Virtual Power Plants

Have residential Virtual Power Plants come of age?

Virtual Power Plants (VPPs) are not a new technology — the linking up of decentralised energy resources (DERs) to flexibly and reliably respond to grid needs has been deployed in various forms over recent years. But with Tesla’s recent announcement of 50 000 home VPP in South Australia, has the residential solar-plus-storage VPP finally come of age?

“Virtual Power Plants” aggregate many smaller DERs — small-scale solar, wind and storage across several locations or households. By using smart technology, all the resources can be treated as one larger entity, intelligently drawing surplus power from the grid when supply is high and feeding it back in as demand increases. This year, the combination of falling battery storage prices with rapidly maturing technology has resulted in an unprecedentedly attractive business case.

Consumers are brought on board with the promise of resilience during power outages and reduced energy fees. For utilities, however, the benefits are even greater: increasing generating capacity without the need for installing costly new plant. Smart decentralised resources can provide short notice peak load power or load-following electricity generation; they are more flexible and reduce the need for redundancy.

And now, increases in size and scale are coming fast. Tesla’s South Australia development has a planned 250 MW of capacity – enough to contend with traditional coal and gas power generation. With this in mind, how have residential VPPs fared in other countries?

Energy storage provider and battery manufacturer Sonnen leads the European and German energy storage market, with a 40% share of the German solar battery market. Its SonnenFlat model offers an appealing prospect to consumers — buy a battery system and stop paying for electricity — with a ROI of approximately 6 years.

When around 100 homes in a community buy in, Sonnen can begin offering storage and grid services to local utilities. Its SonnenCommunity model, in place since 2015, allows communities to link up to share electricity amongst themselves. Due to Germany’s deregulated energy markets, Sonnen are able to compete directly with electricity suppliers. Buoyed by their success and growth in Germany, Sonnen have set their sights on expansion into the Australian market.

While Tesla’s project may be the largest residential VPP once built, it will not be the pioneer in the Australian market. San Francisco startup Sunverge won its title of largest VPP just earlier this year with 1,000 home VPP in South Australia.

Sonnen are developing competing projects in the region — while Sonnen prefer to go it alone and compete with utilities, Sunverge prefer a more collaborative approach. Will this method fare better in the regulated US energy market?

United Kingdom
UK energy storage provider Moixa kicked off its VPP programme GridShare in 2015, and just last year opened the system up to batteries from other manufacturers. With funding from local and international, commercial and government sources, Moixa is aiming to aggregate 200 MWh of battery storage capacity by 2020.

The rapid increase in capacity and scope for residential VPPs shows a ripe market. Players are jockeying for position and keen on overseas expansion. In Japan, both Sunverge and Moixa are making inroads, while in the United States the mix of regulated and deregulated energy markets means developers must collaborate more closely with utilities. The opportunities for early expansion, however, are clear.

Brett Simon, analyst at GTM Research, is positive about the significance of such developments for residential energy storage, “they provide both scale and the opportunity for residential projects to earn revenue via grid services. That is particularly important given that a major hurdle for residential storage to date has been clearly monetizable value streams.”

Further reading:

Distributed Energy Storage for virtual power plants
Large-Scale Energy Storage Is The (Virtual) Power Plant Of The Future
Germany’s sonnen offers ‘free’ grid power deal to solar users
Sonnen Tries Different Virtual Power Plant Models in Germany, Australia and America
Energy Deregulation Around the World: A Comprehensive Guide
sonnenCommunity connects households and makes conventional electricity suppliers obsolete through self-generated power
Moixa wins Gridshare funding – after learning lessons on recruiting customers
Next Kraftwerke brings Belgium’s first Virtual Power Plant into operation
Tesla’s Latest South Australia Battery Project to Rival the Capacity of a Coal Plant
Sunverge Deploys Fleet of Energy Storage Systems in Japan

If you want to know more about this and other topics directly from end users of energy storage technologies join us at one of these annual events: The Energy Storage World Forum (Grid Scale Applications), or The Residential Energy Storage Forum, or one of our Training Courses.


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