HOW A VIRTUAL POWER PLANT (VPP) WORKS

Over 3 million Australian homes, businesses and schools have embraced the opportunity to generate, store and consume their own electricity. This has been achieved mainly through solar panels and, more recently, the adoption of home battery storage and electric vehicles.

As we continue the transition to a zero-carbon electricity system, new technologies and approaches are being developed and deployed to help increase the penetration of renewables and provide more flexibility in the way we use energy.

A Virtual Power Plant (VPP) is one such innovation.

Below are some frequently asked questions about VPPs.

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What is a Virtual Power Plant?

The collective capacity of solar PV systems in Australia now exceeds 10 GW – more than eight times the capacity of the former Hazelwood power station, or four times the capacity of the Liddell power station.

One of the few drawbacks of integrating solar energy into the grid is its intermittency – the sun doesn’t always shine and it can’t be ramped up or down according to demand. The traditional electricity network also isn’t designed to accept and manage large amounts of rooftop solar.

So to keep the grid balanced and ensure power is available whenever it is needed, network operators are looking for ways to store and release solar energy when it’s needed.

This is where VPPs come in.

Hailed as the next evolution of solar energy, a VPP is a network of interconnected distributed energy resources (DERs) such as rooftop solar PV and home battery storage that can be centrally controlled and dispatched to provide various services to the grid.

In other words, a VPP is like a ‘virtual power station’ that can be used to provide the same services as a traditional power station, but without the need for large, centralised generation and storage assets. It’s an innovative way to get more value out of existing solar PV systems and battery storage units, harnessing the collective power of Australia’s behind-the-meter energy assets.

In a nutshell, a VPP is clean energy on demand.

How does a Virtual Power Plant work?

There are many ways a VPP can work, depending on the type of interconnected resources and individual program structures.

If you participate in a VPP, you will typically be joining a network of other solar PV and battery storage owners who are willing to allow their system to be centrally controlled.

During a period of high demand on the network, a VPP operator will use a cloud-based aggregation platform to remotely control and optimise the output of your system, trading it on the National Energy Market (NEM) to help manage this demand – similar to how a traditional power station would operate.

The VPP operator receives compensation from the NEM for satisfying the spike in network demand and passes on a portion of this compensation to participating households.

What are the benefits of Virtual Power Plants?

There are many benefits of VPPs for participants, network operators, the environment and the broader community.

For network operators, VPPs provide a flexible, distributed solution for managing demand on the electricity grid. By aggregating thousands of individual home batteries, VPPs allow renewable energy to be injected into the grid with lightning speed to address frequency and voltage imbalances, local disruptions or disturbances and keep the network stable. This can be particularly useful during extreme weather events.

In addition, VPPs can help retailers avoid high spot prices. When peak events occur, sometimes retailers need to bring on additional capacity and purchase on the highly inflated spot market. VPPs allow retailers to tap into the aggregated capacity of home batteries to meet their needs and avoid these high prices.

These savings can trickle down to the broader community. Whilst households don’t get charged directly for electricity purchased at spot prices, eventually, this flows through to higher electricity bills.

Ultimately, VPPs enable more reliable use of renewables and with this, deliver cheaper electricity and a more stable network for all Australians.

For participants, VPPs provide an opportunity to generate additional income or savings from their solar PV and battery storage system. How much you save will depend on how often your energy is shared from the battery into the VPP network and on which approved VPP program you join.

Depending on the VPP provider, this could mean a reduction in energy bills or receiving grid credits for the energy discharged from your battery and shared to the VPP network. Some programs give an upfront discount for participation which will further reduce the cost of installing a solar battery.

Lastly, the benefits for the environment are simple – as VPPs provide an injection of clean energy into the grid, this displaces electricity from dirty generators. By firming up the intermittency of renewables, VPPs play an important role in the transition to a cleaner energy system.

How do I participate in a Virtual Power Plant?

If you’re interested in participating in a VPP, you will need to register to join one of the many programs available across the country. Each program has specific eligibility criteria and program structures.

To discover which VPP program best suits your household or business, you can refer to our regularly updated VPP Offer Comparison Table. This table outlines key features of the various VPP programs currently available in Australia.