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What is a virtual power plant?

A virtual power plant (VPP) is a rather new term, taking its name from the physical power plants that we can see across the country. Unlike the industry owned and led power plants, the virtual type puts the choice, production, and power into the homeowner’s hands. This blog will discuss the characteristics of virtual power plants, illustrate the benefits, and offer insight into why a solar battery homeowner would want to join a VPP program.

Virtual Power Plant

A virtual power plant can be defined as a network of distributed energy resources (DER)—these including LG Home Battery and solar panels—that all work together and communicate with one another as a single source of energy.

The LG Home Battery and solar systems can be located throughout many neighbourhoods. Each energy source communicates harmoniously between each other over WIFI through software which efficiently charges and discharges energy from the collective batteries. Being a part of a VPP can be a worthwhile decision as this method is an optimal way to reduce the payback time on your battery system as you can get paid for joining one with your home battery and receive credits for trading energy.

Joining a VPP can offer a range of financial incentives and other benefits. Such incentives include being eligible for discounted solar and home battery technology, reward payments, reduced electricity tariffs, back-up protection, and credits on your electricity bill every time your battery system is cycled by the VPP operator during a VPP event.

VPP event

What is a VPP event? This refers to the events where the electricity is exchanged between the grid and your home battery and vice versa. This energy exchange is managed by the VPP operator which acts as a mediator for electricity trading.

During one of these events, a VPP operator has the ability to discharge (sell) some of the energy stored in your battery to the grid or charge (buy) your battery with energy from the grid. One of the reasons the operator may use your energy storage system is to raise or reduce the frequency of electricity in the grid. The VPP operator will aim to generate revenue from trading the electricity on the National Electricity Market, this will reward you and the other households enrolled in the VPP program.

The actions a VPP operator can do on your behalf are to:

  • Sell the stored energy to the grid.

  • Create revenue for helping keep the grid stable.

  • Buy energy when it is cheap and sell it at a premium.

Operational Advantages of a VPP

As mentioned above, a VPP operator can control each home’s solar and battery system offering financial benefits for its members. There are also operational advantages that VPP’s provide over the typical power plants, these qualities are:

  1. Adaptable Design A VPP can be simply expanded by adding new energy systems to the network. A typical power plant is usually constrained by its equipment, as the electricity output is usually pre-planned to a certain number of megawatts.

  2. Power Grid Load Reduction Electricity from power stations is outputted along the large transmission lines, these carry the energy to substations which then disperse the electricity to homes and businesses. In comparison, using a VPP reduces the amount of load on individual power lines as the energy is dispersed. One of the benefits is that this will reduce power outages and load shedding, as peak demand is reduced.

  3. Greater Dependability If an event occurs that puts the power plant offline, the energy generation will cease, affecting many people who rely on that system. With a VPP, the energy is dispersed, transferred, and stored independently from one another, therefore if one storage system goes down then you can still rely on others in the system, the impact is far less in comparison.

Tips for Homeowners

VPP’s are increasingly becoming more mainstream in Australia as more households explore ways to maximise the incentives and benefits of their home battery.

When deciding on which VPP operator to join, consider these tips:

  • What background information do you know about the VPP operator and the electricity retailer.

  • How much does the home battery system cost?

  • How will you be rewarded for partaking in the VPP program?

  • What electricity plan are you on, what are your electricity charge rates and your feed-in-tariff amount?

  • How much of your battery storage can you spare for backup/blackout protection?

  • Is there any termination fee?

  • How much electricity can the VPP operator contractually discharge from your battery per year?

The LG Home Battery range is compatible with several VPP programs such as Discover Energy, we have developed a list which details the programs that are currently on offer. Virtual power plants are an exciting advancement in solar-based technology which LG Energy Solution Australia is pleased to be taking part in. LG Energy Solution Australia is ensuring customers get the most out of their battery systems by giving customers the ability to choose among many VPP schemes—giving you the best option that suits your needs.


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