Updated on October 7, 2025
A VPP is a virtual power plant. One solar system with a battery working alone can’t do much to relieve the electrical grid during our current energy crisis. But if you were to connect thousands of solar systems with batteries and use that energy to relieve the stress on the electrical grid, then you’d be in business.
That’s what a VPP does. There is, however, so much more to the ins and outs of VPPs and how they can be a great benefit to you (or something for you to ignore, they’re not for every customer).
At PSC Energy, we want you to be as informed as possible about every aspect of the solar industry. Whether you go forth and sign up for a VPP or start an anti-VPP campaign at the next solar industry convention is entirely up to you. But before you do either of those things, we want you empowered with knowledge.
In this article, you will learn:
- What is a VPP?
- Why Would You Use a VPP?
- Why Would You Avoid a VPP?
- A Community Mindset
- Is a VPP Right for You?
- FAQ: VPP
By the end of this article, you’ll be an expert on VPPs and why you might or might not want to consider signing up for one once you purchase solar with a battery.
What Is A VPP?
A VPP (virtual power plant) is a cloud-based network that controls a community of solar batteries. It’s operated by an energy retailer, who coordinates the release/charging of participating battery’s energy reserves to relieve strain on the electrical grid.
If you sign up for a VPP, you’re sharing limited control of your solar battery (and the energy you have stored up in it) with a company. That company (energy retailer) will decide when to release or store energy in your battery in a limited capacity.
The energy retailers who operate VPPs instruct participating solar batteries to release stored solar energy into the electrical grid during peak periods of the day when electricity is in high demand. For example, the late afternoon into the early evening when folks get home from work and when it starts to get dark outside.
Those same energy retailers also use a VPP network to charge participating solar batteries up again in off-peak hours when electricity is cheaper.
Why would an energy retailer offer this service? An energy retailer is the middleman between you and the raw materials used to create electricity. It costs a pretty penny to buy that energy and sell it to you. They don’t want to pay for that if they can avoid it.
By networking thousands of solar batteries, they’re harvesting energy from households across Australia at a much cheaper price point. They’re saving money and reducing their carbon footprint by using solar instead of fossil fuels to power the grid at peak hours.
If you’re interested in solar batteries, you might want to check out the following article titled, Are Solar Batteries Worth It in NSW? PSC’s Ultimate Guide for 2025.
Why Would You Use A VPP?
In exchange for sharing control of your solar battery, participating households receive benefits. Let’s get into those.
Some VPPs offer an upfront discount on the cost of a solar battery. This could be an important part of your decision-making process on whether you want to purchase a solar battery. Energy retailers who offer participation in a VPP are kind of counting on that, actually. The more participants they have in their VPP, the more efficient the VPP.
The unfortunate reality of the solar industry in Australia today is that feed-in tariffs are just not as lucrative as they used to be. Years prior, they were used to incentivise Australians to install solar systems by rewarding them handsomely for every kilowatt hour exported to the grid.
Energy retailers who operate a VPP increase the feed-in tariff price for participants. Some VPPs offer monthly payments that can be extremely helpful for households with solar batteries. Those payments add up over time. The price per kilowatt hour (kWh) for a VPP feed-in tariff can range widely depending on the VPP and time of day they use your solar battery.
This is, in some cases, a price jump from a typical feed-in tariff which can range from $0.04 – 0.07 per kilowatt hour. There are a lot of terms and conditions that need to be met to get the high end of that payout in addition to shopping around for the highest-paying energy retailer. It could very well be worth your while though as the increase might fit well with your energy consumption patterns.
If you’re interested in learning a bit more about the price of solar batteries, you might want to check out the following article titled, How Much Are Solar Batteries? A Full Breakdown of Prices, Rebates, and Value in 2025.
Why Would You Avoid A VPP?
There are some disadvantages to VPPs. After all, a VPP is sharing control of your solar battery. Most solar customers get a battery to regain that control, not share it.
While many VPPs do indeed offer discounts on solar battery purchases (the Tesla one is particularly helpful in the use of a Powerwall), some require you to purchase a specific type of battery to be able to participate. You certainly wouldn’t be eligible for the Tesla VPP if you’re keen on an Enphase battery.
The feed-in tariff incentive is great for getting some money back on your electricity bills, but you’ll probably want to do some math and determine how much it offsets the cost of your system. In some cases, a VPP incentive won’t accelerate the return on investment for your battery.
Charging and discharging your solar battery decreases its lifespan. It’s just the science of how batteries work. Solar batteries are warranted for years, but the overall time of coverage is actually just an estimate of how long a manufacturer thinks their battery will last you. If you read the fine print on your warranty, you’ll see that it frequently covers either a time period (say ten years) or a number of cycles. A cycle for a solar battery is a complete charge and discharge cycle.
A VPP will increase the number of charge and discharge cycles by using it more often. This is done at the energy retailers’ discretion based on the agreement you sign with them. Some VPPs will only draw energy from your battery for an agreed-upon number of times per year. Tesla, for example, will only do it up to 50 times in a year. And really, the need for your solar is only required in the summer when Sydney experiences blackouts and brownouts.
Others will only draw energy up to a point leaving your battery with a percentage of energy for emergencies. There are VPPs that have a contracted limited that they will only deplete your battery to 10% or 20%, and there are some that will fully deplete your battery when they use it.
Speaking of emergencies, that minimum percentage of energy some VPPs will leave you with doesn’t go very far. What condition will your household be in if the VPP has drawn all your stored solar energy in an emergency leaving nothing for you? It’s a worry for a lot of customers, and not why they purchased a solar battery in the first place.
If you’re interested in looking at some solar battery choices, you might want to check out the following article titled, Which Solar Battery Should I Buy?
A Community Mindset
By their nature, VPPs are about community. A group of households share the burden of supplying energy during peak hours for everyone. If you eliminate the financial incentives for either party and focus simply on the principles of a VPP, it’s extremely progressive.
Cloud-based software used by energy retailers controls the way batteries in a community charge and discharge based on the circumstances of the moment. This decentralisation of resources is not entirely unlike the principle behind the advantages of microinverters; the strain is no longer on the system but instead on the individual components.
There are other advantages to decentralising energy distribution. If there’s a natural disaster or extreme weather event, a single power plant might be jeopardised and put a community at risk. Movement into spreading energy responsibility across households away from power plants may be the future of energy.
Cutting-edge technologies like artificial intelligence are being developed to monitor and regulate VPPs. The VPP becomes more effective, and the computer system is better equipped to predict energy usage based on existing patterns.
If you’ve done some research into solar systems, you probably understand that energy consumption patterns dictate so many of the choices you make when installing a solar system. When you’re home and what you power with electricity determines the placement of your solar panels for maximum efficiency.
The principle is the same here on a larger scale. This information can only lead to a better understanding of our needs which in turn leads to more efficient choices.
VPPs are awfully handy when there’s extreme weather. As anyone with a solar system can attest, a cloudy day can cause problems for solar production. In the case of extreme heat, the spike in energy caused by air conditioning can be alleviated by VPPs and reducing reliance on the grid and fossil fuels.
As other energy technologies advance and develop, VPPs may find more participants. If the electric vehicle industry continues to grow, the needs around peak hours will change. VPPs can pave the way for different choices around how we utilise our electricity.
If you’d like to learn a bit more about what solar batteries are on the market, you might want to check out the following article titled, 6 Best Solar Batteries on the Market.
Is A VPP Right For You?
VPPs are an interesting development in the solar industry. They operate as a community, sharing the burden of electrical grid overload at peak hours. There are many options to go with should you choose to participate with a VPP provider. It’s important to look at the financial incentives and weigh them against the long-term consequences for your solar battery.
At PSC Energy, we want you to understand the specifics of the multifaceted solar industry. VPPs are a big talking point these days, and it’s important for you to be informed. Our goal is to build a greener future for everyone, and it starts with educating each other about our options.
If you’re interested in learning a bit more about the federal solar battery rebate, also known as the Federal Cheaper Home Batteries Program, you might want to check out the following article titled, What the 2025 Federal Election and the Government Rebate Means for Solar Batteries in Australia.
FAQ: VPP
What is a Virtual Power Plant (VPP)?
A VPP is a cloud platform that controls many home batteries as one big energy source. It tells participating batteries when to charge and when to send power to the grid during peak demand.
How does a VPP work with my solar and battery?
Your panels make energy. Your battery stores it. The VPP can top up your battery in off-peak times and discharge part of it during peak times to support the grid and pay you.
Why would I join a VPP?
You may get upfront battery discounts, higher feed-in rates during events, or monthly credits. You also help stabilise the grid and reduce fossil fuel use.
Why would I avoid a VPP?
You give up some control. Extra cycling can shorten battery life over many years. You may need a specific battery brand. Incentives may not improve your payback enough.
Do I still get to use my battery at night with a VPP?
Yes. You can set a backup reserve so the VPP does not drain the battery below a minimum level. Check the contract for the exact reserve rules.
How much can I earn in a VPP?
Payments vary by retailer, plan, event length, and time of day. Some offer higher export rates during events, upfront credits, or monthly payments. Read the fine print and do the maths.
What is the difference between a VPP credit and a standard feed-in tariff?
A standard feed-in tariff pays a flat rate for exports, often around a few cents per kWh. VPP credits are event-based or dynamic and can be higher during peak demand.
Will a VPP drain my battery before a blackout?
It can reduce your stored energy if an event runs just before an outage. Choose a plan with a sensible reserve (for example 10–20%) and keep blackout-critical circuits sized to your battery.
How many times per year will a VPP use my battery?
It depends on the provider and the contract. Some cap events at a fixed number per year. Others are dynamic. Ask for the maximum events and typical event duration.
Does joining a VPP void my battery warranty?
No. Cycling counts toward normal warranty limits, but joining does not void a valid warranty. Check both the battery warranty and the VPP terms on allowable cycles.
Will a VPP shorten my battery life?
More cycles mean more wear over time. Good programs balance events and reserves. Compare the extra revenue against potential long-term degradation.
Can I leave a VPP at any time?
Most plans have contract terms or exit fees. Ask about minimum term, cooling-off period, exit fees, and hardware lock-in.
Which batteries work with VPPs?
Compatibility depends on the retailer. Some VPPs are brand-specific (for example Tesla with Powerwall). Many accept AC-coupled batteries such as Enphase. Always check the approved list.
Do I need a smart meter and internet?
Yes. A smart meter tracks exports and time-of-use. A stable internet connection lets the VPP control your battery and verify events.
Will a VPP control my home usage?
No. It controls battery charge and discharge only. You still control appliances and energy habits.
Is a VPP available for three-phase homes?
Yes. Both single-phase and three-phase homes can join. Backup capability depends on the battery. Some batteries back up only one phase. Others provide true three-phase backup.
Can I join a VPP if I am off-grid?
No. VPPs require a grid connection to export during events.
How do I choose the right VPP?
Compare payment type, export rates, event caps, reserve settings, contract length, exit fees, compatible batteries, app features, and customer support.
What data does a VPP collect?
It typically collects battery status, power flows, export data, and device info. Read the privacy policy and ask how long data is kept.
Can a small battery join a VPP?
Yes, if it meets the minimum size for the program. Smaller batteries earn less and may feel events more. Check minimum capacity rules.
