Virtual Power Plant (VPP) | What Is It, Exactly? And How Does It Work?

With the rise of solar technology also come newer, more clever ways to incorporate renewable energy into our daily lives. Virtual Power Plants, or VPPs, are currently among the ones making the biggest waves.

But what is it, exactly? How does it work? Is it even useful to you?

To answer that last question, yes, it’s absolutely useful, as it can help further reduce energy costs and stabilize the electricity grid. As for the other concerns, let’s talk about them more deeply. Here’s a list of everything I’m covering in this article:

What is a Virtual Power Plant?

A virtual power plant, or VPP for short, represents a new-age innovation in how we distribute and manage power, making it more flexible and efficient.

Imagine if each house with solar panels and batteries could share their excess electricity when others needed it, much like sharing food with friends. Virtual Power Plants (VPPs) make this possible by connecting many homes together through a distribution channel, specifically the internet in this case.

This creates a giant team that can help power essential services like schools and hospitals when there’s not enough renewable energy available from other sources. It’s akin to building a giant solar battery from the many small solar batteries in different houses, ensuring there’s always enough power for everyone.

VPPs are important because they help ensure that the lights stay on and everything keeps running smoothly, even when it’s extremely hot or cold and everyone is using a lot of electricity. Plus, by sharing power from solar panels and batteries, we’re utilizing clean energy.

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How do VPPs work?

A virtual power plant operates by leveraging the collective storage capacity of thousands of individual home batteries, allowing for the rapid injection of stored renewable energy into the grid to manage frequency and voltage imbalances, local disruptions, or disturbances.

This system enhances grid stability and resilience by providing a range of services, including energy shortfall response, frequency control ancillary services, and network support. Again, this is all done through the internet.

Participants in virtual power plant projects often receive compensation through direct payments or bill credits, incentivizing their involvement. Speaking of incentives…

Recommended: Solar Panels 101: Full Guide to Solar Panels in Australia

What can it VPPs do for Australians?

Let’s talk about future-proofing. In a not-so-distant future where electric vehicles (EVs) have become the norm, a city that has mastered solar-harnessing practices could become a world pioneer or leader in the power generation space. This might seem like wild conjecture, but hear me out.

In addition to participating households solar batteries, electric vehicles (EVs) are emerging as a significant component of VPPs, offering both storage capacity and the potential to return energy to the grid.

Trials, such as REVS conducted by ActewAGL, have demonstrated the feasibility and benefits of incorporating EVs into VPPs, further expanding the scope and capabilities of these systems.

Another VPP project is the Tesla Virtual Power Plant in South Australia. It is the world’s largest VPP and aims to equip 50,000 homes with solar and Tesla Powerwall battery systems. This ambitious project not only showcases the scalability of virtual power plants but also emphasizes their potential to affect energy costs and grid reliability.

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Are Virtual Power Plants mainstream in Australia?

Yes, they are. In Australia, the rapid adoption of rooftop solar systems has positioned the country as a leader in virtual power plant development.

With over 2.5 million rooftop solar systems installed, contributing to a collective capacity of more than 10 GW, Australia’s energy landscape is uniquely suited for the implementation of virtual power plants.

These systems are capable of addressing the inherent variability and intermittency associated with renewable energy sources and play a crucial role in stabilizing the grid during periods of peak demand.


To summarize, a VPP is like a giant battery that’s made through the connection of individual home batteries. This connection is made via the internet, and every solar battery works to keep the electricity network stable.

Naturally, getting yourself involved in VPPs will also come with compensations that further reduce your electricity bill. Oh, and it helps reduce reliance on fossil fuels, too. So it’s great for the environment.

Now, if you don’t have a solar system yet and you want to be part of the revolution, we can help. We have a network of pre-vetted solar installers that’s ready to give you 3 FREE quotes right away. Just let us know, and we’ll get right to it.