Virtual Power Plants (VPPs) are becoming increasingly important as Australia transitions from fossil fuel generated electricity to renewables. VPPs are allowing grid participants to manage solar energy generated by individual households and discharge that energy at times of need.
With various VPP and storage incentive schemes, Australia is experiencing a home battery storage boom; nearly one in two systems installed in the second half of 2025 included a battery. The economics of battery storage has improved greatly, but now another decision: Should you join a VPP?
For consumers, VPPs can add to the complexity of going solar. In this article, we explain what a VPP is, how they work, the potential benefits and what to consider when deciding to join one.
What is a virtual power plant (VPP)?
A virtual power plant (VPP) is a network of small distributed energy systems that combine to release energy to the grid at times of need to help to stabilise it. An operator essentially has control over all of the systems in the VPP and manages their charge and discharge. In return, owners of the individual systems can receive upfront, or ongoing, financial credits for participating in the VPP.
Small distributed systems that can be used include: solar batteries, solar panels, electric vehicles (EVs) and some other smart appliances.
A VPP operates similarly to a typical power plant, in that it releases large amounts of energy to the grid during times of peak demand. However, a VPP pools its energy from many different individual sources (homes and small businesses) to form one plant.
How VPPs work
Home battery owners can choose whether to sign up and participate in a VPP. Participating in a VPP means that you hand over control of your system to the VPP operator. In return, you receive some form of financial compensation.
The VPP operator will then decide when to charge and discharge your energy systems based on the needs of the grid, or when wholesale prices dictate.
During times of peak demand, the VPP operator can instantly release stored energy to the grid from the all of its participants – an injection of energy to help meet consumption demand.
Each VPP is different
Each virtual power plant operates differently with different rules and incentives. It’s important to compare VPPs before committing to one as the contract terms vary for each. It’s worth comparing:
- Financial credits from your VPP
- Do you need to change electricity providers
- The rate you pay for electricity
- How much control you have over your battery (if any)
- Your household energy use
Maintaining grid stability
The abundance of solar energy generated during the middle hours of the days is creating problems for the grid – there is excess supply during the day, yet demand remains very high during morning and afternoon peak periods. To combat the problem, retailers are lowering feed-in tariffs, and governments are devising offers like 3 free hours of electricity. Virtual power plants are another tool designed to help alleviate peak electricity consumption demand.
Benefits of a VPP
The key benefit for most consumers that choose to participate in a VPP is financial savings – whether they be upfront payments or ongoing credits.
There are other considerations too; VPPs provide a more efficient use of renewable energy, with less going to waste. There are many benefits to using more renewable energy, the key one being that it reduces our collective carbon emissions.
Individual benefits of a VPP
Joining a virtual power plant (VPP) can lead to many benefits for individual households and businesses:
- Reduce the cost of batteries
- Lower electricity bills
- Effective use of solar energy to reduce emissions
While joining a VPP can lead to electricity bill savings for the individual, it is not a guarantee. It really depends on how and when you use your electricity.
Communal benefits of a VPP
The benefits of virtual power plants are arguably greater for the community than the individual. And, the VPP operator benefits too!
VPPs contribute to the greater good by:
- Helping to maintain grid stability
- Using more renewable energy
- Reducing carbon emissions
- Lowering electricity prices
- Reducing the likelihood of blackouts
Challenges of VPPs
It’s important to understand the contract terms of participating in a Virtual power plant, because each plan will be different. As well as the financial benefits and electricity rates, the key consideration is what sort of control you’ll have over your energy use. Your household’s energy needs may not marry up with the needs of the VPP operator.
If you hand over complete control of your energy systems, you may be forced to discharge your battery at a time which doesn’t suit your household. Key bill savings are made when you can use your solar energy for electricity use in your home or business. If you handover control of energy, you limit the ability you have to marry your solar generation and storage with household consumption.
Additional VPP incentives and rebates
Connecting to a VPP can lead to some big upfront cost savings. For example, it is a key eligibility requirement of the federal battery rebate that systems have the ability to connect to a VPP. Though at this point, participating in one is not mandatory.
There are further VPP incentives available at state level.
New South Wales
The NSW government provides an upfront rebate for residents that connect a battery to a VPP. The NSW VPP incentive can provide a cost saving of between $400 – $1,500.
The NSW VPP rebate is in addition to the federal battery subsidy. It is an initiative of the NSW state government’s Peak Demand Reduction Scheme (PDRS), which aims to reduce energy usage during hours of peak demand.
SA VPP incentive
The South Australian government offers a VPP incentive indirectly through its Retailer Energy Productivity Scheme (REPS). A rebate is available for consumers that connect a battery to a VPP. The savings available through the scheme differ depending on the size of the battery but are typically between $670 – $,2050.
More information on the SA REPS incentives can be found here.
Are VPPs worth it?
The communal benefits of VPPs are easily understood. For individual households and businesses though, are VPPs actually worth it?
It all comes down to the nuts and bolts of each VPP plan and your electricity consumption habits. If reducing the cost of a solar battery is really important, then the upfront payments that come with connecting to a VPP can be really valuable.
However, in the process, you’ll likely handover control of your solar and battery system to the VPP operator. Doing so limits your ability to take control of your solar energy and use it when it suits you. You may forgo solar savings in the search for VPP savings.
Remember that the VPP operator may be able to charge and discharge your home battery whenever they please. Also, be sure to check the feed-in tariffs on the VPP plan and the electricity rates. Only when you consider all of this information can you be sure if VPPs are worth it.
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