Virtual power plants are still dogged by major trust issues, industry experts say, as high up-front costs and complex offers leave customers reluctant to hand over control of their solar and battery assets.
Representatives from some of the leading players in the nascent virtual power plant (VPP) sector discussed both the huge potential for consumer resource aggregation, and the significant barriers to uptake, at Australian Energy Week last Thursday.
“There’s been a lot of value that’s been attributed to achieving [VPP] coordination. Lots of reports on that potential… but we’ve seen very little uptake,” said Ryan Wavish, the general manager of innovation at Engie Retail.
Wavish notes that for the first six months of the New South Wales battery subsidy, which offers an extra discount for battery systems join a VPP, only 513 of the 10,000 rebate applicants signed up.
It’s no secret that consumer buy-in to VPPs has been poor, so far. The problem has been flagged by the Australian Energy Market Operator (AEMO), which is counting on the aggregation of home batteries and other consumer assets to make them a more visible – and more biddable – part of the grid.
“Consumers are tentative to share control and coordinate the operation of their consumer energy devices through a third party such as their electricity retailer,” AEMO said in In a Draft 2025 Inputs, Assumptions and Scenarios Report published in December.
But now, the pressure is on to sell the concept to sceptical Australians, with home battery uptake set to soar under the soon-to-launch federal rebate scheme – and with VPP incentive schemes ramping up in two states, including in WA where battery rebate recipients are required to sign up to a VPP for a minimum of two years.
“Trust is actually the biggest issue,” says Dean Spaccavento, co-founder and CEO of Reposit Power, which has been a leading independent innovator of VPPs in Australia.
Spaccavento says the problem has a “few components to it,” one being that product design is still a work in progress, with more trial and some error still likely.
“There’s a long way to go,” he says, but not a whole lot of consumer patience left to test. “One of the things we see is the expectation versus reality equation that particularly [affects] consumers in the NEM… where they were promised a thing – falling prices – and they got rising prices, and so they go in with a mistrust.
And then there are the inherent complexities of VPP’s, he adds, “which in their relatively immature state and [with] the deficiencies of the distribution channel … create this expectation-reality mismatch that really does reinforce ‘this is not what I was sold.’
“And I think that that is a problem that… needs to be dealt with.”
Reposit has its own unique experience of this, having started out with a VPP product that for five years offered $1/kilowatt-hour battery feed-in tariff called Grid Credits. “It sounds like a good idea, but it was not a good idea,” Spaccavento told the conference in Melbourne.
“It was a bad idea: very difficult to operate; naturally trust destroying for the customer; another selection, another choice you have to make; prone to inflated promises from …solar installers, and; [an] extremely high cost to serve.
“Our response to that was to deliver what we call a no-bill product, where we guarantee households no electricity bills for seven years, regardless of price rises, regardless of feed-in tariff drops. There’s no lock in, there’s no penalties,” he says.
“Essentially, the bargain this time around is you buy the gear, finance it however you want, give us full control and, in return for full control of your equipment … we will guarantee you no electricity bill at all. “And that works,” Spaccavento says.
“It’s very simple. It’s profitable to do … because we’re able to do all of the tricky trading. And, like, that’s that’s our thing. We’ve got tricky… trades across multiple co-optimised markets and the cost to serve is almost zero.
“The customer doesn’t worry anymore, and it’s mainly because we’re aligned with them… We have incentive to take care of their equipment. They know we have incentive because we’re trading it. “We are on the hook for everything [and] that works. It breeds trust.
“It does suffer from a too-good-to-be-true issue,” he adds, “which is another trust issue, but its simplicity does work.”
Caitlin Trethewy, the head of VPP operations and trading at AGL Energy, agrees that complexity is the enemy of consumer buy in, particularly considering how most customers are accustomed to managing their energy consumption.
“VPPs are very complicated, and I think then the onus is on us as an industry to ensure that we’re doing everything that we can to actually educate consumers and help consumers navigate this product space,” she told the conference.
“So I think that’s been a really interesting challenge, and different companies have taken different approaches to it.
“At AGL, we’ve been on a journey of simplifying our VPP offering to try and make it sort of as simple as possible for customers. We’re still on that journey, and have released a new battery rewards plan recently in that theme.
“There’s still a long way to go on product design,” she adds, “and this is a fiercely competitive industry where everybody’s innovating all the time, so customers can have a lot of options.
“It’s about how they get the information that they need to navigate those options.”
In Western Australia, it will be mandatory for households to join a VPP for a minimum of two years to get access to the home battery rebate. This makes the state a particularly interesting test-bed.
“We are actually going to face different challenges,” says Katalin Polus, the head of customer marketing at Synergy, the state-owned energy provider that will offer one of the three VPPs on offer in the state.
“[Our challenge is not] necessarily the appetite for customers for the product update, but how do we nurture that trust that … [customers] are asked to give us,” she says.
“What we have found at synergy, through customer research, is at the time when customers purchase their battery or their DER assets, that’s too late to start building trust.
“Often, when they purchase the assets, they have the feeling of, yay, I beat the system. I don’t need to pay electricity bills anymore.
“So … trust has to be built throughout our whole journey with customers, very early on …it has to be really, really consistent.”
Matt Armitage, director of energy at Ernst & Young Australia, remains convinced that the future is “really bright” for VPPs in Australia.
“The potential is enormous,” he says. “The subsidy now aiming for a million batteries to come into Australia is going to have a profound impact.
“Batteries through VPPs have been delivering services for a number of years already… [they have] proven that they can deliver …not just FCAS but a variety of services. So I think building on this base is is really exciting.”
But he also believes that cost and complexity continue to present significant barriers to uptake.
“VPPS are still predominantly battery based – they’re big investments, particularly in a cost of living crisis,” he says.
“Home batteries haven’t really come down in price materially for a number of years. I mean, the subsidies now are going to help. But …to hit scale, we need to have really simple, preferably low- or zero-interest financed options, low up-front costs for the mass consumer, and for things to be much simpler than they are.”
Polus says that at Synergy, the VPP product has been built in a way that customers feel they have a choice, even though it is mandatory to join.
“And the choice is that they can opt out,” she says. “It’s only for a certain term. “As well as that we have fixed the number of activations that customer will need to participate in. And finally, we also do give a ‘not worse off’ guarantee.
“So in this really early phase of building trust with VPPs, we really wanted to go the extra mile and build a product that customers would opt in anyway, even if they weren’t required to. “And over the next two years, where we want to make our offering more complex, we can build that trust, bit by bit.”
Horizon Power, which will run the VPP on WA’s regional grid, says the product has taken more than six years to design and roll out. CEO Krystal Skinner says while trust has been at the core of convincing people to join, their VPP journey has had its challenges, unique to the state’s isolated and stringy grid.
“In 2010 we introduced the very unpopular hosting capacity constraints on our systems… to really safeguard safe and reliable power supply for all of our customers.
“But as you can imagine, telling our customers that they might not be able to put on solar was not something that made us particularly popular,” she told a separate forum at Australian Energy Week.
Horizon Power started developing a distributed energy resources management system (DERMS) as a way to do exactly what a VPP is supposed to: manage fluctuating electricity generation versus use in micro- or shaky areas of the grid.
It’s now available to households in all of the company’s jurisdictions and means Horizon Power could remove those hosting constraints in exchange for having some control over the systems.
Skinner says their customers are, in the main, very happy about it.
But it’s taken years of intensive engagement with those customers and with solar installers, who were noisy in their denunciations of the hosting constraints and Horizon Power, to win people over to the idea of a VPP.
“One of the key signature learnings that came out of [the first large] case study [in Onslow] was the depth and the repetitive, really intensive nature that is required around the engagement efforts to make sure you’re taking customers on the journey,” Skinner says.
“We invested really heavily in what that user experience looks like on both the customer side, but also the installer side as well.
“We find trust can be eroded really quickly, and you’ve got to be very transparent. You’ve got to set people’s expectations. That’s why we said right from the very start, we will, from time to time, have to energy manage your system, and we’ll try and keep that within 10 per cent. If we go over that, we’ll try and communicate why.”
