A virtual power plant (VPP) is a system that aggregates CER such as batteries, solar PV, and controllable loads into a single, dispatchable entity, typically to provide B2B services to electricity networks, retailers or market operators.

Key points

• A VPP coordinates CER across multiple customer sites as a single controllable portfolio.
• VPPs can help retailers manage wholesale market exposure and provide services to distribution networks.
• Customers may be rewarded through equipment discounts, lower electricity tariffs or dispatch payments.
• Interoperability, consumer protections and future market registration requirements remain important areas of development.

What services can a VPP provide?

VPPs can be used to manage spot market exposures for a FRMP, while services can also be offered to DNSPs as network services. While there are differing views in the Australian market about what constitutes a VPP, a common defining feature is that it is a B2B service operated to manage the problems of an industry participant rather than solely to optimise an individual customer’s energy use. A customer can be rewarded for hosting the CER supporting these services in a range of ways including equipment rebates, reduced retail electricity tariff rates and dispatch payments.

How does a VPP service provider operate?

A VPP service provider uses customer devices, software platforms, control systems and communications infrastructure to coordinate and optimise the operation of CER across multiple sites. The VPP provider is not itself registered in an electricity wholesale market but enables (for example) a retailer to better manage its customer loads in accordance with its market trading position and strategy. The VPP provider typically interacts with the market customer by contracting as a platform and/or technology provider or by providing agreed services such as energy, capacity, and FCAS.

What assets can participate in a VPP?

Customer assets that are commonly used in VPPs include BESS, C&I loads and EVSE. EV charging can also be managed via a telematics service provider including automakers and third-party vehicle telematics aggregators.

What should VPP product developers consider?

VPP services are not specifically regulated in the NEM and are not subject to specific technical requirements. Key considerations for VPP product development include:

• BTM interoperability: Australia does not currently have minimum interoperability standards for CER devices, but government are exploring this in relation the National Technical Regulator reforms. The lack of minimum standards impacts the cost, complexity and risk of integrating with customer end-devices.
• Interoperability with retailer systems: Retailer systems are not standardised and often use internal or third party APIs, including via vehicle and inverter OEMs, in addition to open protocols such as OCPP. This diversity increases integration costs and limits portability. A ‘Retailer Integration Profile’ has been proposed to define minimum interoperability requirements however this is not under active development.
• Ancillary services requirements: Around a dozen VPPs are registered to provide FCAS across the NEM. Further information on this is provided in the section Participating in a frequency control market.
• Government support schemes: The NSW PDRS and SA REPS provide incentives for small-scale battery (and in the future, V2G) owners to participate in a VPP program. These are open to both “traditional” VPPs (as defined here) and control schemes that optimise customer resources under dynamic pricing arrangements. The national Cheaper Home Battery Program offers rebates for small-scale batteries that are “VPP-capable”. This principally requires batteries to have an internet connection and the ability to respond to remote control signals.
• Interoperability with network systems: VPP services will need to operate within local network arrangements for generation and load management. Increasingly, VPP providers offer integration with both retailers and network systems for joint programs. For portfolio level integration, the OpenADR standard has been used, however many networks now also publish dedicated APIs for VPP integration and may consider using the storage extension being developed for CSIP-AUS v1.3.
• EVSE interoperability: South Australia requires OCPP v1.6 (or greater) for EVSE grid connection and OCPP 2.1 for standardised V2G communication, while funding agencies such as ARENA are adopting OCPP 2.0.1 as a minimum interoperability requirement. Industry stakeholders consider that OCPP 2.x is likely to become formalised as a minimum market requirement in the medium term.
• New Energy Tech Consumer Code: The NETCC is a voluntary consumer-protection code that applies to businesses selling, installing, or operating new energy technologies, including solar, batteries, and services marketed as “VPP-enabled”. While NETCC does not regulate VPP programs themselves, it applies to any provider that enrols customers into VPP offerings or controls customer-owned CER, setting standards for sales and marketing, quoting and contracting, installation, data use, and warranty and support obligations.

The evolving landscape of VPP regulations

The role of VPPs is under review by AEMO and market reform initiatives such as the Nelson Review which are examining how to increase the visibility of CER in central dispatch, and consultations around the potential role of a new National Technical Regulator. In parallel, the AEMC and AER are considering how VPPs should be treated within broader market frameworks, including obligations for registration, metering, and consumer protections.

While some reforms (such as the introduction of the IRP category) have created clearer participation pathways, significant uncertainties remain around a range of potential future arrangements. For example, governments are considering how consumers could switch between VPP programs as this is not yet supported by standardised processes.

VPP technology services are offered by an increasing range of specialist providers and OEMs, with most major energy retailers incorporating VPP capability into their customer product offering. These services are evolving rapidly as CER product developers seek to capture multiple value streams from CER through B2B2C customer acquisition pathways.

Related articles

• Participating in the National Electricity Market
• Registering as a market customer or retailer
• Registering as a small resource aggregator
• CER interoperability standards