How virtual power plants work

GEM Energy National Sales Manager David Gilles explains how virtual power plants (VPPs) can benefit owners of household batteries.

A virtual power plant (VPP) is the virtual connection of distributed household batteries linked through software to a single control point. 

In layman's terms, batteries that are installed on homes in Brisbane, Bundaberg, Emerald, Rockhampton, Mackay or Cairns can be grouped to form a power plant.

This power plant is controlled through an operator – usually an energy retailer or a dedicated VPP manager. 

Through this software, the VPP supplier can control the charging and discharge of the battery for the benefit of the grid. 

Most batteries installed within the last couple of years will have VPP capability included as standard. No additional hardware is required, just a solid internet connection.

VPP advantages

There are benefits to the electricity grid, the VPP manager and the homeowner for being a part of a VPP.

In a high-demand event, like a 40ºC day, large numbers of Queenslander would arrive home from work between 5-6pm. They would simultaneously turn on their air-conditioners and begin standard home routines, such as cooking dinner, showering and using home entertainment systems. 

In some instances, the network may not have the generation capacity to support the demand created by these activities so energy stored in your home battery could be used to assist the network. 

During the middle of the day, the networks experience low load due to increased volume of renewable energy connected to the network, primarily driven by rooftop solar.

The battery can charge when energy volume is high, taking a load off the grid, and discharge that energy later in the day when its needed most.

What’s in it for me?

As a homeowner opting into a VPP, you will give the grid the ability to charge or discharge your battery to support the network as required.

VPP providers will then reimburse the owner for this power consumed and the ability to access their stored energy. 

This remuneration will be higher than the standard electricity costs, so it is a financial win for the homeowner. 

A typical 5kW battery can generate hundreds of dollars per year in additional payments from the network.

Plan options

When a homeowner signs up for an energy plan through a retailer there are two different types of plans. 

A “fixed-rate” for all their power or “time-of-use”, which include fluctuating costs based on known times of peak demand. 

When signing up to a VPP, the homeowner may benefit from being on a time-of-use tariff energy plan as energy stored in a battery will usually be used at peak times.

Energy is then drawn from the grid on off-peak times at a considerably lower cost than electricity at a flat rate. 

Many retailers are switching residential customers to time-of-use tariffs as they more accurately represent the cost of generating and distributing electricity.

Financial benefits

For a homeowner, the additional revenue generated from a VPP assists with paying for the battery quicker, increasing their return on investment. 

VPPs help the environment by removing the need for power generation plants to use additional fossil fuel resources to provide power to Australians.

VPPs will become increasingly popular in the future and it's essential for consumers to partner with suitable operators to ensure the value of their battery is maximised.

It's also important to remember that the primary purpose of your home battery is daily energy savings and blackout protection.

The VPP operator needs to consider this and ensure the battery isn't cycled too much, reducing the battery's life expectancy.