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Revolutionising the grid: ARENA invests in Adelaide’s second virtual power plant

Extreme heatwaves put tremendous pressure on the electricity grid as demand for energy outstrips supply. As temperatures soared above 40 degrees in Adelaide in February 2017, a blackout caused by load shedding left 40,000 households without power for over half an hour.

It’s at times like these that backup generation comes into play. Typically, this may require firing up a diesel-powered turbine or a gas plant, like the one at Pelican Point in South Australia, to meet the increased need for power

Another option is distributed energy resources (DER)-small-scale, locally generated power sources that can be amassed to form a power supply that is efficient, reliable, and cost-effective. One example is the virtual power plant (VPP), a network of home battery systems installed ‘behind the meter’

To help drive initiatives in this space, ARENA is investing $7.8 million in Simply Energy VPP—a $30 million development that will see 1200 Tesla Powerwall 2 home batteries sold to homeowners at a subsidised price. They will then be delivered to Adelaide households with rooftop solar systems to create the city’s second virtual power plant

“Simply Energy is proud to be able to deliver this innovative solution that helps our customers reduce their energy costs while also providing additional energy security in South Australia,” says Simply Energy CEO Carly Wishart

“We will work closely with South Australian Power Networks to give both networks and the market operator greater visibility of behind-the-meter batteries and the ability to use batteries to manage demand and manage network constraints, reducing network costs.

The ground-breaking Simply Energy project incorporates Australia’s first digital marketplace for renewable energy, known as Decentralised Energy Exchange, or deX

Developed by energy startup GreenSync, which was also funded by ARENA, deX allows users to buy and sell power generated by rooftop solar and stored in home batteries. After a successful pilot at two network locations in the ACT and Victoria, the Simply Energy VPP will deploy deX on a commercial scale for the first time

The scheme’s benefits include reduced electricity bills for users as they consume solar power generated on their rooftop and sell energy back to the grid via deX during peak, high-price periods. Commercial users will have access to a more reliable energy supply, and energy companies will benefit from reduced network costs and increased grid stability

The changing grid

Initiatives that rely on DER, like the Simply Energy VPP, signal a shift in Australia’s energy production from a centralised grid to a decentralised system incorporating more renewables

Traditionally, the electricity grid was a vertical system that distributed energy in one direction—from the power plant to consumer

Today, advances in technology mean that any house with rooftop solar and battery storage system can operate as an electricity generator. Link these households up, and you have a DER network that, when collectively managed, can both reduce demand and supply power during peak periods

Aggregated DER can also help maintain the grid’s stability as more energy comes from renewable sources like wind and solar, which can be intermittent

ARENA CEO Ivor Frischknecht says the project will further demonstrate how home batteries can be aggregated to help with grid stability, managing demand and better utilise rooftop solar to store surplus electricity

“This deployment of a further 1200 batteries into South Australia’s grid will deliver benefits to both individual customers and energy networks and demonstrate a potential model for how distributed energy resources can be operated at large scale in the future to help reduce energy prices,” she says

“This trial will also demonstrate the commercial benefits of including a virtual power plant into a distributed energy market platform, such as deX.”

What is demand response and how does it work?

Energy retailers can increase supply—to a point—but this can be a slow and imprecise process.

During summer heatwaves, electricity consumption spikes by as much as 46 per cent. Demand response sees users reduce consumption during these peak periods to help maintain supply and avoid outages

Users, often offered financial incentives, agree to reduce consumption during periods of high demand. In the event of a heatwave, this helps curb demand and stabilise the grid without having to rely on inefficient and costly sources of backup generation


What are distributed energy resources and how do they work?

According to the twentieth century model of energy distribution, large power plants fuelled by coal, hydro or gas, generated electricity that was distributed via a centralised grid. Power flowed in one direction from plant to end user.

Now the picture has changed. Advancing technology has diversified the grid, adding new sources of energy generation and two-way power flows. Utility-scale wind and solar farms are supplying an increasing proportion of our power. Many Australian households generate their own electricity via rooftop solar photovoltaic (PV) panels, which can then be stored using home battery systems. Demand response and smart meters are changing the way we consume electricity, allowing users to reduce consumption during peak periods to help balance the grid.

Reliability has emerged as a major concern as the grid struggles to guarantee supply to meet increasing demand, particularly during peak periods when expensive backup generation is required to keep the lights on.

Enter distributed energy resources, known as DER: small-scale units of local generation connected to the grid at distribution level.

The arrival of DER – a source of decentralised, community-generated energy – and its two-way flow of power is transforming the grid.

DERs can include behind-the-meter renewable and non-renewable generation, energy storage, inverters (electronic devices that change DC, or direct current, to AC, or alternating current), electric vehicles and other controlled loads (separately metered appliances like hot water systems). DER also comprises new technology like smart meters and data services.

Common examples of DERs include rooftop solar PV units, natural gas turbines, microturbines, wind turbines, biomass generators, fuel cells, tri-generation units, battery storage, electric vehicles (EV) and EV chargers, and demand response applications. These separate elements work together to form distributed generation.

DER penetration is growing every year. The Electricity Network Transformation Roadmap (ENTR), a joint publication by Energy Networks Australia and the CSIRO, projected that over 40 per cent of energy customers will use DER by 2027. By 2050, that figure will grow to more than 60 per cent.

Home appliances such as air conditioning units can contribute to the makeup of DER


The increasing penetration of DER into the grid comes with a raft of benefits and opportunities for the power system and its participants.
Affordability is one. Customers with access to DER assets can expect to pay less for electricity as they sell power back to the grid or are compensated for allowing their storage systems to help stabilise the grid, especially during peak periods.

Reduced network costs could also lead to a fall in the overall cost of energy. One study found that investment in DER could reduce network expansion costs by nearly 60 per cent by 2050.

Reliability is another benefit. In areas where there is a high reliance on variable energy resources (VER) like wind and solar, DER can be deployed to help balance the grid and improve its reliability, either reducing demand or providing energy to help smooth out intermittent supply.

A limiting factor is hosting capacity, or the amount of DER which can be connected to a distribution network and operated within its technical limits. DERs can be incorporated into the grid where no threats to safety, reliability or other operational features exist and no infrastructure upgrades are required. In many cases, however, grid modernisation is necessary to safely integrate DERs into the network.

California offers a useful case study in DER development. The state is a leading solar producer: rooftop solar penetration is more than 7 percent, and in 2015, 10 percent of California’s energy came from a combination of solar thermal, utility-scale PV and rooftop PV. By 2030, 50 percent of the state’s power will be supplied by VER (wind and solar).


ARENA is allocating more than $12 million in funding to optimise investment, improve system performance and reduce technical, market, and regulatory barriers to increased uptake of DER in Australia.

The funding will be invested in network hosting capacity technology and demonstration projects to develop new ways to understand and manage the impacts of high DER penetration in different parts of the distribution network. This will allow networks to connect more DER (such as rooftop solar PV panels) cheaper and faster while reducing costs and operating within the technical limits of the power system.

Another slice of funding will be allocated to new studies or models that contribute to increasing the value, capacity or efficiency of DER, or reducing costs or risks associated with its development and application.

These studies will help networks, retailers, government and system operators understand more about the technical and commercial challenges of managing a grid with a high penetration of DER. This could include identifying new ways of managing energy flows, better understanding how consumer behaviour might influence DER take-up or developing local or time-of-day incentives to encourage the use of DER.

For further information and to apply, visit the DER funding page