEX, and new revenue, which goes back to the previous framework that I was highlighting: protect the asset, decouple the costs and then create new value with existing asset.

In Finland, Elisa has pioneered VPP deployment, and is achieving €800 per site additional revenue. If you add all that together, it makes a huge difference. It’s moved beyond a pilot - it's being deployed across multiple regions, and has provided market validation. It's easy, it's feasible, it's practical, and it provides replication logic for the rest of the players. This is just one example, but we are seeing deployments across more than 14 countries across the world. In Japan, we see NTT DoCoMo and Hokkaido Electric Power using base station batteries for demand response, and in China, Zhejiang Mobile has built a 250 MWh / 22 MW storage system across 5,000 sites, and they've assembled a 30 MW communications network VPP, which saves them close to CNY 28.3 million in electricity costs over two years.

In terms of the recognition, Huawei won a Frost and Sullivan Award in 2025 for Global Technology Leadership Innovation for VPP Solutions. The evaluation was mainly on the technology and innovation side, but another critical evaluation criteria was the commercial impact, potential and tangibility it brings to the market. With that win, Huawei has proved that the technology is commercially viable.

Adele Nardo: The Nordic market sets a high benchmark; in Central Europe, we also see increasing revenue between €300 and €1000 per site. Operators willing to invest more in a completely bidirectional battery installed for trading purposes can reach a value around €200,000 per megawatt per year when the assets are aggregated. The next step is clear, dynamic value stacking once the local use case is completely satisfied. Rather than focusing only on wholesale trading, operators should go into local flexibility programmes, as well as balancing services in the markets where they are open for aggregated resources. This is the next step to make this revenue not only €1,000 per site, but scale up and ensure resilience in a changing market.

What is still needed to scale telecom site energy storage into Europe's VPP ecosystem, and what does a win-win model look across the ecosystem – whether for technology providers, aggregators, operators and regulators?

Gautham Gnanajothi: It has to be looked at it holistically from a top level. One single player will not be able to push it to the maximum extent; the industry has to come together. It's important that harmonisation takes precedence; if regulations become a little more lenient, that would push adoption further. The win-win is when all the ecosystem players do what they do best. For example, when technology providers like Huawei make the asset available, make it safe and dispatchable. When Aggregators like Hive Power bring everybody together. When operators reach maximum facility efficiency. Telecom infrastructure and power are undergoing a huge transformation at the moment, and it's just getting started.

Li Shaolong: At MWC Barcelona 2024, Huawei was the first to publish a VPP solutions white paper, and industry peers have since introduced similar initiatives. Since 2023, Huawei has worked with standards organisations like the ITU & GSMA, as well as with telcos, to develop VPP rules in the industry. We have been contributing to VPP-related standards within ITU-T SG5 (Study Group 5), and for VPP cyclic use, high-quality batteries are required for safety, so we help develop these standards. Huawei consistently focuses on how to minimise the telecom operator’s investment to provide them more revenue. This is a win-win case; keep the solution simple to reduce costs and provide benefit to our customer.

Adele Nardo: VPP is not a straightforward technology; it requires very intense interaction with a client that is not a power trader, and who has other priorities rather than trading in the market. Through our collaboration with Huawei, we have a manufacturer that is open to developing products further to reduce client investment. Telecom operators are extremely price sensitive, so this is a key factor to be able to deploy their batteries into VPPs. On the technical and commercial aggregator level, we need to have enough flexibility in granting the client a commercial model that makes sense for how the company is structured, as well as how they expect the market to develop in future years - even if this sometimes clashes with our forecasting of the market or the interest of the company – but it's an enabling factor for them to start trading and eventually to change their mind if needed. We hope for a point in time in Europe where every country is opening balancing markets - aFRR, mFRR, even FCR to distribute energy resources - but we still see that there are extreme zonal differences between countries, so that is something we have to work with. Through collaboration like we have with Huawei, but also with other aggregators, that we can show to regulators good concepts that are working in order also for them to apply them further to strive for harmonisation in the future.