Should You Join a Virtual Power Plant With Your Home Battery?
If you have a home battery, or you are thinking about getting one, you have probably come across the term virtual power plant, or VPP. Some energy retailers and providers promote them as a way to earn extra money from your battery, reduce your power bills and help the grid at the same time.
It sounds appealing, but it also raises a fair question: should you join a virtual power plant?
The short answer is it can be worth it for some households, but it depends on the terms. Joining a VPP means sharing some control of your battery, so it is important to understand what you gain, what you give up and what to check before you sign.
What Is a Virtual Power Plant?
A virtual power plant is a network of home batteries, and sometimes solar systems, linked together by software so they can work like one large power station.
A single home battery is small compared with the size of the grid. But when thousands of them are connected, together they can supply a significant amount of electricity when the grid is under pressure or when power prices are high.
In return for allowing the VPP operator to use part of your battery's stored energy, you typically receive payments, credits or other benefits.
How Does a VPP Work With Your Home Battery?
Day to day, your battery still works to power your home, just as it would without a VPP. The VPP operator connects to your battery over the internet and, at certain times, can draw on some of its stored energy to send to the grid.
Your Home Usually Comes First
Your solar system powers your home first. VPPs typically draw on the energy stored in your battery rather than your live solar generation.
You Can Often Keep a Reserve
Many VPP arrangements allow you to set aside some battery capacity for your own use, such as for the evening or for backup. How much you reserve affects how much the VPP can use, and therefore what you may earn.
What Can You Earn From a VPP?
VPP offers vary a lot. Depending on the program, benefits can include:
Payments or credits for the energy your battery supplies to the grid
Higher feed-in rates for exported energy than a standard plan, often at peak times in the evening
Bill discounts or credits linked to the plan
Sign-on incentives in some states, such as New South Wales and South Australia
What you actually earn depends on your battery size, how much capacity you reserve for yourself, how much electricity your household uses and the terms of the specific plan. Incentives and eligibility also change, so always check the current details.
It is also worth keeping expectations realistic. Some independent analysts have pointed out that a VPP offering above-average feed-in rates may only modestly improve the overall economics of a battery, so a VPP should be treated as a bonus rather than the main reason to buy one.
The Benefits of Joining a VPP
You may earn extra income or credits from energy your battery would otherwise not use.
You may receive a higher rate for energy supplied at peak times than you would from a standard feed-in tariff.
Some programs offer incentives that reduce upfront battery costs.
It can shorten the time it takes for a battery to pay for itself.
Your battery helps support the grid when demand is high.
What to Watch Out For
Shared control. You are giving the operator permission to use part of your battery, within the limits of the agreement.
Compatibility. VPPs often only accept certain battery and inverter brands, usually ones they have tested. You may also need a smart meter and a stable internet connection.
Battery wear. More charging and discharging means more cycles. Many home batteries have a warranty covering a set number of years or cycles, whichever comes first, so check how a VPP could affect yours.
Less backup power. Energy used by the VPP is not available to you during an outage, so check how your reserve and backup settings work.
Contract terms. Some programs have minimum terms, and leaving early can mean exit fees or repaying incentives.
Plan details. A VPP offer may be tied to a particular plan or retailer, so look at the total cost of the plan rather than just the headline rate.
Questions to Ask Before You Join
Is my battery and inverter compatible with this VPP?
How much of my battery capacity can the VPP use, and can I set a reserve?
How often is my battery likely to be used?
How will it affect my battery warranty?
What happens during a blackout?
How and when am I paid, and what are the plan's usage charges?
How long is the contract, and what are the exit fees or conditions if I leave?
Are there any sign-on incentives, and what conditions apply?
Is a VPP Right for You?
A VPP may suit you if you:
Have a compatible battery with spare capacity
Want to earn extra value from your battery
Are comfortable sharing some control of it
Have read the contract terms and are happy with them
A VPP may not suit you if you:
Want to keep full control of your battery
Rely heavily on your battery for backup power
Already use most of your battery capacity every day
Do not want to be locked into a contract
Choose the Right System First
A VPP is an add-on, not a substitute for a well-designed system. The right battery size, inverter and installation matter more to your day-to-day savings than any single offer. If you are planning a new battery, it can be worth asking your installer whether the battery and inverter you are considering are compatible with the VPP programs available where you live.
Frequently Asked Questions
Can a VPP drain my battery during a blackout?
It depends on how your system and the VPP agreement are set up. Check how your backup reserve works and what the operator can access, so you know what will be available if the power goes out.
Do I need a battery to join a VPP?
Generally yes. Most VPPs are built around home batteries, and they usually require a compatible battery and inverter.
Does the VPP use my solar power?
Your solar powers your home first. VPPs typically draw on energy stored in your battery.
Can I leave a VPP?
Usually, but the conditions depend on the program. Some have minimum terms or exit fees, or may require you to repay incentives if you leave early, so read the terms before you join.
Does joining a VPP affect my battery warranty?
It can, particularly if the warranty is limited by a number of charge cycles. Check your warranty terms and ask both your installer and the VPP provider how the two fit together.
Ready to Get More From Your Battery?
Whether you are thinking about adding a battery, getting more value from the one you have or choosing equipment that suits your needs, DSW Energy can help you understand which options make sense for your home and energy use.
DSW Energy provides solar, battery and energy solutions across South Australia, Queensland, New South Wales and Victoria.
Call DSW Energy on 1300 958 778 to discuss your options.
