Can Virtual Power Plants Provide Revenue for Householders?
A recent study into the use of virtual power plants (VPPs) in Australia has shown that the market is not quite ready for them. The returns to the participants appear to be less than what they would achieve by storing their excess solar generation in their home batteries and using it themselves overnight. “The average household electricity cost reduction from VPP participation — where an aggregator has unlimited access to a household battery — is around $200/year.”
“A VPP,” IEEFA writes, “is a network of distributed energy resources – not just rooftop solar, but also batteries, electric vehicles and smart appliances – working as a single power source and aggregated via software to participate in energy markets. The DER are ‘operated in a coordinated manner so that from the system’s point of view this set behaves as one single conventional, flexible and dispatchable power plant.’”
Revenue from VPPs is currently too low to support a significant move in this direction. As battery prices drop and the regulatory landscape is remolded to be more fit for purpose in a renewables-dominated grid, this will change, especially in Australia where almost a third of all households are equipped with rooftop solar. Australia has the highest penetration rate in the world. Over the past two years, and in the midst of a pandemic, over 3 gigawatts (GW) of rooftop solar were installed. If we add commercial and industrial rooftop systems, we get a combined total rooftop solar capacity of 17 GW at the end of 2021.
Return on investment just for home use means that after government subsidies, the average household rooftop system pays for itself within 4 years, and batteries within 8 years. Studies are being conducted to see if all of these systems can be integrated into a virtual power plant to support the wider grid. Project Symphony in Western Australia is an example of a VPP test project. Here is another example of a VPP in Australia.
The VPP marketplace is still in the early stage of development. NEM’s total household VPP fleet is currently about 300 megawatts (MW). Of that, Origin Energy has 205 MW from over 100,000 connected services. Australia’s development of VPPs has been supported by a number of trials partly funded by the Australian Renewable Energy Agency (ARENA).
All VPPs in AEMO’s trial were based on household batteries connected to rooftop solar systems. Approximately 7,150 consumers were involved, or about 6% of the estimated 110,000 BTM batteries in the NEM. The majority were from South Australia, where government subsidies have led to a significant take-up of home battery systems.
“The trials found coordinated batteries could deliver wholesale FCAS services and, potentially, network services, in some cases simultaneously,” Gabrielle Kuiper writes. “During the trials, a potential conflict was noted when wholesale prices were high and there was simultaneous need for frequency lower services (provided by batteries discharging). In this circumstance, which both use the discharge of batteries, AEMO modified the optimization algorithm to ensure priority was given to FCAS services and the stabilization of the system, despite this causing a reduction in the aggregator’s wholesale market revenue.
“This set of trials is reflective of a future where VPP revenue is likely to be gained during infrequent events, rather than daily peaks. More work needs to be done to understand the potential nature of VPP revenues, especially as market dynamics change with the inevitable transition to variable renewable energy.”
Can VPPs provide revenue for householders? Not yet, but the future is electric and I am sure as we progress down this road, viable systems will emerge in the VPP space, just as they will in the V2G vehicle space. A little more creative thought is needed.
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