An intro to customer-centric virtual power plants
In Australia there are over 3 million homes with solar panels on their roofs, and a growing number with battery storage and electric vehicles. With their decision to purchase these distributed energy resource (DER) assets, households and businesses are both investing in and becoming infrastructure for our energy system.
The need to decarbonise our grid has never been more urgent, so this is great news for individual Australians and Australia’s energy system more broadly. However, the grid was designed as a one-way street for big generators, and we're only just now developing the tools needed to ensure that these smaller, local types of assets can continue to grow in number and contribute to the grid in the most effective, efficient way possible.
The alternative to smart management and orchestration of DER is a suite of blunt tools that limit the utility and value of these assets to their owners and the energy system alike. These include almost punitive approaches like static or zero solar export limits, which can stop rooftop solar from sending energy into the grid even when the grid could use it. The way the energy system works is changing, however, and many of the old rules are going out the window.
Some Australian suburbs have rooftop solar installation rates well above 50%, creating a huge opportunity to re-imagine how the electricity system works. Virtual Power Plants (VPPs) are one tool that energy companies will use to deliver a DER-integrated grid.
The expectations of DER owners
Until recently, the role of DER owners - and what they expected from their assets - were straightforward:
Solar PV system owners used their systems expecting to save money by generating a portion of their own energy and getting paid to feed excess into the grid.
Solar + battery system owners could store their solar energy for later use. Batteries could also be used for tariff arbitrage - charging up the battery on cheaper rates to hedge against more expensive, ‘peak’ rates. Home batteries can deliver some value without solar, but mostly they allow system owners to get more from their solar.
Energy-consuming devices like air conditioners, water heaters & pool pumps deliver some kind of amenity to the owner. Some of these have a track record of being ‘controlled loads’, helping homes & businesses save money on electricity costs, but historically they have not been viewed as ‘assets’ to the grid in the way that solar and batteries are seen now.
In the coming decade, electric vehicles and charging stations are going to transform the grid’s operation in a way akin to rooftop solar. There are massive opportunities (and also significant challenges) for EVs and associated infrastructure to bring unprecedented flexibility to the grid if we deploy them with the lessons of rooftop solar in mind.
These expectations are crucial in understanding how Virtual Power Plants (VPPs) can and should work, and they inform SwitchDin’s approach to DER management technology.
VPPs are one key tool for energy companies to engage with homes and businesses who have DER assets so they can be part of a modern, distributed electricity system. At SwitchDin, VPPs are not just about controlling devices - they are about unlocking new value that puts the class of DER owners front and centre as key energy system players.
At the same time, a whole new world of opportunities is arising with assets like community batteries coming into the picture, as well as new approaches to embedded networks and microgrids. SwitchDin’s view is that all of these will eventually be part of our interconnected, distributed energy infrastructure. Just as with consumer-owned assets, these elements will first and foremost serve a role with and for the asset owners, but focusing only on this ‘traditional’ value set will leave new, additional values on the table.
What is a VPP?
It’s more than just a fleet of batteries.
A VPP is a distributed power plant that aggregates a mix of different distributed energy resources (DER) to deliver services that larger, conventional power plants would traditionally deliver. In the public imagination VPPs are typically composed of fleets of home batteries, but will come to include any type of asset, including solar inverters, electric vehicles, community batteries and more.
A range of types of organisations can operate VPPs, but the main ones are electricity retailers, who trade electricity and on-sell it to their customers, and utilities & network operators, who manage the physical infrastructure of the grid (with or without a market component).
Example of a mixed-asset VPP using Stormcloud and Droplets.
Why does the grid need VPPs?
Electricity grids around Australia and the world are becoming increasingly decentralised, with more and more people owning solar generation and storage assets. VPPs are one way to organise and coordinate these assets to benefit not just their owners but also the broader electricity system as well. The assets are already here - VPPs are the tool to make the most of them.
VPPs can improve the operational efficiency of the energy system by unlocking otherwise invisible or inaccessible value, and they’re a key way for asset owners to earn from their systems while also helping to support a cleaner, more dynamic energy system.
These ‘hidden’ values include optimisation for behind-the-meter assets for an individual home or business, as well as the value of locally produced energy for a distribution network operator.
It’s these opportunities that SwitchDin helps our energy retailer clients unlock, so they can offer greater customer choice and value, with the flexibility to be different.
Read the next piece in this series: The role of virtual power plants in the evolving grid.