The Australian Energy Market Operator, together with fellow market bodies the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and industry members, have today released a consultation paper to seek feedback on the establishment of a framework for Virtual Power Plant (VPP) demonstrations.

A Virtual Power Plant (VPP) refers to an aggregation of resources, coordinated using software and communications technology, to deliver services that have traditionally been performed by a conventional power plant. In Australia, grid-connected VPPs are focused on coordinating rooftop PV and battery storage.

“Australian consumers have now invested in more than 7.6 gigawatts of rooftop PV capacity, with Australia now among the highest per capita rate of rooftop PV adoption in the world (22%), and in Queensland and South Australia this rate is over 30%,” said Executive General Manager Markets Mr Peter Geers.

“VPPs have the potential to maximise value to consumers, while also supporting power system security. This is an important first step within a broad program of work designed to inform changes to regulatory frameworks and operational processes to enable integration and optimisation of Distributed Energy Resources (DER) within the National Electricity Market (NEM),” said Mr Geers.

While VPPs in the NEM are currently on a small scale, several large-scale VPP projects, and Government subsidies to support VPP capable systems have been announced recently, with targets that equate up to 700 megawatts (MW) of VPPs operating in the NEM by 2022. AEMO’s 2018 Integrated System Plan (ISP) projects that by 2040 the NEM will host up to 31,000 megawatts of rooftop PV capacity in a Neutral scenario, which would make rooftop PV the highest capacity generation technology in the NEM by 2040.

AEMO’s principal responsibility is to ensure system security across the NEM throughout the transition to a more decentralised power system, which not only includes real-time operations, but also the processing of registration applications from current and intending market participants, conducting technical due diligence of each party’s ability to deliver services for which they are seeking to register.

“The real present day challenge is that as the market operator, AEMO does not have visibility of how VPPs operate, and as VPPs reach a greater scale, the continued lack of operational visibility could present system security risks, as VPPs can move from charge to discharge instantaneously. AEMO’s central role in these demonstrations will be to learn how to effectively integrate VPPs so that they help to maintain a reliable and secure power system, rather than present a potential risk to system security,” said Mr Geers.

In the collaborative effort between AEMO, the AEMC, the AER and industry members of the Distributed Energy Integration Program (DEIP), the VPP demonstrations will:

  • Allow VPPs to demonstrate their capability to deliver the full value stack (which includes the ability to deliver services in the energy and frequency control ancillary services markets, and network support services such as congestion relief).
  • Provide AEMO with operational visibility to help the central market operator consider how to integrate VPPs effectively into the NEM.
  • Allow the AEMC and AEMO to make informed changes to the regulatory frameworks, systems and processes required to facilitate the smooth integration of VPPs as they ramp up in size.

“Virtual power plants powered by residential batteries or other technologies, and the market aggregators that will control them, will continue to have an increasing impact on the energy market. It’s important that we consider how the existing rules can accommodate these developments, but also look at where and how new rules may be needed to benefit the market and consumers,” said Paula Conboy, Chair of the AER.

“The secure integration of DER, such as VPPs, into our systems and markets can enable the efficient use and optimisation of all available resources in real time for the benefit of Australian consumers, DER owners and the power system as a whole,” said Mr Geers.

“VPPs will benefit consumers most if they can earn returns from each of the services they are able to deliver. VPPs were not contemplated when the current energy regulatory framework was developed, and this project is about learning how the framework needs to change to enable VPPs to deliver the most value to consumers,” said Mr Geers.

The AEMC’s Executive General Manager, Security and Reliability, Suzanne Falvi, said virtual power plants are likely to play an increasingly important role in the energy market.

“The AEMC welcomes this collaboration with AEMO and the AER as we develop our understanding of the technical and regulatory requirements to enable virtual power plants to participate in energy markets. We expect these trials will guide future evolution of the regulatory framework so the benefits to consumers of virtual power plants can be fully realised,” said Ms Falvi.

AEMO invites all interested parties to provide written feedback on this paper to VPP@aemo.com.au by 21 December 2018.

Want a crash course on VPPs? Check out our recent podcast on VPPs below: