As the economics of energy storage makes it appear more favourable, a battery sales company is planning what it hopes will be the country’s, if not the world’s, biggest virtual power plant.
A power shift is underway where owners of rooftop solar systems are facing a fall in revenue from exports as networks and regulators tackle drooping levels of daytime demand. The economics of owning a battery are sure to be revised as self-consumption of solar becomes the obsession of households with PV.
Looking at the bigger picture, the Australian Energy Market Operator is wishing for a legion of battery-owners to offer their services to enable virtual power plants to provide services to the grid. The ball started rolling a few years ago and today about 11 VPPs are slowly being knit together in various parts of the NEM, with a particular focus on South Australia.
With bill savings from greater self-consumption and fresh revenue associated with membership of a VPP on offer, the case for storage is improving.
Solar Service Group chairman Rod Woolley felt a shift in the wind a few years ago and by this time next year expects the VPP offered by Members Energy, a subsidiary of Solar SG, to be the biggest in the world.
Solar SG and the companies aligned with it sell and install batteries, which allows Members Energy scope to construct a significant virtual power plant from its 10,000 customers and anyone else in the NEM who wants to sign up, particularly if they are in NSW, Victoria or the ACT. By the middle of 2021 he expects the Members Energy VPP to include about 6,500 batteries.
Participants will have to start rolling in fairly swiftly to hit that target. At the end of October 2020, 150 customers had signed up to the VPP, with about 400 in the queue. “It takes a little bit of time to get people connected,” Woolley tells EcoGeneration. “We’ve got to test the battery connections and comms in particular.”
Still, he’s assured it will be the biggest VPP in Australia. “We’re confident because we’ve got the customer base.”
A tough sell
Anyone who wants to see a successful transition to renewables knows that VPPs will play an important role in moderating an abundance of midday generation from rooftop solar. “In the early days of VPPs – which wasn’t that long ago – there was this sense that if you built it, people would come,” Woolley says. “Except they didn’t.”
When batteries are privately owned, the task of signing up participants to hand over control of their expensive storage devices becomes a challenge. Consumers generally don’t feel they owe energy retailers any favours, and they suspect that no matter how the benefits are explained to them it will be the VPP aggregator that gets the better end of the bargain.
This impasse between hopes for an easy set-up of a VPP and reality inspired Solar SG to go to its customer base and ask them what they wanted. “We’ve done an immense amount of work on this,” Woolley says.
For a start, it helps if you don’t call your virtual power plant a virtual power plant. Instead, the Members Energy VPP is called a “Solar + Battery Members Plan”.
It might not help that many of the existing VPPs and VPP trials in the market are linked to large energy incumbents: German battery-maker sonnen is now owned by oil giant Shell, AGL owns coal and gas plants in Australia. “You’ve got these very large – in my view – polluters who are engaged in a green-washing exercise and using this new concept of a VPP as a vehicle,” Woolley says.
Solar SG sells battery technology by Eveready, Tesla, Hive and alphaESS.
The Members Energy VPP is targeting a mix of revenue streams including FCAS and spot price arbitrage and is awaiting approval from AEMO. It is yet to trade. “We’re very close to it,” Woolley says. It will utilise software developed by Evergen in conjunction with the CSIRO.
Here’s the pitch
The pitch to consumers is kept simple: PV system owners relying on feed-in tariffs are selling into the grid at the same time everyone else is, and revenue for exports is in decline. A better option is a smart system that will sell excess energy when it is of most value.
It takes a bit of explaining, he says, but that’s to be expected when you are a “classic disruptor”.
Like many of the other VPPs establishing themselves around the NEM, Members Energy is aligned with retailer Energy Locals.
Of the 2.5 million Australian rooftops that host solar arrays, only a tiny proportion – maybe 70,000 or so – are connected to batteries. Woolley blames the high cost of technology and subsequent long payback periods for a slow take-up.
When VPPs start to exercise their muscle by freeing up value in stored solar energy, the market will be turned on its head.
“It’s our expectation we’ll have a very large customer base in a very short period of time,” he says, predicting that by the end of 2021 Solar SG’s customer base will have doubled to 20,000 and the Members Energy VPP will be the largest in the world.