Virtual Power Plants: Complete Guide 2026
Can solar energy enhance the electricity grid? Without a doubt, Virtual Power Plants prove that it can be done! It’s genuinely beneficial for both the electricity network and those top-notch individuals with solar batteries who contribute their power.
Table of contents
What is a Virtual Power Plant?
A Virtual Power Plant (VPP) is a network of solar batteries exporting part of their stored electricity to the grid in return for credit on their electricity bills.
VPPs are often regional, controlled remotely, and require members to have a specific solar and battery system capacity.
How does a virtual power plant work?
A VPP has an operator. The operator uses WIFI and a remote control unit to connect all the participating batteries. It enables the operator to access the batteries and take out a portion of the power from the battery as agreed with the owner.
With several solar battery systems working together, small amounts of power can accumulate to power a city.
When an individual joins a VPP network, they must sign a contract that indicates how much power they would like to supply to the grid via the network. It ensures that you also have sufficient power for your use if need be.
Each battery owner is paid for the amount of power they supply to the grid.
Top virtual power plants in Australia
Australia’s leading Virtual Power Plants are operated by energy retailers and government-backed programs that aggregate thousands of household batteries into dispatchable grid assets.
These VPPs differ by battery eligibility, incentive structure, market participation, and level of homeowner control.
| Program | Operator | Coverage |
|---|---|---|
| Tesla Virtual Power Plant | Tesla Energy | NSW, SA, QLD, VIC |
| AGL Virtual Power Plant | AGL Energy | NSW, VIC, SA |
| Origin Energy VPP | Origin Energy | NSW, VIC, QLD |
| EnergyAustralia VPP | EnergyAustralia | VIC, NSW |
| Simply Energy VPP | Simply Energy | SA, VIC |
| SA Power Networks VPP programs | Government / DNSP-led | South Australia |
Features of a VPP
Solar batteries – VPPs are based on solar batteries, so to join a VPP, you must have the approved solar battery for the program.
Since a VPP is controlled remotely, you must have a solar battery system that is compatible with the controlling software. It makes it possible for the controller to access, monitor, and get power from your battery.
Eligibility requirements – To be eligible to join a VPP, you must be in a participating region, have the applicable solar batteries, and your solar system must have the required capacity. Additionally, your home must also be connected to grid power.
System capacity – Depending on your region, the minimum solar system capacity ranges from 3kW to 5kW. But the larger the capacity, the more you get paid.
Minimum energy storage for the battery owner – It refers to the amount of energy stored in the battery reserved for the homeowner. Agreements vary, so you can essentially choose how much of your battery you allow to participate.
Contract terms – Contracts stipulate how much of your battery you are willing to share, how often it can be drained, how much you are paid, and how long you will be in the program.Â
Benefits of joining a virtual power plant
- Increase the savings on your electricity bills. When you join a VPP, you get paid for the amount of power exported to the grid from your solar batteries, paying you over and above your feed-in tariff.
- Helps build a modern electricity grid. Power producers are seeking ways to increase the use of renewable energy in the grid. VPPs help to develop and enhance the use of low-carbon solar power in the grid.
- Enhance the reliability of the grid. Helps reduce the occurrence of blackouts during peak times as power from VPPs plugs in the deficiency in the grid.
- Battery subsidy. If you buy a battery through a VPP program, you can get a discount.
- VPP rates are higher than electricity retailers’ feed-in tariffs.
Disadvantages of a virtual power plant
- Solar battery discrimination –Â Many VPP programs have a bias toward the type of solar battery they want their members to use. As a result, many solar battery owners are locked out of the program as they cannot buy another battery.
- Minimal autonomy – Often, the battery owner does not have control over how much power is exported to the grid. SOme programs abuse unsuspecting owners.
- No blackout protection – When you have no control over how much power is used from your battery, you may be in the dark during a blackout as power is being routed elsewhere.
- Faster battery degradation – Due to the intensity of discharge from your battery, shortening its lifespan, and negating any ROI you might have gotten from normal use.
How Virtual Power Plants can aid with climate change relief
Increased use of renewable energy
The primary advantage of renewable energy resources (RESs) over non-RESs is that they have no immediate carbonisation impact on the environment and do not contribute to global warming caused by carbon emissions. Moreover, the energy market liberalisation has resulted in the realisation of the virtual power plant (VPP) concept.
A VPP is a unified platform for distributed energy resources that bring together the capacities of diverse renewable energies in order to improve power generation and administration while also catering to the buying and selling of energies in the wholesale electricity market.
Because of their special ability to handle the grid, VPPs aid in the development, integration, and utilisation of renewable energy resources such as wind and solar.
More stable grid
The benefits of Virtual Power Plants can assist save the world by dispatching DERs to give grid flexibility and relief. VPPs are intended to alert DERs when the grid requires assistance. This alleviation can take the form of reducing load and requiring DERs to utilize less energy.
For example, telling EVs to stop charging. When the energy supply is low, the relief can also take the shape of additional energy, such as a battery or an EV released into the grid. This flexibility helps the grid balance supply and demand, reducing the need for dirty peaking power stations fuelled by fossil fuels to run as often.
Because of their ability to dispatch DER assets in real time, VPPs contribute to a more stable grid. When the energy supply is short, these DER assets, such as batteries and EVs, can supplement the grid. When the grid is pressured, VPPs can also request that DERs reduce or delay their energy use.
Visit our homepage for more articles on VPPs and distributed energy.
How do Virtual Power Plants generate revenue?
Traditional thermal power plants provide capacity as needed while providing various grid-stabilizing ancillary services such as voltage stability and frequency response. VPPs can profit from both sorts of operations.
- VPPs, for example, have already been deployed to avoid the requirement for grid enhancement on the capacity front. In one scenario, an Australian utility called Evoenergy could save roughly AUD 2 million (USD 1.6 million) by avoiding a substation update by adopting a VPP.
- In Oregon, Portland General Electric is putting together a 4-megawatt VPP as the first step toward 200 MW of distributed flexibility. Households participating in the VPP project receive a battery purchase rebate or a monthly payment of $20 or $40 for using existing batteries.
How much does it cost to set up a VPP?
The cost of setting up a VPP is basically the cost of setting up a solar system on your home or buying an Electric Vehicle.
Once you have a power-producing or storage asset, you can join a VPP network which will use the power generated or stored by your system or battery when it is needed at peak times and pay you for the power used.
Which companies are developing Virtual Power Plants?
In recent times, most VPP innovators have been acquired by large crowds, pushing the virtual power plant concept into the mainstream. As an example:
- Ormat Technologies, a geothermal and renewable energy firm, acquired Viridity Energy at the start of 2017.
- Greensmith Energy was purchased by Wärtsilä, a Finnish power company, in the same year.
- Enel, the Italian utility, has gone on a distributed energy technology shopping spree, acquiring Demand Energy, EnerNOC, and eMotorWerks to set the groundwork for its VPP service.
- Engie invested* in Kiwi Power of the United Kingdom in 2018 and Tiko of Switzerland in 2019.
- In 2019, Shell acquired Sonnen, a German home battery manufacturer that is developing VPPs in Australia, Germany, and the United States.
- Green Mountain Power of Vermont is collaborating with software firm Virtual Peaker to send Tesla Powerwall batteries from customers’ homes into the New England network.
- Next Kraftwerke of Germany is negotiating on electric vehicle battery capacity in the Dutch secondary reserve marketplace, while Tibber of Germany is doing the same.
- Sunrun, a residential solar company, has launched solar-plus-storage VPPs in markets ranging from Massachusetts to California and Hawaii.
- Moixa, a smart storage company based in the United Kingdom, manages 22,000 storage systems in Japan, as well as smaller VPP deployments overseas.
FAQ's
A Virtual Power Plant’s primary purpose is there to provide the following objectives to collaborating partners:
(a) Energy trading: They give distributed generator owners new and commercially feasible energy trading options in competitive wholesale electricity markets.
(b) Network services: They provide transmission and distribution system operators with system support facilitation services.
(c) Balancing services: They balance production and consumption demand by utilising different markets in real-time. All collaborating parties profit economically, technically, and environmentally as a result of this.
(d) Optimising: Improving production and consumption inside the VPP.
An optimum VPP system is made up of three parts: DG units, energy storage components, and information and communication technology (ICTs).
Distributed Generator Units (DG)
The use of DGs in the electrical sector has grown dramatically. This is due to three factors: They are small-scale energy generating and storage units positioned near client sites. The installation of DGs minimises transmission network losses and can enhance grid viability and voltage stability.
Energy Storage Components
Energy storage components are critical to VPP operation, particularly for RESs like WT and PV systems, whose output is very uncertain and varied due to weather conditions. The energy storage system is a clever technique of storing energy that gathers and stores solar and wind power and delivers it when it is most needed. It optimises the supply and demand in this way.
Information And Communication Technology (ICTs)
Information and Communication Technologies are playing an important role in EMS. They manage all other aspects of the VPP in a bidirectional fashion. ICTs are used to collect data from scattered RES, storage components, and consumption units. They guarantee that the VPP components work together and that energy flows smoothly.
Virtual power plants enable renewable energy to be pumped into the grid at a lightning pace to resolve frequency and voltage imbalances, local disruptions or disturbances and keep the system stable by aggregating hundreds of individual home batteries.
