The AEMC proposes Virtual Power Plants be allowed to compete with big generators to drive down prices
The proposal would allow for other small-scale, price-responsive resources like community batteries, flexible large loads, and backup generators in the energy market.
The Australian Energy Market Commission (AEMC) has put forward a draft paper proposing that Virtual Power Plants (VPPs) be allowed to compete directly with large-scale generators in the energy market. These changes could lead to substantial cost savings, reduced emissions, and lower energy prices for consumers.
Currently, there is no way for the market to predict how these smaller resources will respond to daily price fluctuations, which poses operational challenges for the Australian Energy Market Operator (AEMO). Addressing this, the AEMC's draft determination suggests that by fully integrating these resources, energy, security, and reliability services could be provided more efficiently, reducing the need for large-scale generation and storage infrastructure.
Anna Collyer, AEMC Chair, explained, "Fully integrating these resources will allow energy, security, and reliability services to be provided more efficiently. Over time, this integration will reduce the need for large scale generation and storage infrastructure, ultimately decreasing costs and emissions for all consumers."
Recent modelling suggests that VPP market participation could save $834 million between 2027 and 2050. To encourage early involvement, the draft determination includes a mechanism for payments to early entrants and calls for the Australian Renewable Energy Agency (ARENA) to consider a trial grant program.
Collyer added, "By incentivising early participants, we're accelerating the transition to a more responsive, efficient, and sustainable energy market."
The AEMC is now seeking feedback from stakeholders on this draft determination, with the consultation period open until 12 September. A final decision is expected by the end of the year.
