AEMO boss says energy retailers need to make VPPs more attractive for homes with PV and batteries

The head of the Australian Energy Market Operator says energy retailers need to make virtual power plants more attractive to households with rooftop PV and home batteries if they are to make a substantial contribution to grid reliability and security.

The boom in rooftop solar and household batterie has been supercharged by the success of the federal government’s Cheaper Batteries program, with more than 90,000 application since the scheme was officially launched three months ago.

Consumer energy resources – which include rooftop PV, batteries and even electric vehicles – are considered the most successful growth area of the country’s energy transition, driven by lower costs, government incentives and rising energy bills.

But AEMO wants as many of these systems to be both visible and capable of being “orchestrated”, because it needs to know how much capacity is out there, what it’s doing, and to be able to draw on its resources should the need arise, particularly as more ageing coal generators leave the grid.

Rooftop solar is reaching penetration levels of more than 50 per cent in the main grid, but in individual states like South Australia the output from rooftop PV can match or even exceed local demand.

That’s an impressive feat, but it makes life difficult for the remaining “baseload” generators that now have to learn to dance around those solar duck curves, increases the need of battery storage (both large and small) and creates a headache for AEMO.

But while VPPs are growing – both Origin and AGL – the concept is not widely supported, mainly because households find them complex, do not trust the utilities to hand over even partial control of their devices, and are not convinced they are getting a good deal.

AEMO chief executive Daniel Westerman, speaking at the AFR energy and climate conference in Sydney, says it is up to energy retailers to make these offers interesting to consumers.

“I think that there will always be a segment of consumers who really want to own, control their own devices, but hopefully at some point soon, retailers through the market will be able to create a value for consumers in the same way that they had with solar itself,” Westerman said.

“To (get the consumer to) say, oh, wow, I’m actually contributing to a lower cost grid for everyone, if I participate in this virtual power plant, and I get, I get value from that.

“And if we can create that value proposition, it won’t be everyone that will sign up, but I think more people will. So I’m optimistic that that can happen. It’s a question for the retailers.”

Rooftop solar is reaching penetration levels of around 50 per cent in the main grid, but in individual states like South Australia the output from rooftop PV can match or even exceed local demand.

That’s an impressive feat, but it makes life difficult for the remaining “baseload” generators that now have to learn to dance around those solar duck curves, increases the need of battery storage (both large and small) and creates a headache for AEMO.

Westerman says that despite the rising costs of transmission, and wind energy, renewables and storage and some firm capacity from gas remained the lowest cost option to replace Australia’s ageing coal fleet.

“Coal fired power stations are closing down. They’re getting old, coming to the end of their lives, and …. what we do know is that the least cost replacement for that energy and to meet our growing energy needs is through renewable energy backed up with batteries and with gas and hydro,” Westerman said.

He says the reliability issue – ensuring enough power at any particular time – is being addressed by a growing pipeline of projects. “Our latest reliability forecast … does call for the delivery of those planned projects on time and in full, and if delivered on time and in full … it actually looks pretty good for the next decade.

“So that’s that’s a good news story, and has improved over the last couple of years.”

The other focus is on system security, which means providing the essential grid services such as inertia and system strength as coal fired power stations exit the system. This calls for a mix of synchronous condensers, gas turbines with clutches and grid forming battery inverters.

He would not comment on the outcome of the next Integrated System Plan, which is currently being prepared with a draft scheduled for December.

“There’s been some cost changes. So transmission costs have gone up. Wind costs have also gone up. Solar costs have come down. Battery costs have come down. So some cost changes,” he said.

That would lead to some modelling changes. “But at a high level, probably what hasn’t changed is that, as coal retires, the least cost way to replace that energy is renewable energy batteries and pump hydro and gas and connect it in with transmission.

“So we haven’t finished the analysis, so I can’t say what’s what it’s actually the optimal development pathway, which is, what the what the ISP calculates.

“I can’t say what’s in that, but certainly the direction of travel will be quite similar, which is, as coal retires, the least cost replacement is renewables, firmed up with storage and backed up with gas.”

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