A consumer guide to virtual power plants
Residential solar and battery storage systems are turning the traditional power model on its head
Volume 8–2020 | https://doi.org/10.3389/fenrg.2020.596817
It’s estimated that in Australia alone, at least 150,000 residential battery systems will be installed by 2025 (AEMO estimate). In a modest growth scenario, that represents a whopping 1 GWh of storage. This opens the door for consumers to become part of a virtual power plant (VPP), with retailers encouraging participants to sign up and benefit from lower bills and greater energy autonomy.
What does it mean to be a participant in a VPP? What benefits will you see, and what can you expect? Read on to find out.
What is a VPP?
In the traditional model, power flows from massive, centralised power plants to businesses and consumers. In a modern grid with distributed energy resources like home solar systems, power flows both ways. This has led to a new power model: the virtual power plant (VPP).
A VPP is essentially a network of distributed energy resources that works together as a single power plant. This could be a network of homes with solar panels, home battery systems and electric vehicle-to-grid technologies. These installations are located “behind the meter” in homes and businesses, so electricity can reach the consumer directly, without having to be purchased from the energy retailer.
How do they work?
VPPS are connected to a central control system that monitors individual, decentralised “plants”. Real-time data is exchanged via secured (encrypted) data connections.
VPP participants in Australia generally have to share control of their storage systems with their retailer or VPP aggregator. The aggregator then balances energy demand fluctuations by increasing or decreasing power supply based on demand.
Demand response explained
VPPs can help balance supply and demand in the grid by means of demand response (DR). DR programs encourage end-users to make short-term reductions in energy to balance supply and demand of electricity — a typical example is by paying energy consumers to shift their use of power to better match supply. This places downward pressure on wholesale electricity prices while maintaining system security and reliability.
For VPPs, real-time data tracking of units mean they can provide DR automatically, shifting commercial and residential loads or aggregating other distributed energy resources.
VPP vs microgrids
VPPs and microgrids both aggregate distributed energy resources. However, microgrids have a very defined network boundaries and don’t generally provide services to the main grid. VPPs, on the other hand, tend to cover a wider area, can serve the main grid, and also have flexibility in terms of expanding or contracting the area in which they operate (depending on market conditions).
VPPs in Australia
The South Australia VPP is a growing network of homes equipped with solar and Tesla Powerwall home battery systems, and it could become the world’s largest VPP. The project has seen 1,100 South Australia Housing Trust properties fitted out with solar panels and batteries since the trial began. Further installations are now being rolled out to another 3,000 SA properties.
AGL began a VPP program in Adelaide in 2016, and has recently announced its expansion for residential customers in QLD, NSW and VIC. In the ACT, the Next Generation Energy Storage VPP program has also been extended — it has so far delivered more than 1,200 subsidised residential batteries to households. Ausgrid is also in the process of growing a VPP demand management trial across its network in NSW.
In Tasmania, the CONSORT Battery Trial on Bruny Island consisted of 40 systems to reduce congestion on the undersea power supply cable.
What can VPPs achieve?
1. VPPS can stabilise electricity supply and demand using clean energy
Energy can be shared amongst individual units in a VPP to help support the community’s energy needs. Power can also be exported to the grid when required, even small amounts from individual battery systems. The capacity of a VPP can match a traditional power station, and VPPs can also provide frequency control and ancillary services (FCAS). The SA VPP was the first in Australia to provide grid stabilisation services that were previously only the domain of large centralised generators.
This is a much cleaner form of FCAS than that provided by fossil-fuel powered “peaking plants”. VPPs can therefore allow more renewables such as solar PV systems to be installed on the grid, continuing the renewables transition.
2. VPPS can increase grid security
As VPPs consist of numerous energy resources with no major single vulnerability, they can potentially make the grid more secure and can provide blackout insurance for individual households.
The SA VPP has already helped avoid blackouts after several major grid disruptions over 2019–2020, including a power station trip in QLD in October 2019.
3. VPPs provide direct value for participants
Participants will directly benefit from baseline savings from their solar generation and energy storage system, as well as tariff arbitrage based on the VPP’s electricity projections. A home battery system allows participants to take full advantage of their rooftop solar by storing the energy for cloudy days. If they generate more power than they consume, they’ll sell the power to their energy retailer and receive a credit instead of an electricity bill.
According to Solar Choice’s Battery Payback estimator, the savings for a 10kWh battery storage system used only for solar charging amounts to about $300 per year. Tariff arbitrage should be able to save a home between $25–50 per year by optimizing time-of-use billing (although this depends on factors such as battery size, consumer energy patterns, and the electricity tariffs that the consumer is subject to).
4. Participants could be compensated for grid services
Participants could potentially be paid for providing grid services like FCAS, and for responding to wholesale spot market prices. This would require the involvement of network operators, the VPP providers and electricity retailers, as Solar Choice explains.
As more VPPs are established, VPP providers are expected to tailor their customer plans by state, similar to the different retail plans offered on a state-by-state basis by electricity retailers.
What do consumers need to take part in a VPP?
1. Solar PV panels and inverter system. A battery system such as Powerwall is AC-coupled and compatible with all inverter types.
2. Home battery system. This may be subsidised by the VPP program (for example, batteries purchased as part of the Tesla Energy Plan attract a lower cost, and offers compliment subsidies such as South Australia’s Home Battery Scheme).
3. Smart meter: for energy management, metering and monitoring functions (Backup Gateway in case of the Powerwall system.)
How much control do VPP participants have over their batteries?
The answer will depend on the energy plan that participants are engaged in.
Customers who elect to be part of Tesla’s Energy Plan are able to monitor their energy usage via the Tesla app. However, they are not able to manually configure their home batteries — the systems are managed collectively by Tesla’s VPP software. Tesla’s algorithms optimise energy consumption, so that batteries charge during low-energy price periods and export power to provide grid support and benefit from high energy price periods.
Tesla Energy Plan customers receive 20 per cent of Powerwall capacity as back-up reserve — this will provide the typical household with two hours of power in case of a blackout.
When should participants charge their devices (i.e. EVs) to optimise their usage?
Participants will generally be aiming to “self-consume” their solar energy, as opposed to purchasing electricity from the grid. Optimising usage may depend on the types of electricity retail tariffs. For instance, those subject to competitive time-of-use tariffs may want to charge their EV during the off-peak period, and use the energy stored in their home battery system to meet their evening power needs.
How should consumers maintain their home battery?
The most important point is to maintain optimal airflow from the vents by keeping the device free of debris. The exterior can be cleaned with a soft cloth. If mounted outside, the sides should be regularly cleared of leaves around the air intake and exhaust.
For best performance and safety, the device should be mounted in a non-habitable room (adequately ventilated) or outside, and kept within the optimum temperature of 0 to 30°C. The Clean Energy Council also recommends owners carry out a visual check at least one a month and liaise with their accredited installer to arrange maintenance checks. At a minimum, users should learn to read critical system health information and recognise when the device needs attention.
VPPs can provide a range of benefits — both to participants and the electricity grid. As with all electricity plans, it remains a must for consumers to check the terms and conditions set out by the VPP provider.
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How do VPPS compete in the wholesale electricity market?
In July 2018, the Australian Energy Market Operator (AEMO) gave the green light for VPPs and demand response projects to compete freely on the wholesale electricity market. This meant that customers with home storage systems could enter into contracts with energy providers other than their main retailers to provide power to the grid when needed.
As VPPs map real-time data of individual DERs, they can generate precise electricity forecasts. This opens up the option of consumers to enter into peer-to-peer energy trading.
What is peer-to-peer trading?
Peer-to-peer trading essentially means that households equipped with solar panels and batteries that are part of a VPP would be able to buy and sell excess rooftop solar. Participants could monetise their excess solar by striking agreements with their neighbours or the energy market. Transactions could be made via blockchain-style third party cryptocurrencies that do not necessarily require an energy retailer. In a microgrid, transactions would be made on a network behind a grid-connected gateway meter energy.
A recently completed study led by Curtin Uni examined the RENeW Nexus project, which uses blockchain to track the transaction of rooftop solar traded between 48 households in Fremantle, WA. The report highlighted that VPPs gave customers access to additional revenue and boosted their energy autonomy, but wouldn’t be attractive to consumers without changes to current tariff structures. Instead it recommended a dynamic feed-in tariff to cope with excess solar during the day.
In terms of grid services, the report found that VPPs could be more cost-effective at maintaining the grid by providing demand response: an alternative to adding more “poles and wires”.
