A virtual power plant sounds like an obvious way to utilise the surplus solar energy stored in residential systems with batteries, writes James Sturch, but only if owners are rewarded fairly. How will they know if that’s the case?
Just when you think the world is starting to get used to three-letter technology acronyms associated with the energy industry – such as IoT (internet of things), DER (distributed energy resources) and EMS (energy management system) – along comes another one.
A VPP, or virtual power plant, generates or distributes electricity by bringing together a volume of small interconnected home batteries which are connected through a cloud platform and can be controlled virtually.
We’re seeing frantic discussions around VPPs as the home energy storage market continues to grow. With more batteries connecting to the grid, VPPs have been positioned as a saviour to stabilising our grid infrastructure for demand response.
At the same time, there have been questions on whether we are ready for VPPs given the complexities we face with different hardware, technology solutions and standards that need to be integrated to replicate the functionality of a conventional power plant that a VPP looks to achieve.
VPP or not VPP
We are seeing lots of trials for VPPs in Australia. There are “product indifferent” VPPs, where different manufacturers work with an aggregator and energy retailer to demonstrate how a VPP can function within a range of different vendor battery technologies.
The Simply Energy platform is an example of a product indifferent VPP which sonnen is involved in as part of the energy retailer’s VPP trial in South Australia. For this project, Simply Energy acts as a functional aggregator for the VPP. The aggregator only looks at battery brands as part of systems which can communicate with their controller for functions to enable energy trading.
Another variant of VPP is the type based on a single manufacturer’s technology. An example would be the sonnenCommunity, which acts as a single aggregator for a VPP allowing sonnen customers to store and share their electricity with others within the community. The advantage of having a single manufacturer’s VPP is the ability to operate, optimise and execute energy sharing capabilities with greater visibility and stability.
Currently, VPPs in Australia operate with the aim of selling to the spot market when the price of energy is high and to purchase energy when the price is low. That is why some homeowners are reluctant to participate in a VPP, as they think their batteries are being used for demand response without their knowledge and for the benefit of a VPP operator. To overcome this, operators need to clearly communicate to homeowners about how and when their batteries will be used.
There is a perception that a good VPP is based on hardware technology – but that is incorrect. While hardware and software are crucial, data and latency are two of the biggest issues we need to address to deliver a good VPP.
For a VPP to exist, a good internet connection is needed to facilitate the transmission of data. Australia’s internet connection hasn’t always been at its best in some locations, especially in regional Australia. This means not all customers stand to benefit from being part of a VPP or have the capacity to participate and benefit from it.
The geographical size of Australia and the connectivity speeds in some regions could prove to be a challenge for VPP operators. Any latency issues could prevent an aggregator from getting full visibility on the home batteries connected to its VPP or ensure the system can respond quickly when required for demand response.
A VPP can only operate if it’s connected to a market to allow energy trading to take place. To be a participant, a smart battery system needs to be remotely controllable, configured and be able to send and receive information rapidly.
Fundamentally, only two types of batteries can operate in a VPP – smart batteries that will take a command and intelligent batteries that will make decisions on their own. We have an equal split between smart and intelligent batteries currently installed in Australia that will qualify and can participate in a VPP. However, there are home batteries that are not smart or intelligent that are currently operating in the grid, and these assets which are not registered will not qualify to be part of a VPP.
Having visibility over a battery is crucial for a VPP to function. This requires a reporting application programming interface for grid parameters to be developed that specifically supports the battery chemistry and hardware of different technology vendors. Without visibility into a VPP, operators may be challenged by the accuracy of data from how much energy has been drawn from batteries and inflict distrust with homeowners.
Balancing value and risk
There is a financial incentive for homeowners to participate in a VPP, and technology vendors and energy retailers need to engage customers in a conversation when it bridges into the return on investment of a home battery. Being able to trade energy provides a better ROI and, indirectly, being part of a VPP benefits everyone as less fossil fuel-generated grid electricity is used.
Not all home batteries that connect to a VPP operate in the same way. Homeowners need to understand there are risks involved in connecting to a VPP. As data is transmitted between their batteries and their VPP operator, they need to ensure the protocol used for data transmission is encrypted and data is securely transmitted to an industry standard. They will also need to seek assurance from their VPP operators that their networks are protected against cyberattacks.
Sonnen’s VPP operates to an ISO-certified system and acts like an intranet with connected home batteries. This provides an additional layer of security for data that is transmitted and stored.
Customers need to look at the warranty cycle count or energy throughput of their home batteries to ensure they will not exceed the charging cycles when invoked by an aggregator to gain financial benefits from a VPP during peak energy demand hours.
Legislate to protect
There is currently no legislation in place to penalise VPP operators under 30MW who could manipulate the market. For example, there are no protections for consumers against unscrupulous VPP operators who may decide to send a signal for batteries to charge at the same time or to discharge energy when the wholesale price of electricity is at its peak.
There needs to be regulation to ensure operators are operating legitimate VPPs. If there are operators with multiple VPPs under 30MW, they should be recognised as a single VPP asset and subject to market competition rules.
With more than 2.5 million homes with rooftop solar connected to the grid, energy retailers, installers and technology vendors need to help current and potential customers with home batteries understand that VPPs are a universal benefit that is much needed to relieve the demand for electricity during peak periods. We need to start educating households on what their home batteries can do beyond just helping them to achieve energy independence or reducing their power bills. The truth is in helping them assess what makes a good VPP they can participate in.
James Sturch is APAC technical director for sonnen.