Why Australians Hesitate to Join Solar and Battery Virtual Power Plants

Many Australians remain unconvinced about the benefits of enrolling their solar systems and home batteries in virtual power plants (VPPs), even with recent data suggesting that participation could significantly lower their energy costs.

A study conducted by Energy Consumers Australia (ECA) indicates that while Australians display interest in VPPs amid their research for battery purchases, this enthusiasm wanes once they actually own a battery, as they are reluctant to relinquish control over their investment.

Insights from the Battery Boom

The surge in battery usage, propelled by the Cheaper Home Batteries rebate, has led to the installation of nearly half a million battery systems across the nation by the end of July, all of which are compatible with VPPs. However, the ECA report titled “Why households adopt batteries and why many aren’t joining a VPP” reveals a lack of commitment from households to engage with this initiative aimed at boosting consumer energy resource participation.

According to a recent inquiry by the Australian Competition and Consumer Commission (ACCC), slightly more than 24% of battery owners are involved in VPPs. Nonetheless, the inquiry also discovered that joining a VPP can lead to reduced energy bills.

Potential Savings with VPP Participation

For the period of 2025-26, households equipped with a solar and battery system reportedly had median annual bills between £329 and £909 (20-52 percent) lower than those of standard customers. In contrast, participants in VPPs enjoyed even greater savings, with median bills reported to be between £762 and £1,093 (57-63 percent) lower.

To encourage more Australians to recognise these financial benefits, it is crucial for governments, VPP operators, and energy networks to foster trust in VPP programmes and to re-evaluate the incentives that currently favour self-consumption of energy.

Consumer Concerns and Preferences

The ECA study elucidates the motivations behind Australians’ battery purchases, highlighting that many consumers prefer batteries not only for cost savings but also for increased energy independence and resilience. About a quarter of those surveyed expressed intentions to eliminate their reliance on the grid altogether.

This implies that some consumers may worry that participating in a VPP could compromise their energy independence, particularly if stored energy is dispatched to the grid, potentially leading to high electricity costs later or reducing the energy available during outages. Such concerns contribute to a strong preference for maintaining complete control over their battery usage.

Revamping Tariffs and Trust Issues

Currently, existing tariffs encourage self-consumption; time-of-use tariffs push users to draw from stored energy during peak hours—precisely when VPPs prefer to export. The ECA suggests that networks could benefit from the implementation of two-way tariffs, rewarding both electricity imports and exports in a manner that aligns with actual network costs and advantages.

Moreover, trust remains a significant issue, as Australians are cautious about transferring control of their major purchases to third parties. Both the ACCC and ECA endorse enhanced consumer protections for VPP operators, advocating for regulations that affirm that aggregators must prioritise customer interests.

Encouraging VPP Participation

There are alternative strategies to encourage households to consider VPP participation, such as featuring these options on government-funded energy comparison platforms or extending larger subsidies tied to VPP participation for home batteries in areas with network congestion, the ECA proposes.

Forecasts and Battery Size Trends

The market operator anticipates that by 2050, roughly 53% of battery owners will likely participate in VPPs, leading to a potential £7.2 billion reduction in required generation and network investments. However, achieving the Australian Energy Market Operator’s (AEMO) Step Change scenario in the 2026 Integrated System Plan (ISP) appears unlikely due to the currently low interest in consumer VPPs, according to the ECA report.

A possible saviour for this scenario could be the large battery systems Australians continue to install in their homes. Since the subsidy adjustment in May, average battery sizes have significantly decreased from an almost 50 kilowatt-hours (kWh) to an average of 22.6 kWh. Nevertheless, this size is still sizable.

AEMO’s projections presume smaller average battery sizes—approximately 10 kWh today, rising to 20 kWh by 2050. Considering the current rise in household battery capacities, with many new systems already exceeding these estimations, it is feasible that substantial orchestrated capacity could be realised even with lower participation rates.