How to Read China's Virtual Power Plant Policy: What 357号 Defines, the 20 GW and 50 GW Targets, How a VPP Connects and Registers, Which Markets It May Enter, and Who Sets the Prices

Short answer. China's first dedicated virtual power plant (VPP) policy is 发改能源〔2025〕357号, dated 25 March 2025. It defines a VPP as an operating model that aggregates distributed generation, adjustable load, storage and other dispersed resources and takes part in system operation and market trading as a new type of market entity, and it sets national regulating-capability goals of 20 GW or more by 2027 and 50 GW or more by 2030. The rest of the framework is scattered: the 2023 demand-side management measures (demand-response targets and a VPP definition), the NEA's 2024 opinions on new-type market entities (registration, licence exemption, one aggregator per resource), the 2024 market operation rules and the 2025 ancillary-service and medium- and long-term rules. This guide reads them in that order. Provincial rules and prices are not covered.

1. The definition and the targets

357号 defines a VPP as an electricity operating organisation model that, on the basis of the power system architecture and using modern information and communication and system-integration control technology, aggregates distributed generation, adjustable load, storage and other dispersed resources and, as a new type of market entity, participates in power-system optimisation and market trading. Its functions are regulating services (peak regulation, frequency regulation, reserve) on the system side, organising load resources for demand response on the demand side, and aggregating dispersed resources for market trading. The targets are stated as regulating capability, not installed capacity: by 2027, mature and standardised construction and operation management and sound market-participation mechanisms, with national VPP regulating capability of 20 GW (2000万千瓦) or more; by 2030, wider application scenarios, innovative business models and 50 GW (5000万千瓦) or more.

The NEA-published interpretation by 电力规划设计总院 staff calls 357号 the first dedicated VPP policy document, says most VPPs currently earn only through demand response while spot and ancillary-service participation is still at the pilot stage, and says China has only two national VPP standards, with a technical guideline still in drafting and no formally issued industry standard.

2. How a VPP is built, connected and dispatched

Provincial authorities are to issue local VPP construction and operation management measures covering project construction, access management, system commissioning, capability testing and go-live. The connection point depends on the business: VPPs taking part in demand response connect to the new-type power load management system; VPPs taking part in the spot or ancillary-service markets connect to the dispatch automation system, or join some products through the load system; dispatch institutions or load management centres assess VPP regulating capability for admission. Resources aggregated by a spot-market VPP should in principle sit at the same market clearing node, with cross-node aggregation allowed where grid conditions and market rules permit; a single resource may not be aggregated by two or more VPPs at the same time.

Safety obligations follow: VPPs within the scope of grid-related safety management accept unified dispatch and grid-safety rules, periodically submit their aggregated-resource list and change applications to the load management centre or dispatch institution, and must execute regulation instructions in grid emergencies; operators must follow the 电力监控系统安全防护规定 and use compliant cryptographic products; eligible projects may receive funding under the 'two new' equipment-renewal and trade-in policies.

3. Which markets a VPP may enter

After meeting the Basic Rules for Market Registration and each market's admission requirements, a VPP may participate as an independent entity in the medium- and long-term, spot and ancillary-service markets; its aggregated resources may not participate in market trading again while aggregated; admission may be appropriately relaxed in the early stage; a VPP that buys and sells electricity in the medium- and long-term and spot markets must hold retail-company (售电公司) qualification; and 357号 also calls for widening spot-market price limits and exploring cross-provincial VPP trading where conditions allow. For ancillary services, bid-price caps must be set fairly for each product without different caps for different kinds of entities, with an assessment mechanism suited to the VPP development stage; for demand response, compensation follows the principle 'who serves, profits; who benefits, bears the cost', the price cap is studied and set by the provincial price authority, and a cost-sharing mechanism is to be improved at the same time.

The market rules already name VPPs. The 2024 Basic Rules for Electricity Market Operation (NDRC Order No. 20) count VPPs, with storage companies and load aggregators, among the new-type market entities. The 2025 ancillary-services rules name VPPs among new-type entities and provide that 'generation-and-consumption' entities such as independent storage and VPPs share or receive ancillary-service costs in a settlement period according to their export (import) volumes on the generation (user) side. The 2025 medium- and long-term rules require bid limits for retailers, VPPs and load aggregators to be set from risk-absorbing conditions such as registered assets, performance guarantees and the historical consumption of represented or aggregated users, and require a VPP aggregating distributed new energy into green power trading to establish the aggregation relationship first and link all declared green volume to each distributed project. The September 2025 guideline for regions with continuous spot markets encourages VPPs, smart microgrids, new-type storage and user-side entities to bid quantity and price in the spot market and explores nodal or zonal price bidding and settlement, and the 2025–2027 storage action plan lists distributed storage aggregated and controlled by VPPs among the dispatch innovations to pursue.

4. The two documents behind 357号

Demand-side management (2023). The Measures for Electricity Demand-Side Management (发改运行规〔2023〕1283号, issued 15 September 2023) list VPP operators among demand-side management service institutions, set a 2025 target that each province's demand-response capability reaches 3%–5% of maximum load (5% or more where the annual peak-valley difference rate exceeds 40%), call for bringing demand-side resources into power balancing through VPPs and similar forms, and define a VPP as relying on load aggregators, retailers and similar institutions to aggregate, coordinate and optimise demand-side resources into scaled regulating capability. CNWattHub reading: the 2023 definition is demand-side only; 357号's definition adds distributed generation and storage as aggregated resources and market trading as a function.

New-type market entities (2024). The NEA's opinions (国能发法改〔2024〕93号, dated 28 November 2024) divide new-type entities into single-technology entities (distributed PV, distributed wind, storage and adjustable load) and resource-aggregation entities (VPPs, i.e. load aggregators, and smart microgrids). New-type entities may in principle be exempted from the electricity business licence; aggregation entities sign agency service contracts with the aggregated resources and file them with the exchange; an aggregated resource may in principle be represented by only one aggregation entity within a contract period; exchanges must set a registration category and may not add registration thresholds; and an aggregator's wholesale settlement data is the sum of the aggregated resources' metering data.

5. Reading the economics

CNWattHub editorial method, not a sourced rule. A VPP in China has three revenue doors, and 357号 names all three: demand-response compensation, whose cap a provincial price authority sets; ancillary services, where caps must not differ by entity type; and energy-market trading, which requires retail-company qualification for purchase and sale. The interpretation says that today most VPPs use only the first door. Two rules shape the asset base: a resource may not be in two VPPs, and may in principle have only one aggregator per contract period, so aggregation contracts are exclusive for their term. Nodal aggregation matters once a province runs nodal spot pricing, because a VPP that straddles nodes needs the market's permission.

Reading table

Checklist

CNWattHub editorial method, not a sourced rule:

1. Ask which system the VPP connects to (load management or dispatch automation) and which business that allows.
2. Check that each aggregated resource sits at the VPP's clearing node, or that the province allows cross-node aggregation.
3. Confirm exclusivity: no resource in another VPP, and one aggregator per contract period.
4. For energy trading, confirm the operator holds retail-company qualification.
5. Find the provincial demand-response price cap and the ancillary-service bid caps; they are set locally.
6. Check the provincial VPP management measures for capability testing and go-live steps.

Scope limits

National texts and one NEA-published interpretation only. No provincial VPP management measures, demand-response compensation levels, ancillary-service caps or market results are described; no current national VPP capability figure is quoted because none of the sources states one. Not legal, regulatory or investment advice.