A Virtual Power Plant (VPP) consists of a network of solar+battery systems installed across the electricity system (in homes, for instance), which can be remotely controlled by the VPP operator to provide power from those systems to the grid, either when wholesale prices are high or when the grid frequency needs to be stabilised.
The VPP operator has knowledge of and access to these electricity markets that individual households don’t have, and can make money by providing electricity when it’s wanted, just as any other power plant can. The VPP operator typically shares this money with the owners of the solar+battery systems, to compensate the owners for the use of their power and the extra wear and tear on their batteries.
There are currently three VPP schemes on offer in South Australia – the SA Goverment’s Telsa/Housing SA VPP scheme, the AGL VPP scheme, and the Simply Energy VPP scheme. There are important differences.
AGL and Simply Energy:
The VPP schemes offered by AGL and Simply Energy are typical of VPPs in general. In each of these, the householder has to own their home. They have to invest in their solar+battery system – and they can use the State Government’s home battery subsidy scheme to help. The householder then gets free solar electricity from their roof, with excess stored in their battery for their use after dark. They also make some of the stored power available to the scheme operator, for a fee.
AGL’s current scheme offers an extra $1000 dollars upfront towards the battery for customers who stick with the scheme for 5 years. It then offers $100 sign up credit and 49.32 cents per day credit for VPP use of the battery (ie $100 once plus $180 per year), plus the feed-in tariff that applies under their contracts (14.2 c/kWh or 18 c/kWh).
The Simply Energy VPP pays $7 a day for use of the battery, up to a maximum of $5100 (which is just under 2 years’ worth) over a 3 year contract, plus a feed-in tariff of 15 c/kWh. They claim a Tesla Powerwall battery can be installed for $10,000 with the SA Government subsidy.
The disparity in payments to VPP customers is eye-catching! However, AGL’s tariffs for supply and usage are up to almost 15 c/day ($54/year) and 3.5 c/kWh cheaper than Simply Energy’s (though the $54 would be entirely wiped out by an annual $60 incentive payment for Simply RAA customers).
The Tesla/Housing SA scheme differs from the others in very important ways – it is in effect multiple schemes under one name. There have been 100 tenants in Phase 1, 1320 tenants in Phase 2, and further phases of the scheme are currently being rolled out.
For Housing SA tenants, the scheme is more a Power Purchase Agreement (PPA) than a Virtual Power Plant. Housing SA tenants with suitable roofs do not have to pay for a solar+battery system to be installed, but neither do they get free use of the system. Instead, Tesla retains ownership of the systems, and sells the electricity they make and store, either on the electricity markets, or to the householder (Housing SA tenant) who lives in the house where the system is installed. In this scheme, the tenant purchases all of the electricity they use, whether from the solar system, battery, or the grid. Because they do not own the solar system, they do not qualify to receive free solar energy or feed-in tariff payments. However, if they sign up to the VPP scheme, they qualify for very competitive rates through the scheme’s appointed retailer, Energy Locals, of 78.32 cents per day plus 31.13 cents/kWh. This rivals the SACEDO Origin Value prices (72.65 cents per day plus 32.19 c/kWh and 34.35 c/kWh over 10 kWh/day). They also get blackout protection via the battery (if it’s holding enough charge at the time of the blackout, which it might not be, as Tesla uses the battery to feed in to the electricity system).
Housing SA tenants have the right to opt out and choose another retailer, either before installation of the system, or afterwards, in which case the system will remain installed, but its output will bypass the household and go straight to the grid – the tenant will revert to buying all their electricity from the grid via their chosen retailer. There is already one story of a tenant opting in, then being wooed back by his previous retailer on the basis that “You should definitely be getting a feed-in tariff if you’ve got a solar system installed.” He will not; he does not own the system or its output.
A limited number of Housing SA tenants (320 for Phase 2) who’ve expressed interest in the scheme, but do not have suitable roofs, have been invited to buy their electricity from Energy Locals at the special VPP rates.
There are additional complexities to this VPP scheme. The first 100 participants (Phase 1) actually got a significant bonus – due to the experimental nature of the scheme, they DO get the full use of the solar+battery system as if they owned it. These systems will be rolled into the rest of the scheme when those tenants move out.
In the latest phase of the scheme, the Tesla VPP is now available to the public, with homeowners able to qualify for significant discount on the cost of the Powerwall battery if they sign up. This part of the scheme works more like the AGL and Simply Energy schemes, with customers investing in a battery and being rewarded for access to it by the VPP.
For Housing SA tenants there is not much apparent risk, and a price benefit that may beat the SACEDO Origin Value offer for energy concession recipients. For others, this scheme represents the cheapest way we’ve seen to get a Tesla Powerwall battery – but one commentator calculates that, even so, the battery is likely to be an economically sound purchase principally for vampires (inactive in daylight; using energy at night). Buyer beware.
Work continues on including community housing providers in the scheme – this hinges on preparing the kind of licence agreement needed to provide access to their roofs/walls for installation of systems owned by the scheme.