The energy sector across the globe has been witnessing some serious innovations and Australia isn’t far behind. Take the concept of virtual power plants. It almost didn’t exist just a decade earlier but has quickly gone mainstream in many parts of the world in recent years. Here is everything you need to know about a virtual power plant or VPP.
An interesting tidbit you might like: Australia is home to the world’s biggest proposed virtual power plant that aims to connect 50,000 households with a combined capacity of 250 MW.
What Is a Virtual Powerplant?
Before getting into the nitty-gritty of a virtual power plant, let’s first understand how power generation and distribution work in general. There are huge power plants across the globe that burn coal or other fossil fuels to generate electricity. There are also nuclear power plants.
This electricity is then distributed through the main power grid. Your house, office and other properties are all connected to the main power grid. You draw power from the main grid as and when you need it.
On the other hand, a virtual power plant is virtual which means it doesn’t really exist in reality.
Almost all businesses and a majority of homes today have battery backups. This battery backup isn’t always in use which means it is free most of the time. A virtual power plant works by connecting the battery backups in businesses and homes in a locality to be able to use the stored power and provide it to those who need power.
It is called a virtual power plant as it typically also involves power generation through solar panels or other sources of renewable energy. In short, it is a collaboration among several households and businesses to allow the use of their battery backups and power generation capacity.
How Do Virtual Power Plants Work?
A virtual powerplant works by interconnecting smart batteries and controlling the use of power stored in the batteries through specially designed software systems. A tunnelled data connection is used to control individual assets.
As and when power is required, the power stored in the batteries is used to meet the demand. The system is centrally controlled and monitored by the VPP operator. The goal of a virtual power plant is to generate value for participants as well as the operator by efficient use of existing resources.
Main Types of VPPs
As far as the virtual power plants in Australia are concerned, the concept revolves around connecting houses and businesses in a location to create a VPP and export the excess electricity generated through solar panels in these houses and businesses to the main grid.
Almost all the VPPs operating in Australia are connected to the main grid and that is how the participants are going to recoup the cost of their initial investment in solar panels and batteries. In other parts of the world, there are virtual powerplants that are not connected to the grid. They exist as a stand-alone network and the main goal is to manage the power demand in the most efficient manner by efficiently using existing battery storage.
Benefits of VPPs
There are many advantages of joining a virtual power plant network. Here is a list of a few:
- Earning money through exporting excess electricity from your battery to the grid.
- VPP providers that are also electricity retailers typically provide a discount on retail electricity rates to those part of the VPP.
- Homeowners typically also get paid additionally on top of the normal solar feed-in tariff.
- It helps in preventing blackouts at times of high power demand.
- It helps in stabilising the electricity grid
- The upfront cost of buying batteries through a VPP is significantly lower
Cons of VPPs
While there are several advantages of virtual power plants, it does have certain limitations. You need to be aware of these limitations in order to make an informed decision. Here is a list of some of the major cons of a VPP:
- Not all VPP programs offer discounts for battery storage and require homeowners to have their own batteries.
- Not all types of batteries are eligible.
- Not all VPP programs are the same. This is why you need to do your own research and carefully go through the contract being offered by the VPP provider you choose one that works best for you.
- More clarity is needed regarding the feed-in tariff rates for participants in a VPP.
- When you are part of a VPP, you will have to give up control of your battery system to the VPP providers. There is a chance that you won’t have any reserve storage in your batteries as all the power is fed back into the grid.
- It might affect the service life of your battery as it will be charged and discharged more frequently as part of a VPP.
Overall, virtual power plants are here to stay. Over the past few years, several virtual power plant operators have entered the industry. It is important to keep in mind that not everyone can join a VPP as every VPP has its own requirement in terms of the type of battery as well as the installation of specialised software or an energy management device. Joining a VPP can save a substantial amount of money by allowing you to earn extra over the regular feed-in tariff.
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