Virtual Power Plants (VPP) explained: How they work in Australia

A virtual power plant, or VPP, connects thousands of home batteries and other energy devices through software so they can act together like a single power station.

If you own a battery, or you are weighing one up, a VPP is one of the main ways to earn money from it, and the ability to join one is also built into the rules for the federal battery discount.

This guide explains what a virtual power plant is, how it works day to day, what it pays, which government support applies, what to check in the contract, and how to join one.

Quick facts

• A virtual power plant is a group of small energy resources, usually home batteries, that a provider controls with smart software so the group behaves like one power plant, according to the Clean Energy Regulator.
• To join, you need a compatible battery and inverter, a reliable internet connection and, with most providers, a smart meter and an eligible electricity plan.
• Joining is optional. Every grid-connected battery that earns the federal discount must be technically capable of joining a VPP, but the Clean Energy Regulator says you do not have to join one.
• Rewards come as sign-up credits, yearly bill credits, payments for each VPP event or higher feed-in tariffs. AGL, for example, advertises a $200 welcome credit, $80 a year in bill credits and $1 for every kilowatt-hour (kWh) that moves in or out of your battery during a VPP event.
• The NSW Government says households can earn up to $300 a year in bill credits or direct payments, and that joining is free if you already own a compatible battery.
• From 1 July 2026, NSW batteries of up to 50 kWh can qualify for a one-off state incentive for connecting to a VPP, which can be claimed once per electricity meter.
• The trade-off is control. Your provider decides when part of your battery charges or discharges, within the limits written into your contract.

What is a virtual power plant?

A virtual power plant is a network of small, distributed energy resources, such as home solar batteries, that are linked and controlled by smart software so that together they behave like one power plant.

The plant is virtual because there is no single site. The output comes from batteries spread across thousands of homes and businesses.

The Australian Renewable Energy Agency (ARENA) describes how aggregating thousands of home batteries lets an operator send stored energy into the grid very quickly to correct frequency and voltage problems and keep the network stable. Households are usually rewarded through direct payments or bill credits.

The organisation running the VPP is called the operator or provider. It can be your electricity retailer or a separate aggregator, and the Clean Energy Regulator notes that a VPP is an agreement between you and the operator, not with the regulator.

Batteries are the main asset today, but a VPP can include other devices. ARENA reported a 2021 trial by ActewAGL that used 51 Nissan Leaf electric vehicles with vehicle-to-grid capability, each with a 40 kWh battery, to support the grid.

Origin says its Origin Loop VPP coordinates solar batteries, air conditioners, hot water systems, smart plugs and EV chargers. EnergyAustralia runs a Sun-Soaked Water project that adds electric hot water systems to its VPP so they absorb excess solar during the day.

How does a virtual power plant work?

A VPP follows the same basic cycle whichever provider runs it.

1. Your battery connects to the provider. The NSW Government says a compatible battery needs no extra equipment because the provider manages the VPP remotely, but you do need a reliable internet connection and an inverter that can be controlled remotely.
2. The provider watches demand and prices. Origin says Origin Loop uses weather forecasts, usage data, market trends and historical consumption patterns to forecast demand.
3. The provider calls a VPP event. A typical trigger is a hot evening when many households run air conditioners at once. A VPP event is any time your battery charges from or discharges to the grid, and it can also include periods when your provider holds charge in your battery. Each event typically lasts less than 10 hours.
4. The battery also soaks up surplus solar. VPPs help balance the grid by absorbing excess solar during the day and discharging when demand and prices rise in the evening.
5. You are paid. Providers may do this differently, but the result is the same. AGL calculates credits across all events in the year and pays them at the end of your 12-month period or contract. EnergyAustralia says its Battery Ease plan gives bill credits every month, whether or not it accesses your battery.
6. You track the results. The NSW Government notes that you can usually monitor performance and payments in your provider's app or website.

AGL's own worked example shows how event credits work. If your battery exports 10 kWh during an event and AGL pays $1 per kWh, you earn $10 in bill credits. If you then need to buy an extra 10 kWh from the grid at 40 cents per kWh, that costs $4, so your net gain is $6.

Operators can also sell the combined capacity into markets. ARENA says operators can use household batteries to respond to energy shortfalls, provide frequency control ancillary services (FCAS) and support the network.

Momentum Energy describes FCAS as markets run by the Australian Energy Market Operator (AEMO) in which assets stand by to respond quickly when the grid is out of balance, and notes that the spot price in the National Electricity Market updates every five minutes.

The South Australian Government says the operator of SA's VPP uses wifi and software to charge and discharge home batteries and trade that energy on the National Electricity Market.

Why Australia is building virtual power plants

Rooftop solar produces most of its power in the middle of the day, when demand is low, and output falls away just as households switch on appliances in the evening.

More than 3.6 million Australian homes have solar, and that this pattern pushes wholesale prices down and strains the grid at midday, then pushes prices up in the evening.

VPPs address both ends of that problem. Batteries absorb surplus solar during the day and release it at the evening peak. The Clean Energy Regulator lists the benefits as potential financial gains from higher feed-in tariffs, lower costs for the electricity grid and better reliability, better use of renewable energy and improved resilience in emergencies.

There is also a system-wide financial case. The Australian Energy Market Commission (AEMC) says its modelling shows that letting these resources take part in the market could deliver $834 million in cost savings between 2027 and 2050, and its reforms include a $50 million incentive scheme for early participants.

South Australia's VPP shows the grid-support role in practice. The SA Government says it was the first VPP in Australia to help stabilise grid frequency, including after a power station trip in Queensland in October 2019 and during interconnector outages between South Australia and Victoria in November 2019, January 2020 and November 2022.

What types of virtual power plant are there?

Providers run VPPs in several different ways, and the differences affect how much control you keep.

Retailer VPPs for a battery you already own

Most residential VPPs are run by electricity retailers for customers who already have a battery. AGL requires you to be on an AGL electricity plan or to switch to one.

Origin lets you connect an existing battery to Origin Loop and says the offer includes high battery feed-in tariffs and sign-up credits, provided your battery and inverter are compatible.

EnergyAustralia's Battery Ease plan, which is available in NSW, pairs a competitive feed-in tariff with monthly bill credits and automatic optimisation of when your battery charges and discharges. EnergyAustralia adds that joining its VPP may also make you eligible for a rebate under the NSW Peak Demand Reduction Scheme.

Wholesale-linked automation

Amber says it does not run a VPP in the traditional sense. Instead, its SmartShift technology charges your battery when wholesale prices are low or negative and discharges it when prices spike. Amber says it prioritises your home's energy needs, has no lock-in contracts, and that its Amber for Batteries product qualifies as a VPP under current government battery rebate schemes. It says wholesale feed-in prices can reach $19 per kWh, or $21 per kWh in South Australia, which are peak-price outcomes rather than everyday rates. Amber operates in Victoria, South Australia, NSW, the ACT and south-east Queensland.

Bundled battery and VPP packages

Some installers sell a VPP as part of a battery package. Plico says its VPP is included in its clean energy package, which covers a battery, an inverter and solar panels, with no upfront cost on standard installations and a 10-year warranty. Plico also points out that bring-your-own-battery VPPs come without a battery discount and may not accept your battery model.

Community batteries and public housing

EnergyAustralia offers Community Battery Ease in select NSW postcodes, where local community batteries connect to its VPP and eligible customers get electricity rates with or without solar. South Australia's VPP places batteries in public housing, which is covered below.

How much can you earn from a virtual power plant?

The amount depends on your provider, your battery size, your state and how often the provider uses your battery. The Clean Energy Regulator says your savings depend on which VPP program you join and how often energy is shared from your battery into the VPP network.

Providers reward you in four main ways.

• Sign-up credits or incentives. AGL advertises a $200 welcome credit. In NSW, a government incentive can be added on top of provider offers.
• Yearly or monthly bill credits. AGL pays $80 a year in bill credits, made up of $20 each quarter, for staying connected. EnergyAustralia pays monthly credits on Battery Ease.
• Payments for VPP events. AGL pays $1 for every kWh your battery charges from or discharges to the grid during events, and it limits total charging and discharging to 250 kWh a year. On AGL's own figures, that puts the ceiling on event credits at about $250 a year, before the $80 bill credit.
• Higher feed-in tariffs. AGL says VPP members can also join its Battery Rewards Plan, which advertises 28 cents per kWh in feed-in credits for exports between 5pm and 9pm. See our solar feed-in tariffs guide for how export rates work.

The NSW Government puts the typical top end at up to $300 a year in bill credits or direct payments.

Providers are not equally generous, and the headline number is not the same as your net gain. AGL's example above shows that extra grid electricity you buy after an event reduces what you keep.

South Australia's public housing VPP works differently. Participating tenants get a battery at no cost and an electricity rate set 26% below the Default Market Offer. The SA Government says a household with model usage of 4,000 kWh a year could save up to $608, including GST, in 2026-27, and that actual savings depend on usage and rates.

Joining costs nothing if you already have a compatible battery, according to the NSW Government. The cost that matters is the battery itself, which is covered next.

What government support is available?

Support comes in two layers: a federal discount on buying the battery, and state incentives for connecting it to a VPP. For other rebates that may apply to your household, see our electricity rebates guide.

Federal: the Cheaper Home Batteries Program

The program gives an upfront discount on new batteries through small-scale technology certificates (STCs). The Clean Energy Regulator sets these requirements:

• The battery must be new, between 5 and 100 kWh in nominal capacity, and on the Clean Energy Council approved list.
• It must be installed with a solar system of no more than 100 kW by an accredited installer.
• If it is grid-connected, it must be technically capable of participating in a VPP.
• It must stay at the property until the end of 2030 or the end of its warranty, whichever is later.

STCs can be claimed on the first 50 kWh of usable capacity. Since 1 May 2026, the STC factor applies in tiers: 100% for the first 14 kWh, 60% for capacity above 14 kWh and up to 28 kWh, and 15% for capacity above 28 kWh and up to 50 kWh. The factor is 6.8 for installations from May to December 2026, then steps down twice a year, to 5.7 for January to June 2027, 5.2 for July to December 2027, and 2.1 for July to December 2030.

The regulator says the settings are designed to keep the discount at around 30% of the upfront installation cost, and the discount is set by the factor on the installation date.

The VPP requirement is about capability, not participation. The Clean Energy Regulator says you do not have to join a VPP, though additional upgrades may be needed if you join later. It also advises checking whether you can combine the federal discount with state programs, because some state programs may not be available if you claim STCs.

NSW: the VPP incentive

The NSW Government pays an incentive for connecting a battery to a VPP. Households and small businesses in NSW may be eligible if they meet these conditions:

• The battery is between 2 and 50 kWh, following an eligibility update on 1 July 2026.
• Your chosen provider offers the incentive.
• Your electricity retailer supports VPPs, which may mean switching retailer, because not all retailers are compatible.

The upfront amount depends on the battery capacity you make available to the grid, up to 28 kWh, and on the provider and contract. There is no fixed dollar figure. The incentive can be claimed once per National Metering Identifier (NMI), which is your electricity meter, and it may be paid upfront, in instalments or as a bill credit. You must sign a nomination form to receive it.

Victoria, South Australia and Western Australia

In Victoria, Solar Victoria explains that you need solar panels and a battery, and that you should check your system's compatibility with the VPP program you want to join. Its page says Solar Victoria is no longer taking applications for interest-free solar battery loans.

In South Australia, the state's VPP is aimed at public housing tenants and is now owned and operated by AGL, which took over from Tesla in 2025, according to the SA Government.

In Western Australia, which has its own electricity market, Western Power has described VPPs as still in early stages, and pointed to Project Symphony, a Perth VPP project run with Synergy and AEMO and supported by ARENA. That article was last modified in October 2023, so check current WA offers with providers directly.

What do you need to join a virtual power plant?

Requirements vary by provider, but the same items come up repeatedly.

• A compatible battery and inverter. AGL lists Tesla Powerwall 2 and Powerwall 3, LG RESU 7H, 10H and 16H, the SolarEdge Home Battery, and selected AlphaESS, Sigenergy and Sungrow models. Other providers have different lists, so confirm your exact model.
• A reliable internet connection. The provider needs it to control the battery. The SA Government says SA VPP systems use less than 2 GB of data a month.
• A smart meter. AGL requires one and says it can arrange installation if you do not have one.
• An eligible electricity plan. AGL requires an AGL electricity plan or a willingness to switch. The NSW Government says not all retailers work with VPPs.
• A solar system. Most residential VPPs assume your battery is paired with rooftop solar.

The NSW Government suggests talking to your provider to confirm that your battery qualifies before you sign anything.

What are the downsides of a virtual power plant?

The main downside is that you hand some control of your battery to someone else. These are the questions to settle before you sign.

• How much of the battery do I keep? AGL commits to leaving up to 20% of the battery in reserve for backup power. Solar Victoria suggests asking whether there is a minimum state of charge, for example no lower than 20%, and how many management events the provider can run each year.
• How will it affect my warranty? The Clean Energy Regulator advises understanding how battery discharge rates affect your system's warranty. AGL notes that each manufacturer's warranty treats VPP participation differently, so read yours.
• Am I locked in? Terms range from no lock-in to multi-year contracts. Amber says it has no lock-in contracts. The NSW Government says providers give a cooling-off period after you sign, during which you can change or cancel the arrangement.
• How am I paid, and can the rate change? Amber suggests asking whether you get a flat rate or a market-linked price, whether you will know when your battery exports, and whether you can opt out or pause participation.
• Do I need to change retailer? Many VPPs require it, which changes your electricity rates as well as your battery arrangement.
• What happens if something goes wrong? The Clean Energy Regulator says it does not get involved in contracts between you and your retailer or VPP operator, so read the complaint process in your contract.

The risk of a drained battery is the most notable risk. Some customers have reported batteries being emptied during peak periods and then having to buy energy back at higher prices, and that retailers have denied these claims.There are also reports that frequent cycling can shorten battery life. Treat these as points to ask providers about, not as established findings.

Virtual power plant or wholesale-linked plan?

A VPP is not the only way to earn from a battery. A wholesale-linked plan passes through market prices so you can charge when electricity is cheap and export when it is expensive, and some providers automate this.

Flow Power says it does not operate a VPP and instead rewards use that follows wholesale prices, with boosted feed-in tariffs that encourage exports when the grid needs them. It argues that a battery owner on a flexible tariff does not necessarily need a VPP to benefit.

Amber takes a similar approach with automation and says its product still qualifies for VPP-linked rebate schemes.

The practical difference is exposure to price swings. On a standard VPP with set credits, your reward is relatively predictable. On a wholesale-linked plan, your costs and earnings move with the market, which can pay more in a price spike and less when prices are low or negative. Choose the model that matches how much variation you are comfortable with and how much you want to manage your battery yourself.

How to join a virtual power plant

The NSW Government sets out a process that applies to most providers.

1. Check your battery and inverter. Ask each provider whether your exact model is on its compatible list.
2. Compare providers. The NSW Government says each provider sets different prices for your excess electricity, different conditions for when they can access your battery, and different limits on how much capacity they can use, so compare more than one offer.
3. Confirm the retailer requirement. Some VPPs require you to be on the provider's electricity plan.
4. Read and sign the contract. In NSW, the provider also gives you a nomination form, which you must sign to receive the state incentive.
5. Use the cooling-off period. You can consider the terms and ask to change or cancel the arrangement before it ends.
6. Complete onboarding. After cooling off, the provider sends an online form, and once your details are confirmed you receive the incentive.
7. Monitor your results. Use the provider's app or website to check events, payments and battery settings.

If you need to compare electricity plans as part of joining, start comparing with Utiity Club.

Virtual power plants for businesses

Businesses can join VPPs too. The NSW incentive covers small businesses with eligible batteries, and larger sites can use commercial programs.

Momentum Energy markets a VPP run by Hydro Tasmania for large businesses in Victoria, Queensland, South Australia, NSW and the ACT that have controllable assets.

Eligible assets include batteries, backup generators, HVAC systems, data centres, cold stores, EV fleets, pumps and electrolysers.

The business sets operating parameters so core operations come first. Hydro Tasmania keeps a small share of the revenue, and the business also pays an annual fee for access to the VPP platform. Momentum offers a free backcast, which uses historical data to estimate what a site could have earned over the past year or two.

Community and public housing VPPs

South Australia's VPP was unveiled in 2018 and is described by the state as Australia's largest virtual power plant. The SA Government says tenants of more than 6,500 SA Housing Trust homes already benefit, Tesla designed and developed the VPP, and ownership passed to AGL in 2025.

Eligible tenants receive a battery, with or without solar, installed and maintained at no cost, and pay a rate 26% below the Default Market Offer for model usage of 4,000 kWh a year. If a tenant leaves the program, the system is reconfigured so the property no longer benefits and the energy goes to the grid instead.

Photo by Nicolas HIPPERT on Unsplash