Virtual power plants made up of other people’s batteries sound like a great idea but, gee, they’re a headache to put together. Will they make it to the finish line or be overtaken by something better?
Trials of residential virtual power plants are progressing at a pace – everyone agrees – but it’s not always clear whether a comparison benchmark is the trotting velocity of a hare or a snail.
Participants at energy conference panel discussions that are dedicated to VPPs always look as though they are sharing a secret. Their PowerPoint presentations never give much away, and the audience is left still waiting for the day when the winning outcomes of VPP trials are pinned to the bulletin board.
What we’d all like to know is whether virtual power plants have become real power plants. And if not today, when?
Although the operational challenges in coordinating a varied orchestra of energy assets are pretty apparent there is plenty of confidence that VPPs can work, says Ryan Wavish, a principal consultant at Marchment Hill Consulting. The technology can perform the task, with batteries and control systems able to be integrated to follow centralised commands. But it’s sometimes the finer details that present hurdles.
“The challenges we’ve seen are around installations,” says Wavish, “particularly in markets that have really strong solar uptake.”
It’s a common theme EcoGeneration has heard from installers, where they would prefer to spend time being paid to install rooftop PV than tread water trying to explain why a battery with a 10-year payback or longer is good value. “There’s a preference for nice, easy, profitable solar than complex batteries,” says Wavish.
Hold-ups and hurdles
Trials of VPPs can get stuck in the mud if impacted by variable battery install work. Other troubles include remote site-to-cloud communications channels that go down from time to time and issues with interconnectivity, where batteries are talking to the network aggregator just fine but are not being understood within the home energy ecosystem. “Sometimes the ability to communicate between those devices is particularly limited,” Wavish tells EcoGeneration, pointing out Tesla’s Powerwall 2 as having “more of a closed approach to interoperability”.
Other than acting to calm networks by distributing energy to the right places when needed, VPPs are being promoted as offering financial value to battery owners – and therefore a shorter payback.
“A lot of these trials are trying to explore to what extent that’s true,” Wavish says. In the Networks Renewed trial in Victoria and NSW, participants were paid up to $330 a year by Reposit, depending on battery size, and $200 by Mondo, for example. The financial incentive to the aggregators is hidden from the customer, of course, but from what he’s seen so far Wavish hints that subsidies paid to customers might outweigh what the industry participants are earning from the deal.
“There’s a real challenge to make it work in commercial reality,” he says. Without funding, which many trials rely on, energy market participants might struggle to see revenues flow in from providing services to the grid.
GreenSync head of customer strategy Bruce Thompson believes technical and market necessity will drive flexibility, “and that’s achieved through virtual power plants,” he says. “It’s about how you coordinate all of those things behind the meter ultimately to manage the variability in supply and demand.”
Batteries are “amazingly good” at solving problems in the grid but VPP operators must have access to enough batteries to make a difference, and a contracted agreement that will make it worthwhile to supply the service.
The technology is catching up, he says. “The ability to connect is increasing but there’s a little bit of a way to go.” GreenSync’s deX platform aims to coordinate distributed energy resources from a physics side, he says, so they are visible to networks and transmission system operators and can be contracted by market participants.
If not now, when?
It takes a fair bit of belief in batteries to invest in the technology at current prices. It takes a different type of faith to participate in a virtual power plant. If the market settings are right, Thompson says VPPs will reach necessary scale. Secondly, coordination of distributed energy resources will minimise risks to the grid as more and more solar and storage assets are connected. “We’re connecting systems that are smart and that can be better utilised in the future,” he says. As more homeowners and business owners invest in smart solar and storage systems, VPP operators will have a deeper pool of resources to approach to help them test their propositions.
“If we do have these projections that 40% of our electricity generation will come from behind the meter, it’s implicit that there needs to be coordination … and the value of those systems needs to be recognised,” says Thompson, who admits it will take a few years for VPPs to “progress”.
“There isn’t a business model currently through a VPP to completely cover the cost of installing a battery,” he says. The breakthrough will come as prices fall and value is realised in front of the meter.
Too small to fail
As a swarm of distributed energy resources are built into the grid, and power supply issues are perhaps made worse, one wonders if the powers that be will one day knock on owners’ doors to say, ‘You’re going to connect to a VPP whether you want to or not.’
Other scenarios that might spoil the plans for today’s architects of VPPs include community storage facilities owned by networks or retailers and the enormous potential of the Snowy 2.0 and Tasmanian Battery of the Nation projects.
As storage is included in larger PV systems, business owners may be approached to take part in VPPs that have the potential to squeeze more power out of fewer assets than a residential equivalent. In the commercial and industrial business sector it is much easier to shift large loads with comparatively little effort.
Another complication with VPPs is the hard task of enticing battery-owners – who have paid a lot of money to put the energy companies at arm’s length – to agree to allow energy companies back into their homes to help themselves to their private supply of solar. “People often buy batteries because they want to escape the retailer,” Wavish says. “They want some energy independence and to kiss goodbye to power bills.” It’s a long shot to expect those people to team up with a retailer all over again. “It’s a different mindset to the one they entered the purchase with.”
Not all VPPs are offered by retailers, who face the homeowner “trust test”, and Wavish anticipates it may be the technology brands that gain traction. German battery-maker Sonnen is moving ahead in this area with its sonnenFlat offer of fixed monthly energy charges in exchange for access to residential batteries. “The customer is buying the brand, not the retailer brand,” he says, although sonnenFlat is offered through a white-labelled retailer, Energy Locals. “I think Tesla is well-placed [to do something similar], via their batteries or their cars – because you can use a car in the same way, ultimately.”
You need scale
Natural Solar CEO and founder Chris Williams has had his head in the VPP world as a partner to the rollout of sonnen’s offer. He won’t say how many customers have been signed up to sonnenFlat, but it’s more than the 1,000 households in AGL’s Adelaide VPP, he says.
VPPs might be a bit of a buzzword at the moment, but the model can unlock value through economies of scale, Williams says, from being able to recoup investment in storage through delivery of services to the network distributors. “It all comes down to scale and location and a clear message to customers.”
Consumers aren’t easily fooled, especially when they’re shelling out between $13,000 and $20,000 on a solar-and-storage system. “They’re able to distinguish between offers that provide genuine benefits versus offers that might be more of a marketing gimmick,” Williams says. “Any extra value to customers, even if it reduces the return by only one year, is significant when you start getting to that five-, six-year payback mark.”
AGL’s Adelaide VPP trial finally hit its target in September with the installation of the thousandth battery needed for the 5MW scheme. It’s been a long road for the energy giant, which announced an original 7MW trial back in 2015. Generous subsidies have helped make it a palatable offer for customers, with AGL pitching a $1,000 cash back offer from July on top of the South Australian government’s $6,000 of free money in its Home Battery Scheme.
South Australia is brimming with VPP trials to help it understand the value in the enormous levels of solar generation in the state. In September a fifth VPP was added to its grid with a joint effort from ShineHub and energy retailer Powershop, backed by a special deal with battery-maker Alpha-ESS. As with AGL, ShineHub is offering an extra $1,000 off the cost of the Alpha-ESS unit.
Also in South Australia the Tesla Energy Plan, available via Energy Locals, offers customers a Powerwall for $3,500 plus installation. “There’s a lot of customer interest in this as you’d probably imagine,” says Energy Locals founder and CEO Adrian Merrick.
Lots of money and effort is being expended in the pursuit of proving the value of VPPs. If history comes back and judges it all as a costly exercise in herding cats, so be it. In the meantime, fingers crossed.