by Eliza Booth, Journalist

The way we generate, use and store energy is changing. As the world moves towards more renewable energy options, and large traditional power generators are retiring, maintaining the balance between supply and demand at all times is crucial to preventing power outages. One way communities and utilities are addressing this issue is with virtual power plants (VPPs). But what exactly are VPPs? Here we explore how VPPs can act as a substitute for conventional dispatchable power plants and accelerate the transition to a low-carbon future.

What is a virtual power plant and how does it work?

Virtual power plants are relatively new to the energy industry and have caused waves in countries like Australia, Europe and the US. In the simplest terms, a VPP is a cloud-based network that connects multiple distributed energy resources (DER) in separate locations, which can be managed and aggregated using a central control system to supply reliable power.

For a VPP to work, it involves using software and communications to make the DER visible to a retailer and/or the network. To understand how VPPs operate, first we need to understand the role of DER.

DER encompass a range of behind-the-meter technologies such as rooftop solar, home batteries, inverters, controllable loads both in homes and commercial and industrial facilities, electric vehicle charging points, smart appliances and systems (such as fridges, air conditioning systems, hot water heaters and pool pumps) as well as relevant enablers such as smart meters and data services.

Traditionally, communities relied solely on large-scale centralised power plants to provide reliable power, such as a gas or coal-fired power station, and power flow was in one direction; from the utility to the business or consumer.

However, fossil-fuel based power plants are a major source of greenhouse gas emissions, and Australia has committed to reducing its emissions by 26 to 28 per cent from 2005 levels by 2030 as part of the global effort to combat climate change.

Australia has one of the highest uptakes of DER in the world, with costs for home solar and battery systems continuing to decline thanks to technological advances and funding from governments and local councils, however two-way flows of power have created challenges for grid operators.

An oversupply of energy from DER can overwhelm the grid and potentially spark outages, and high levels of DER can affect local voltage, unless a voltage control scheme is in place. The intermittency of renewable generation is also an issue, such as when solar supplies suddenly drop when the sun starts to set, which creates a spike in demand and results in utilities having to turn to fossil-fuel based generators to make up the gap. This is where VPPs are beneficial.

A traditional power plant provides centralised generation of electricity that is transported to local electricity distribution networks where it is used by customers within their homes and businesses. While VPPs are made up of multiple smaller independent energy systems, they can still be centrally coordinated, or orchestrated, to provide the same services to the electricity system as traditional centralised generation.

What VPPs achieve is the ability to combine multiple energy sources concentrated in a certain area, coordinate and organise them through a remote software system, then distribute this energy across the network to areas that need it most, providing a stable and balanced supply.

The benefits of VPPS for industry and communities

The rise of affordable rooftop solar has dramatically transformed the way that Australian homes and businesses engage with energy. For customers, VPPs help to keep energy costs low, which is especially important as many families face tough times ahead as a result of job losses and a national recession caused by the COVID-19 pandemic.

Customers can also rest easy knowing they are helping to reduce harmful greenhouse gas emissions caused by the use of fossil fuels, a win-win situation for both humans and the environment.

Utilities reap the benefits of VPP systems in a number of ways. VPPs can provide ancillary services to the grid to help smooth out imbalances caused by renewables or failures of large power plants, they have the ability to provide peak load electricity at short notice, and because energy is generated close to the locations it will be used, there is a decline in energy loss during transportation.

VPPs also offer some unique benefits when compared to microgrids. Microgrids, much like VPPs, combine and optimise DER, however they have a clearly defined network boundary. VPPs, on the other hand, are able to cover a wider area and have the flexibility to grow or contract as needed.

Also unlike some microgrids, VPPs serve the main energy grid, creating a holistic energy landscape. However, increasing reliance on DER may expose the grid to an increased risk of malicious cyber attacks, which could undermine system stability, compromise user data – or both.

The equipment used in DER – like inverters and batteries – are consumer appliances. While there are basic grid safety standards that these devices are required to meet, the security of their communications is not subject to the same level of scrutiny as large, centralised generators (classed as ‘critical infrastructure’).

The Criticality Assessment Tool, developed by the Australian Energy Market Operator (AEMO) in conjunction with the Australian Cyber Security Centre, Critical Infrastructure Centre and the Cyber Security Industry Working Group, is helping raise awareness of the growing cyber threat to energy sector players, and mentions the risks associated with DER management and cyber security, which will only increase as VPPs grow in number and importance.

The state of VPPS in australia

Australia is currently one of the leaders of virtual power plants in the world, with multiple VPP programs underway. In 2016, AGL Energy announced the launch of its Adelaide VPP, which started as a network of connected solar batteries that can be called upon to provide energy when the grid needs it.

The Australian Government, through the Australian Renewable Energy Agency (ARENA), provided $5 million funding to support the $19.22 million project, which was expanded in 2019 to include customers from other states with compatible solar batteries.

In September 2020, AGL launched solar battery sales and installations for residential customers in Queensland, New South Wales and Victoria, allowing for further expansion of the virtual power plant.

AGL General Manager Decentralised Energy Resources, Dominique Van Den Berg, said that AGL is supporting the transition to a low-carbon economy by investing in renewable and flexible generation backed by storage technologies.

“By joining AGL’s VPP program, customers receive payments for allowing AGL access to their batteries at key times during the year to help improve grid reliability, making the decision to invest in batteries more attractive,” Ms Van Den Berg said.

“This is an exciting demonstration of the sharing economy in which we create value by using customers’ distributed energy assets like batteries and sharing the value with them.”

With the support of the South Australian Government, Tesla and electricity retailer Energy Locals are developing South Australia’s Virtual Power Plant (SA VPP) – a network of up to 50,000 solar and Tesla Powerwall home battery systems across South Australia forming the world’s largest VPP.

In September 2020, the Tesla SA VPP was expanded to include the deployment of residential battery and rooftop solar systems at 3,000 properties owned by Housing SA.

Together with 1,100 systems already installed in a previous phase, the combined 20MW/54MWh of residential energy storage will help to deliver lower energy bills and a more resilient electricity grid.

SA Power Networks has also been collaborating with the Tesla SA VPP on the Advanced VPP Grid Integration project, which has shown how higher levels of energy exports to the grid from customer systems can be enabled through flexible, rather than fixed, export limits.

To achieve this, the project developed and trialled an Application Programming Interface (API) solution through which varying time and location export limits could be published to the VPP to enable increased export at times when additional capacity is available and be reduced during the rare times when the network is congested.

There are also many more VPP programs underway in Australia, with Ausgrid, Energy Queensland and Origin Energy all trialling VPPs.

In April 2019, ARENA announced funding of $2.46 million for AEMO for a VPP integration trial over a period of 12 to 18 months, focusing on demonstrating the operational capabilities of VPPs to deliver energy and Frequency Control Ancillary Services (FCAS).

ARENA’s funding will accelerate upgrades to AEMO’s systems and processes to allow smooth integration of VPPs before they reach commercial scale.

While most VPPs are currently at relatively small scale – approximately 5-10MW – AEMO forecasts there may be up to 700MW of VPP capacity by 2022.

In November 2020, AEMO confirmed the extension of the VPP demonstration to 30 June 2021 after obtaining three additional participants, bringing the total number of VPPs participating in the demonstration to five – including the AGL VPP and the Tesla/Energy Locals SA VPP.

AEMO has published two Virtual Power Plant (VPP) Demonstrations Knowledge Sharing reports, which highlight the key role that it expects VPPs to play in Australia’s energy future.

The insights from these demonstrations will inform necessary regulatory or operational changes to facilitate a smooth integration of VPPs into the National Electricity Market before they become widespread.

In addition, AEMO, in partnership with ARENA and Energy Consumers Australia (ECA), is undertaking a VPP customer insights survey, with early insights to be released in the third knowledge sharing report in early 2021, which will further help the industry understand how VPPs work for customers and how they can create successful and sustainable energy services for Australia.

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