How a Virtual Power Plant (VPP) Works

The term ‘virtual power plant’ or ‘VPP’ has been in use since the 1990s, but VPPs weren’t a viable option for homeowners until relatively recently, when home solar battery systems that store the energy generated from rooftop solar PV panels began to proliferate. With the Australian energy landscape undergoing notable changes – a push for greater renewable energy usage that will reduce reliance on fossil fuels – many homeowners are looking to virtual power plants to reduce energy costs and increase energy independence, while providing stability to the grid in times of need. 

What is a virtual power plant (VPP)?

In an article from 2018, we addressed some of the top-level questions our installer partners hear when engaging customers in conversations on the benefits of virtual power plants. A VPP generates or distributes electricity by bringing together a volume of small interconnected home batteries which are connected through a cloud platform just like the internet and can be controlled virtually. Additionally, virtual power plants enable the rapid harnessing of renewable energy to keep the network stable and reduce fossil fuel reliance, while providing financial benefits for participants in the VPP via solar feed-in tariffs or monthly payments. 

How does a virtual power plant (VPP) work?

A VPP aggregates the individual home batteries into a network, like the sonnenCommunity, enabling the renewable energy generated from rooftop solar panels (stored in solar batteries) to be injected into the grid. This means joining a network of other homeowners with battery storage systems connected to their rooftop solar PV panels who are also willing to allow their home energy system to be centrally controlled by a virtual power plant operator, like sonnen.

During times of high network demand, the VPP operator remotely controls and optimises your home energy system’s output with a cloud-based aggregation platform and trades it on the National Energy Market (NEM). The NEM compensates VPP operators, like sonnen, for their contribution and, in turn, they pass on a portion of this compensation to the participating households in their VPP network. 

What are the benefits of a virtual power plant (VPP)?

One of the primary benefits of a virtual power plant is that by joining a VPP network and providing the operator with access to your home battery storage system, you can help to stabilise the grid. This helps to manage increased energy demand, addresses frequency and voltage imbalances and helps to maintain grid stability. A stable grid benefits all who use and are reliant on it.  

Another way in which VPPs provide benefits to the greater community is by enabling energy retailers to access the aggregated energy storage capacity of individual batteries in the VPP to meet energy demand during peak events. These peak events include extreme weather events, for example, storms, cyclones, heatwaves and bushfires, which are often exacerbated by traditional peak periods, like 4pm to 8pm. 

When peak energy events occur, retailers often need additional capacity to support their network and they’re then forced to purchase energy on the ‘spot market’, which is highly inflated and leads to higher energy bills for consumers. By accessing the aggregated capacity of the VPP, retailers can avoid higher priced energy procurement and pass the savings onto their customers. At sonnen, we’re sharing energy where and when needed to help the sonnenCommunity and the greater community to stabilise the grid and keep energy costs down.

Virtual power plants also deliver significant environmental benefits, most notably, by helping society transition to a cleaner energy system by reducing the intermittency of solar and other renewable energy sources and stabilising the grid. This stability reduces the need for energy generated by ‘dirty’ sources of energy – along with fossil fuels like coal, oil and gas, this includes unsustainable bioenergy which are typically produced from agricultural crops, and nuclear power – and helps to create a cleaner energy future for us all. 

How can I join a VPP and get involved? 

As a member of the sonnenCommunity, you’ll be helping to stabilise the grid and reduce our reliance on fossil fuels by contributing to the aggregated capacity of sonnen's virtual power plant. Are you an eligible sonnenBatterie owner who’d like to make a positive difference while enjoying the many benefits of participating in the sonnen VPP? Why not apply for sonnenConnect online today? Not a sonnenBatterie owner yet? Explore our home battery storage solutions that empower you to store and manage the energy your rooftop solar PV system generates.