Unlocking value through virtual power plants

GemLife Virtual Power Plant

Table of Contents

Virtual power plants (VPP) – what they are and why they’re important.

The energy sector is rapidly transforming, and with it, we’re seeing the evolution of much smarter energy ecosystems. The VPP acts as an integral part of this energy puzzle offering a solution for greater energy control, efficiency and resilience.

What is a VPP?

VPPs are quickly emerging as a popular option for managing and integrating high volumes of decentralised power sources – like solar panels, wind turbines, and battery storage systems. This seamless, often aggregated, integration of energy generation sources into the energy distribution network, is managed through sophisticated and continually evolving energy management software and systems.

VPPs enable more efficient and flexible energy management, turning small-scale assets into new and powerful grid participants that are returning higher profitability on renewable energy asset investments.

What’s driving the use of VPPs?

There are many reasons for the rapid uptake of VPPs – a few of these include:

  • The volume of transmission upgrades is on a steady increase. This means energy production and consumption are becoming increasingly important for us to manage.
  • There continues to be an increase in distributed energy resources (DERs) driven by the need for more sustainable, renewable solutions.
  • Climate change impacts are stimulating the need for more renewable energy options – our challenge is to create more resilient energy network systems to cope with this.
  • VPPs help manage demand and supply volatility to support improved grid and voltage stability through its integration of distributed energy resources.
  • Market mechanisms continue to incentivise VPP schemes through demand management programs and ancillary services, creating additional value for businesses.
Reasons for the rapid uptake of VPPs

What are the benefits of using a VPP?

With renewable energy projects on the increase globally, there are some well evidenced and compelling reasons to consider incorporating VPPs into your projects. Some of the benefits increasingly making VPPs a smart choice for modern energy management include:

  • Improved energy efficiency – VPPs optimise the use of renewable energy investments, maximizing output and reducing waste.
  • Reduced operating costs – by integrating small-scale energy assets, VPPs lower energy bills and demand charges, offering significant cost savings.
  • Improved grid reliability – by integrating small-scale energy assets into a cohesive network, VPPs balance supply and demand, mitigating peak load impacts, and providing more resilient power to businesses and communities.
  • Lower carbon emissions – supporting broader sustainability goals, VPPs help reduce carbon footprints.

These benefits are typically translated into behind-the-meter and in-front-of-the-meter benefits:

Behind-the-meter:

  • Self-consumption: this is about maximizing the use of locally generated renewable energy.
  • Retail arbitrage: taking advantage of price differences between peak and off-peak times.
  • Network charge reduction: decreasing costs associated with energy distribution.

In-front-of-the-meter:

  • Frequency control ancillary services (FCAS): maintaining grid stability by balancing supply and demand.
  • Wholesale arbitrage: profiting from price fluctuations in the wholesale energy market.
Benefits of VPP

What to consider: greenfield vs brownfield.

Virtual Power Plants (VPPs) can be used in both greenfield and brownfield environments, although the implementation approach for each can vary quite significantly.

Greenfield sites benefit from the freedom to design and build from scratch, easily enabling installation of new technologies and scalable infrastructure. However, in contrast, brownfield sites need more careful assessment and upgrading of existing infrastructure. Using VPPs in these different site environments can involve some distinct challenges.

For greenfield sites, considerations include:

  • Regulatory approval – land use law, environmental impact assessments and zoning laws often mean lengthy approval processes.
  • Infrastructure development – with very little existing infrastructure, there is often an initial high investment to develop and build.
  • Integration with future proposed development – consideration needs to be made for expansions, and potential integration of additional energy resources which may eventuate as the site develops.

For brownfield sites, considerations include:

  • Existing infrastructure – integrating new energy systems with old ones may require significant retrofitting and upgrades.
  • Contamination and remediation – brownfield sites may have high levels of contamination due to previous industrial use. This means they may need remediation effort and clean up before energy systems can be safely installed.
  • Space constraints – these sites may have limited space due to existing structures and often require creative solutions to fit in new energy technologies.

How Prospecta tackles the challenge of site complexity.

We’re proud to create bespoke VPP solutions that meet every unique challenge and site circumstance. Setting up our sites as embedded networks means that we can leverage procurement capacity that creates greater value from the energy ecosystem.

For greenfield sites, we focus on delivering customised designs, scalable infrastructure builds and smart grid integration. For brownfield sites, we carefully consider site assessments, remediation, retrofitting and upgrading infrastructure, making the best use of the space we have available, and implementing hybrid energy systems that seamlessly integrate with existing power sources. This enables us to promote sustainable, resilient energy systems across diverse environments.

Through our trusted and recognised network of industry partners, regardless of whether you’re operating in a greenfield or brownfield environment, we have negotiated some of the very best electricity retail rates for customers. This provides long term certainty and confidence about contracted tariffs.

Right sizing your virtual power plant (VPP) solution.

When it comes to VPPs, one size does not fit all. So, the question often asked is ‘how do I know when I’m right sizing vs over sizing?’ Well, this really depends on the specific asset class and the local requirements of the asset.

In general, the optimal size for onsite power generation and storage depends on several factors:

  • Energy demand patterns – understanding peak and off-peak energy usage. The sweet spot should accommodate the highest demand periods while ensuring minimal waste during low-demand times.
  • Renewable resource availability – assessing the availability of renewable resources like sunlight or wind. In regions where there is a lot of solar energy, a slightly larger solar system might be justified to reap full benefits.
  • Storage capacity – adequate battery energy storage is important to manage fluctuations in renewable energy generation and to ensure steady supply. The sweet spot typically includes enough storage to cover peak evening hours when solar generation drops but demand remains high.
  • Economic considerations – balance your initial capital expenditure with long-term savings. Right sizing focuses on achieving the best return on investment by avoiding unnecessary oversizing costs.

Ultimately, your sweet spot will depend on your industry and how you’re hoping to use your VPP. For residential communities, this may mean prioritising consistent, low-cost power with smaller, more frequent storage cycles to match typical household usage patterns. For commercial developments, it may mean needing larger systems to handle higher and more variable demand, reducing demand charges and optimising peak shaving. Industrial applications on the other hand, often require more robust systems that hold a higher capacity for ensuring uninterrupted operations, particularly where there is critical infrastructure or manufacturing activities.

At Prospecta, we conduct a comprehensive sensitivity analysis that unpacks the ‘sweet spot’ for onsite generation and storage. This uses a series of metrics to calculate the optimum balance to gain full site energy independence so you can be confident about the return of your renewable asset investments.

The integral role of an energy management system (EMS).

What is an EMS?

The EMS acts as the technology brain centre of a VPP, orchestrating the complex interactions between distributed energy resources. This ensures ongoing efficient, reliable, and profitable operation. The EMS uses real-time data, advanced analytics, and robust control mechanisms to optimise energy production, consumption, and market participation.

More about Prospecta’s EMS.

Our bespoke EMS is focussed on battery optimisation. As a cloud-based system, it integrates seamlessly with embedded network generation system inverters, into the National Electricity Market and then into the battery energy storage system.

Our EMS can intelligently observe the market, embedded network, and the weather, in five-minute intervals, which in turn, informs the battery’s operation. This functioning is enabled through sophisticated artificial intelligence capability. Through this interplay, it learns the unique system generation and consumption patterns over time to enable greater system performance, reduce battery degradation and enhance overall outcomes.

Insights into the functioning of an EMS

Insights into Functioning of an EMS

Choosing the right virtual power plant (VPP) model.

VPP innovation is less about the product itself, and more about the model you select to operate it. If you’re looking to start your VPP journey, make sure you select a model that allows you to ‘right size’ requirements aligned to your unique business needs. Let’s explore how each of these models differ, and how each can cater to different energy needs and applications.

Model 1: The battery is installed behind the main site meter and the site load is exposed to the wholesale market

This model often poses spot risk for loads and is used by large businesses who have dedicated and specialist teams with the capability to manage these risks.

It can be used with or without the site retailer involved, a task we at Prospecta can also perform, and is often suited to residential communities including land lease, build-to-sell and build-to-rent apartments, retirement living and aged care facilities.

BESS installed behind the site/gate meter

BESS installed behind the site/gate meter

Model 2: the BESS is installed using an on-market child meter to expose only the battery to the wholesale market

In this model, a child meter requires a customer third party, separate to the site owner, who is also likely to be a separate financially responsible market participant (for example, a retailer or small generation aggregator). As network charges are only levied on the main site meter, the battery can still generate demand savings for the entire site.

This model is easily applied to use on C&I assets or precincts, as well as in residential master planned communities. If operating on an industrial site, the battery could also be monetised to leverage revenues created from both frequency control ancillary services and wholesale arbitrage.

BESS installed using an on-market child meter

BESS installed using an on-market child meter

Model 3: The virtual energy network (VEN)

What is a VEN?

A VEN is a digital platform that integrates and manages distributed energy resources like solar panels, wind turbines, battery storage systems, and electric vehicles. By using advanced software and communication technologies, a VEN allows these resources to be monitored, controlled, and optimised as a single, cohesive unit.

Also known as ‘virtual net metering’, in this environment, customers or assets generating excess solar power can share it with other sites unable to generate the same energy. In operation, solar export is matched with consumption by other sites during each five-minute settlement intervals. This matched usage is then netted off at the consuming site, less their retail cost.

Although this model is most preferred for sites within the same entity or portfolio, Prospecta is ideally placed to offer its VEN solution across bespoke entities. This allows its customers to deliver significantly better financial returns on solar projects, as well as realise ongoing environmental and reputational benefits.

A virtual energy network in operation

A virtual energy network in operation

Top tips to consider before you embark on your virtual power plant (VPP) journey.

While VPPs can act as a powerful tool to manage your energy resources, realising their potential does require careful planning and execution. Here are some things to look out for when embarking on your VPP journey:

  • Underestimating initial costs – while it’s easy to focus on the longer-term projected savings, don’t underestimate the upfront investment that may be required for your infrastructure build, particularly for brownfield sites.
  • Inadequate site assessment – thorough site assessments are important to avoid technical and logistical issues later. Accurate data on energy usage patterns, available space, and local regulations all need to be thoroughly considered.
  • Ignoring regulatory compliance – all VPPs need to comply with relevant laws and standards, overlooking these can result in legal complications and missed opportunities for incentives.
  • Poor integration with existing systems – a seamless integration strategy is key for optimal performance and VPP success.
  • Overlooking maintenance and ongoing support – make sure you’re working towards implementing a robust maintenance plan from the outset. If you neglect this, over time, it can lead to costly system failures and reduced efficiency.

While a VPP may be your preferred solution, remember, if it’s not possible, there may be other solutions for you to explore instead. Options such as microgrids, standalone distributed energy resources, and energy efficiency upgrades all offer great pathways for you to consider as part of your sustainable energy management roadmap. Our friendly team here at Prospecta is always happy to provide advice specific to your circumstances.

The Prospecta virtual power plant (VPP) offering.

As a pioneer in VPPs for the land-lease community sector, particularly with its GemLife partnership, Prospecta has earned a credible reputation for its VPP capability in the market. Now, we’re excited to be expanding this innovative solution to commercial and industrial customers, continuously adapting our VPP model to meet the unique needs of our new client groups.

Our VPP solution seamlessly integrates embedded network operations (behind the meter) with energy market participation capabilities (in front of the meter). Our tailor-made energy management solution, coupled with our high-speed enterprise networks, enables real-time monitoring and control of your distributed energy resources. Using data analytics and machine learning, our VPPs can independently predict energy demand and supply patterns, ensuring energy distribution and storage is managed in the most efficient way possible. Our solution also facilitates participation in demand response programs, incentivising adjustments in energy consumption during peak periods.

What gives Prospecta’s VPP offering a competitive edge?

Our competitive edge lies in our customised, fully integrated solution and our front-of-meter capability. We pride ourselves on these purpose-fit solutions which we build for flexibility and scalability.

Our modern software platforms offer advanced monitoring and control over all connected assets, enabling us to tap into revenue streams you might know about but haven’t been able to unlock. Frequency ancillary control services (FCAS) include generators and other market participants, and by working together with them in the energy ecosystem, we can help manage demand and supply fluctuations of the grid. Our private enterprise 5G communication networks allow us to access lightning speeds, enabling us to operate quickly and effectively within these FCAS markets.

Navigating the complexities of a highly regulated industry can be challenging, but we do the heavy lifting for you. We keep things simple, enabling compliance and participation in incentive programs every step of the way.

By focusing on all these things, we make sure that our systems meet the diverse and evolving needs of residential, commercial and industrial assets, delivering ongoing economic and environmental benefits.

Wrap up and summary

About the author

James Harvey, Head of Energy at Prospecta Utilities

James Harvey, Head of Energy at Prospecta Utilities

Our dynamic Head of Energy, James Harvey, has an inspiring record of leading high-performing teams across diverse sectors, including real estate, investment, energy, technology, and consulting. Specialising in ESG, business transformation, digital innovation, corporate venturing and alternative investments, James brings a wealth of knowledge and experience to the corporate table.

Having delivered multiple large-scale business transformation and technology projects across the real estate value chain, James has spearheaded some significant initiatives. This includes new business launches, the rollout of 5MW C&I solar systems, and the development of carbon-neutral embedded networks for residential and build-to-rent projects.

Beyond the boardroom and separate to his popularity in the professional speaking circuit, James boasts an impressive athletic background. He’s played 350 NBL games, won two NBL championships, and earned seven All-Star titles. As the captain of the Australian Boomers, Sydney Kings and Gold Coast Blaze teams, he’s also former Vice President of the NBLPA, demonstrating the true spirit of leadership and excellence.

Now, in this ‘Unlocking value from virtual power plants’ blog article, James continues to shape the future of energy, business and technology, with his innovative and strategic vision on virtual power plants.

Read more about James