What exactly is a Virtual Power Plant?

As the pace of technological disruption continues its meteoric rise, industries like energy are redefining their traditional business models to meet the markets’ evolving needs and utilise new energy sources. Amongst the most interesting transformative changes within the energy sector is the integration of distributed energy assets into a single entity such as a Virtual Power Plant.

Nectr’s two-part Virtual Power Plant (VPP) series breaks down and analyses what a Virtual Power Plant is, highlights why energy retailers are participating in them, and what it means for customers with solar and batteries.

1) What is a Virtual Power Plant? (VPP)

You might have heard of the term “Virtual Power Plant” (or VPP for short) if you have added solar and battery energy storage to your house in the last few years or are keeping across energy industry trends. Essentially, a VPP is a cloud-based network that acts as a “brain” for all its connected solar and battery systems. This control centre allows the user to manage the connected devices to improve efficiency and utilisation of the assets and optimise their interaction with the energy market.

2) Why are VPP’s important to the Energy Industry?

For energy retailers, a VPP offers a range of simple solutions to common problems experienced in the industry. As we’ve seen in 2021, the wholesale cost of energy has bounced around quite dramatically following the incident at the Callide C coal-fire power station and subsequent supply-demand imbalance. This sort of price instability impacts the hedging costs of wholesale energy, which ultimately influences longterm retail energy prices seen by consumers. VPPs provide an innovative and highly flexible form of insurance that retailers can use to protect themselves from spikes and instability in the wholesale energy price.

VPP platforms also provide accurate insights into energy usage and demand throughout the day and across different seasons or weather conditions. Having access to this information allows energy retailers to better manage their load, energy assets, and their pricing models.

Depending on how they’re operated, VPPs may also be used to reduce peak demand – reducing network distribution costs by improving utilisation, deferring the need for upgrades and increasing resilience of the grid. In the future it could even be possible to operate VPPs as connected microgrids, enabling quick restoration of power in response to disasters and blackouts.

Finally, a VPP provides clean, sustainable, distributed, and dispatchable power that is located close to the point of consumption. This helps the energy industry to reduce its reliance on coal and gas, reduce its carbon emissions, and minimise its overall environmental footprint.

3) What are the benefits for Energy consumers?

If you’re an existing solar + battery customer, you may be aware that energy retailers or other energy businesses are promoting their VPP programs. In a similar way to receiving a feed-in-tariff for installing solar panels, battery customers can earn a participation fee for allowing the VPP operator access to their battery across a 12 month period. In many cases this access is capped at set ‘access level per year’ and is based on the battery having excess/unused storage available (in addition to what the household needs). In the future, the consumer may have control over when the battery is accessed or can even choose to share the excess supply with family members, neighbours or their local community.

The Nectr Home Battery AddOn includes participation with our VPP program. In exchange, our battery customers will earn a $10 monthly credit across the entire contract to help reduce your energy bill and help us better manage our energy assets. That’s in addition to the savings from increasing your solar self-consumption and the benefit of having a backup-circuit to provide power during blackouts. If you’d like to learn more about our buy now pay later solar battery plan, you can head here.

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