Post: Virtual power plants to revolutionise Australia’s energy market

Virtual power plants to revolutionise Australia’s energy market

The Australian Energy Market Commission (AEMC) has unveiled a draft paper proposing allowing Virtual Power Plants (VPPs) to compete directly with large-scale generators in the energy market.

Published on 25 July, the draft determination seeks to address the growing amount of unscheduled price-responsive resources, such as community batteries, flexible large loads, and other price-responsive small resources like backup generators.  

Unscheduled price-responsive resources such as virtual power plants, community batteries, flexible large loads and other price-responsive small resources, are providing opportunities to customers and retailers to reduce their bills. But they are not fully integrated into the planning and operation functions within the National Electricity Market (NEM). As such, the market struggles to predict how these resources will respond to daily price changes, posing significant challenges for the grid operator.

AEMC’s view is that integrating these resources will streamline energy, security, and reliability services, reducing the need for extensive generation and storage infrastructure and ultimately cutting costs and emissions. Recent modelling suggests that VPP participation could save $834M from 2027 to 2050.

To encourage participation, the draft determination sets out plans to

1. allow aggregated consumer energy resources (CER) to be scheduled and dispatchable in the NEM
2. include a short-term incentive payment to drive participation in dispatch
3. introduce a monitoring and reporting functions to understand the forecasting challenges and errors from unscheduled price-responsive resources

This rule change is a key part of a package of reforms to integrate CER. It is the main rule change in the AEMC’s work program that focuses on integrating these resources into the wholesale electricity market. Views are invited until 12 September.