Low virtual power plant uptake? Perhaps we are asking the wrong question

By Laura Jones, Energy Systems Specialist 

There is a lot of discussion around the industry at the moment about the (low) uptake for Virtual Power Plants (VPPs) – depending who you ask around 5-10%. The big question is: why is this? I can’t say for certain – but I do spend a fair bit of time talking to both industry experts and householders about Virtual Power Plant (VPP) uptake.

There is a lot of expectation on the role of home batteries in decarbonising the grid. AEMO in their 2024 ISP (the most recent completed version) predicted some 42% of distributed Consumer Energy Resources (CER) would be co-ordinated in 2026/27. Although, this raises two key questions for me: What do we mean by co-ordination? And why would people want to participate in the grid?

What do we mean by co-ordination?

When we hear about low VPP uptake – I wonder what VPP uptake would lead to it being discussed as a success story? AEMO clearly expects high levels of co-ordination but VPPs clearly aren’t the only type of co-ordination out there. I often think of it as a spectrum:

Mandatory grid participation

Standards define what it means to be a good grid citizen. AS4777 for example tells us that it’s non-negotiable that batteries stop generating when voltage or frequency get too high, and vice versa. If they didn’t it’d make voltages too high for everyone, or impose massive costs on the energy system to resolve a swathe of voltage and frequency issues. In the same vein, in most parts of Australia now, solar inverters need to be able to be turned down or off by AEMO when there is too much CER for them to manage. These standards are things we have decided are that important that there needs to be 100% participation in them. However, part of the compact of them being mandatory is we expect they are rarely used in practice. Voltage should rarely be high enough to cause CER to reduce its generation, and most of the time AEMO doesn’t need to curtail CER.

Although not quite mandatory, Dynamic Operating Envelopes (DOEs) inhabit this twilight zone between mandatory and non-mandatory co-ordination. For example, in South Australia you can opt out of dynamic operating envelopes, but if you do you have a paltry 1.5 kW solar export limit. With DOEs, you can export between 10 kW and 1.5 kW, depending on the limit SA Power Networks issues you in real time. So, DOEs aren’t mandatory, but the non-DOE option is a bit silly, so SA sees a very high uptake of DOEs. No wonder. However, there is no expectation that a limit less than the 10 kW maximum is rare – SA Power Networks is free to issue whatever DOE reflects the network capacity in your area at that time. Evidence through actual experience indicates that real limits are closer to the maximum than minimum on average. SA Power Network’s latest Regulatory Information Notice tells us that the average customers are not at their maximum export limit for only 3 hours a year.

To date apart from in Queensland DOEs have largely only been applied to energy exports. So they are generally an approach used to manage solar exports. Energy Masters in South Australia is testing dynamic operating envelopes on energy consumption though, so maybe in the future DOEs will equally apply to (at least some sorts of) energy consumption and generation.

What's optional?

Other types of co-ordination are more or less optional. Pricing is not optional – we all receive energy bills for the energy we consume, but you can choose how “dynamic” or time varying pricing is. Flat tariffs were once common and didn’t give householders any particular incentive to change their consumption beyond whatever is most convenient for them. They are rare these days, most people are on some kind of time-varying price, that encourages them to shift when they consume or generate energy to times where it is more convenient for the grid. Simplest of these is a time of use energy tariff where consuming energy is more expensive at some times of day. From there it gets more complex. Some tariffs give free energy when it’s sunny (e.g. Solar Sharer), some give generous rebates for feed in at certain times. Some others supply households a dynamic price that changes every 5 minutes.

I have spoken to quite a few householders about dynamic prices and I think they are like vegemite - you love it or hate it. Those who love them will excitedly tell me about that time they made $100 in a day with their battery with a dynamic price. Others really don’t like it for a variety of reasons: embracing the chaos of dynamic prices is often incompatible with family life, for example. Many people find something more predictable suits them better.

About VPPs

VPPs are a slightly different beast. Everyone has pricing, but only some have a VPP. They enable households to exchange some control of their battery for payment. For example, on hot days your energy retailer can access your battery a few times a year. Most Australians it seems are happy to have their batteries sans VPP though, given the low uptake.

When I speak to households about VPPs, control is one of the most common issues they raise. However, many are not opposed to the concept of giving control of their battery occasionally to someone else, especially if it’s for a worthy cause.

But what do we want from people?

Clearly VPPs aren’t the only type of co-ordination out there in wide use. With strong uptake of DOEs, most batteries are subject to some modicum of time-varying tariff; maybe we don’t need many batteries in VPPs? Or maybe none at all? Recent evidence I have seen is that home batteries alone seem to be having a fair impact on market prices as they fundamentally change the energy system, including reducing evening prices. Maybe it’s actually not a big deal if VPPs are a niche product only a few take up? There are, after all, plenty of other solutions out there, and some of those, by necessity, have pretty much 100% uptake.

For my part, what I’d really like to see is a more nuanced discussion around Consumer Energy Resources co-ordination. What is the role of all of the different types of grid participation we see out there today? How much of which types do we need in a decarbonised grid?

Reframing the discussion around co-ordination

If you ask me why VPP uptake has been low, I think fundamentally how we talk about energy to households is one of the main contributors. For so long we have told people they are responsible for their own energy use – selecting tariffs from a complicated market, buying technology, deciding what to do with it. That framing leaves little room for anything else. Research indicates that there are lots of reasons people might be open to supporting the grid, and financial reasons aren’t even that high on the list. The grid is a commons that we all contribute to the functioning of. If we want people to be civic minded with their energy devices, maybe we should start treating them like a member of a community rather than islands unto themselves?

This article was first published on Linked In. Read the original here.