Virtual Power Plants represent one of the most exciting developments in residential energy storage. By connecting thousands of home batteries together through smart software, VPPs can provide valuable services to the electricity grid while generating income for participating battery owners. This guide explains how VPPs work, what programs are available in Australia, and how you can earn money from your home battery.
What Is a Virtual Power Plant?
A Virtual Power Plant is a network of distributed energy resources, primarily home batteries, that are coordinated to act as a single power plant. Unlike a traditional power station in one location, a VPP's capacity is spread across thousands of homes, each contributing a small amount of storage and generation capability.
When the electricity grid needs additional power, such as during peak demand periods or unexpected generation shortfalls, the VPP operator can send signals to participating batteries. These batteries then collectively discharge power to the grid, providing the same service that a peaking power plant would. The key difference is that this capacity already exists in homes and can be activated within seconds.
Key Takeaway
A VPP turns thousands of small home batteries into the equivalent of a large power plant. Your 10kWh battery alone can't power much, but combined with 10,000 other batteries, that's 100MWh of grid-scale storage.
How VPPs Create Value
VPPs generate revenue by providing services that the electricity grid operator and market participants will pay for. Understanding these services helps explain where your VPP payments come from.
Peak Demand Management
During extreme weather events or unexpected demand spikes, wholesale electricity prices can soar to hundreds of times their normal level. VPPs can discharge stored energy during these high-price periods, earning revenue that's shared with participating battery owners. This service also helps prevent blackouts by adding supply when it's most needed.
Frequency Control
The electricity grid must maintain a very precise frequency of 50Hz. When generation and demand become unbalanced, frequency deviates. Batteries can respond almost instantaneously to frequency deviations, injecting or absorbing small amounts of power to help stabilise the grid. This "frequency control ancillary service" (FCAS) is a premium service that VPPs can provide very effectively.
Network Support
Local electricity networks sometimes experience congestion or voltage issues. VPPs can help manage these issues by coordinating battery discharge in affected areas, reducing strain on network infrastructure and potentially deferring expensive network upgrades.
Major VPP Programs in Australia
Several VPP programs operate in Australia, each with different structures, requirements, and payment models.
Tesla Energy Plan
Available to Tesla Powerwall owners in South Australia, and expanding to other states, the Tesla Energy Plan offers a unique structure. Instead of direct VPP payments, participants receive more favourable electricity rates with low usage charges and reasonable feed-in tariffs. Tesla can dispatch your Powerwall to support the grid during critical periods, and in return, you benefit from lower overall electricity costs.
SA Power Networks VPP
Operating in South Australia, this network-based VPP focuses on using batteries to manage local network constraints. Participants receive ongoing credits for making their battery available to support the network. The program is typically integrated with battery rebate schemes, providing both upfront and ongoing benefits.
Retailer VPP Programs
Several electricity retailers operate their own VPP programs with varying structures. AGL's VPP offers bill credits for battery availability and grid dispatch, with different tiers based on battery capacity. Origin Energy's Loop VPP provides payments for participating in grid services. Simply Energy, Amber Electric, and other retailers also offer various VPP arrangements.
Pro Tip
VPP programs change frequently as the market evolves. Check with your battery manufacturer and electricity retailer for current program availability and terms in your area.
How Much Can You Earn?
VPP earnings vary significantly based on your battery size, location, program terms, and grid conditions. However, typical earnings provide a useful reference point.
Most VPP participants earn between $200 and $600 per year from a standard 10kWh to 15kWh home battery. Earnings can be higher in years with extreme weather events that drive high wholesale prices. South Australia tends to offer better VPP returns due to its higher wholesale price volatility. Some programs guarantee minimum payments, while others are entirely performance-based.
While these amounts won't make you rich, they represent a meaningful contribution to your battery's return on investment, effectively reducing your payback period by a year or more in many cases.
What Happens During a VPP Event?
Understanding what occurs during a VPP dispatch helps you evaluate whether participation suits your lifestyle.
The Dispatch Process
When grid conditions trigger a VPP event, the operator sends signals to participating batteries, typically through the internet. Your battery receives instructions to discharge to the grid at a specified rate. The discharge continues for the duration of the event, usually minutes to a few hours. Once the event ends, your battery returns to normal operation.
Impact on Your Home
During a VPP event, your battery's capacity is partially or fully committed to grid support. This means stored energy you planned to use may be discharged to the grid instead. Your home draws from the grid rather than the battery during the event. After the event, your battery may have less charge than usual, depending on timing.
Most VPP programs include protections to minimise impact on participants. Events typically don't exceed a few hours, many programs allow you to set minimum reserve levels, some programs only dispatch during times when you're unlikely to need your battery, and advance notification may be provided for predictable events.
Participation Note
VPP events typically occur during periods of extreme grid stress, which are also times when electricity prices are highest. By participating, you're being compensated for helping prevent blackouts that could affect your community.
Joining a VPP: What to Consider
Before enrolling in a VPP program, evaluate whether it's right for your situation.
Battery Compatibility
Not all batteries are compatible with all VPP programs. Check whether your specific battery model is supported, whether firmware updates are required for VPP functionality, and what internet connectivity requirements exist. Major brands like Tesla, Sonnen, LG, and BYD are widely supported, but verify compatibility before assuming you can participate.
Program Terms
Review program terms carefully before signing up. Understand the commitment period and exit terms. Know the maximum frequency and duration of VPP events. Clarify what control you retain over your battery, whether you can set minimum reserve levels, and how earnings are calculated and paid.
Impact on Other Benefits
Consider how VPP participation interacts with your other energy arrangements. Some programs require you to have your electricity account with a specific retailer. VPP dispatch may affect your self-consumption rates if events occur during your normal battery use periods. Check whether VPP participation affects your battery warranty in any way.
The Future of VPPs
VPPs are expected to play an increasingly important role in Australia's electricity system as more homes install batteries and the grid integrates more renewable energy.
Expect to see larger VPP networks as battery adoption grows, providing more substantial grid services. More sophisticated dispatch algorithms will improve both grid benefits and participant experience. Higher payments may emerge as VPPs demonstrate their reliability and grid operators become more comfortable relying on distributed resources. New services beyond current offerings may develop as the technology and regulatory framework evolves.
For battery owners, VPP participation offers a way to extract additional value from your investment while contributing to grid stability and the clean energy transition. Even if current payments seem modest, early participation positions you to benefit as the VPP market matures.
Getting Started with VPPs
If you're interested in VPP participation, start by checking your battery's VPP compatibility through the manufacturer's website or app. Research available programs in your state and with your current electricity retailer. Compare program terms including payment structure, event limits, and commitment requirements. Enrol through your chosen program's process, which typically involves linking your battery to the VPP platform. Monitor your participation and earnings through the program's app or portal.
VPPs represent an exciting opportunity to earn extra income from your battery while helping build a more resilient and sustainable electricity grid. With thoughtful program selection, you can add meaningful value to your battery investment.