What Is a Virtual Power Plant?

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What is a VPP?

How does a VPP work?

Pros and Cons of a Virtual Power Plant

How do I join a VPP?

Can I still change my electricity retailer if I join a VPP?

Are VPP programs the same across Australia?

Ready to join the solar wave?

Long story short

A VPP turns solar-powered homes into mini power networks

Your home’s solar panels and battery can be used to share power with your neighbours and the grid when it’s under pressure.

Remote software does the heavy lifting

Your VPP providers manages when your battery charges and sends energy back into the grid, so you don’t have to do the guesswork.

You could get extra perks for joining a VPP

Some VPPs offer credit, discounts, and upfront battery installation incentives that can help you pay off your solar setup faster than a standalone home.

What is a VPP?

A virtual power plant (VPP) is like a little neighbourhood of solar-powered homes that act as their own mini power plant. It’s a community-styled approach to Australia’s energy market. In a VPP, homes pool their excess solar energy and battery storage to help power each other and send some extra supply back to the main grid when it’s needed. VPPs use these distributed energy resources to power everything from modern electric vehicles to traditional hot water systems. Kind of like a potluck dinner: each person brings their own plate, but everyone gets to enjoy it.

All homes in a VPP are linked to a central system run by either an energy provider, a battery brand, or an independent VPP operator. This system manages the flow of power across your network. This means that you don’t control exactly when your battery charges or discharges; the VPP software does. It decides which batteries send power back to the grid during peak demand, and which ones top up during the day.

VPPs usually only accept certain home battery models, but they can come with extra financial perks compared to going solo with rooftop solar. Many VPP energy plans offer energy bill discounts, credit from sharing your stored power, or upfront incentives on battery installations (if you don’t already have one).

How does a VPP work?

The centralised software on your VPP is constantly monitoring the different parts of your energy system, from your electric vehicle charger to your battery. Whether you store or immediately use the power from your solar panels, the software tracks all your energy usage, so the real-time flow of energy in your network is clear to see.

Your VPP provider looks at this energy flow and decides when batteries should charge or discharge. During peak demand, when electricity prices spike, your provider might sell some of the stored energy back to the grid. When wholesale energy costs drop (or are even negative), the VPP might charge batteries instead. Whatever power is moved around, it’s usually drawn out in small amounts across different homes, depending on how much energy storage each home has at the time. Since all of this is done the background, you don’t have to worry about picking the best time to use your energy and sell it.

How a VPP runs can vary slightly depending on where you live and your energy demand needs, but most discharge batteries when the grid needs help to stabilise.

In practice this might mean that come midday on a warm summer day, your VPP might capitalise on a big influx of energy from solar homes outside of your VPP taking advantage of feed-in tariffs by charging your battery. On a freezing winter night, stored energy might flow from your battery to help keep the heaters on in homes nearby. Either way, your system will work as normal, but your VPP will call the shots when your battery energy is moved around.

But don’t worry, the homeowner’s power needs always come first. Your solar will power your home before any energy is shared, and typically VPPs only take power from your battery reserves, not your live solar supply.

Pros and Cons of a Virtual Power Plant

Pros

• Helps stabilise the local grid during peak demand periods
• Some VPPs offer an upfront battery incentive when installed
• Stack multiple incentives together, like solar feed-in tariff and bill credits
• Gain savings on your bill from VPP discounts and credits
• Pushes more renewable energy into the main grid
• Can help you pay off your solar battery quicker than going solo

Cons

• Most VPPs need an existing solar battery installed
• You won’t be able to control when you can use your battery
• Some VPPs might run your battery overtime, wearing down its lifespan
• Can be left with minimal or no battery reserve
• You might need to sign a contract locking you into an energy provider
• Limited ability to charge your battery when off-peak tariffs are in effect

How do I join a VPP?

To join a VPP, you’ll need to tick off a few boxes before you can sign up. Most VPPs need compatible solar panels and a battery already installed or planned to be soon, usually with at least 5 kWh of capacity. But you’ll need to check the requirements of the specific VPP provider you’re looking at. You’ll also need a smart meter (which you should have since you need them for solar panels). Then you’ll be able to browse through the energy retailers and providers available. If you haven’t installed your battery yet, take this time to check whether any state rebates could help, too.

A good starting point when finding a VPP is to contact your solar installer or energy retailer and check if they have a VPP program. Once you’ve compared providers and checked over the contract terms, your VPP provider will register your system; you might need your battery system number for this. Then your provider should walk you through how they’ll use your battery. You should get a fact sheet that might answer any extra questions before your cooling-off period starts, to make sure that a VPP does suit your home energy usage style.

Helpful tip

Some VPP plans let you set a minimum backup battery reserve, so you’ll still have a little bit of power left over during peak demand events. Having this backup reserve also means that you could have some power if a blackout occurs. But not all VPP providers offer it, so always read through your plan details – especially if having power during a blackout is important to your household.

Julia Paszka

General Manager – Utilities & Credit Cards

Can I still change my electricity retailer if I join a VPP?

If you sign up for a VPP through an energy retailer, you’ll likely need to stick with them. Switching providers often means leaving your VPP entirely to hop over to a new one with your electricity provider. If you do go down the energy provider VPP route, make sure to check if they have a lock-in contract or not. This will make things much easier down the line if you do find a plan that better matches your needs.

Battery brand VPPs can be more flexible, but you’ll find that some will have a dedicated retail energy partner, so you could find yourself in the same boat. But not all do, which is why it’s important to understand how your setup works and all the plan details.

Are VPP programs the same across Australia?

VPPs are available for states that are a part of the National Electricity Market (NEM), including Victoria, Queensland, New South Wales, the Australian Capital Territory, South Australia, and Tasmania. Homes in Western Australia can also jump on the VPP train, too. While the basics are similar across Australia, incentives and bonus payments vary between VPP providers, just like with retail energy plans.

Some energy providers who offer VPPs have two different options. One where you join as a home with existing solar, and the other as a newly solar-powered home. The only difference between these is that some new homes (mainly NSW ones) could get an upfront incentive for installing solar and a battery. But there are other rebates available across states for homes looking to install a battery. There are also cases where energy retailer VPPs let you control when you discharge and charge your solar battery instead of losing control to your VPP provider, but these aren’t too common.

Ready to join the solar wave?

If the idea of installing solar power sounds like the right move for your home, it might be time to explore your options and see what’s out there. When switching over to solar, you’ll need to make sure that your energy plan matches your new setup and energy usage habits, which is where comparing can help you out. With iSelect, we can help you compare from a range of providers online to see which might suite your solar setup the most. Head online or call our energy comparison experts at 1800 664 532 to start enjoying the sunny side of the grid.