Chris, a former engineer, explains how virtual power plants work to harness renewable energy and reduce emissions. Chris is working with Clean Energy for Eternity and Clear Sky Solar Investments to help reach the Northern Beaches Council ambitious target of 50% of suitable premises in the LGA installing solar panels by 2030.

What is a Virtual Power Plant?

A Virtual Power Plant consists of a network of distributed solar power and battery systems co-ordinated by a central VPP operator that:

  • Releases some (or all) of the batteries’ stored energy into the grid during periods of peak demand when wholesale electricity prices are high.
  • May direct the batteries to charge from the grid when electricity demand is so low that grid stability is threatened.

How does it work

The provision of these grid services can be very lucrative for the VPP operator and they will share some of this benefit with their network members in different ways, including periodic fees, payment for battery energy used, and enhanced feed-in tariffs for exported energy, reduced consumption rates, etc.

By being part of a Virtual Power Plant you allow your battery to play an active role in the operation of the grid, supporting it in handling increasing levels of renewable energy – so it’s a good thing to do in principle. You’ll also get some financial reward.

But for this you’ll be giving up control of your battery to a third party, may find your battery has insufficient charge for your needs at times and will have your battery worked harder than if used by yourself alone.

A VPP operator will generally become your Retailer, or may operate through another designated Retailer.

Choose your VPP operator carefully

It’s really important to read the small print on any VPP offer, as the mix of rights (the operator’s) and benefits (yours) vary considerably and can be hard to understand and compare.

A couple of points to keep in mind: 

  • The VPP operator is focused on making money for themselves, not for you – and it’s your battery which is the asset they’re going to be using, so be sure you’re getting a fair slice of the benefits
  • The big ‘gentailers’ (Energy Australia, AGL, Origin) have a strong interest in maximising output and extending the life of their fossil fuel power stations, and excessive market power within the NEM, so consider if you want to give them control of your battery as well! Look instead for a VPP operator focused on renewable energy only.

In conclusion

If you do your research and decide you can put your battery to work in supporting the grid, and get more than enough benefit to compensate for the sacrifices, then go for it – but do so with an VPP operator that shares your commitment to renewable energy!

There are several sources comparing current VPP offers, including this one from Energy Matters.

Solarquotes  and Energy Matters have very good information about VPP on their websites, which we’ve drawn on substantially for this article.

Need assistance with solar for your business or home?

Chris Lee is happy to discuss solar for your business or house, you can email Chris here.