Who has VPP bragging rights?

Hey Reader, welcome to The Energy's weekly data newsletter. This week we explore the growing competition in batteries coming from the smaller end of the market.

Competition in VPPs

Last week Australia’s competition regulator celebrated the rise of small energy retailers exerting competitive pressure on the “big three” integrated power companies in the market for virtual power plants (VPPs) or small batteries “under orchestration”.

Australian Competition and Consumer Chair Gina Cass-Gottlieb said small retailers had captured more than three-quarters of the VPP market and “we are hoping this continues, rather than defaults to the current big three".

If the big three don’t have bragging rights in this vital emerging market for energy services, who does?

It’s important to know because small battery sales have lit up since the commencement of the Albanese government’s subsidy program, which rebates 30% of the cost of a VPP-ready battery up to 50 kilowatt hours.

In the last month householders and small business owners have signed up for batteries at an aggregate rate close to historic — though not recent boom-time — levels of final investment decisions on utility-scale batteries.

Small batteries can be operating, and cutting grid emissions, within weeks of a contract being signed, thanks to Australia’s world-beating army of highly efficient installers.

For a government whose climate targets are being derailed by a go-slow in major project approvals and FIDs, the surge in batteries and VPPs maximising the benefits of rooftop solar is something to embrace.

*Big energy retailers boast large VPPs, but only a fraction of the capacity is represented by home batteries in VPPs*

Origin Energy and AGL Energy, the largest gentailers, caught the VPP vibe years ago and now boast large fleets of resources under orchestration.

Origin disclosed 1.454 gigawatts of capacity connected to their VPP in their annual results last week (now 1.5GW), up from 1.385 GW a year earlier, and AGL 1.49 GW. China Light & Power-owned EnergyAustralia — the third member of the triumvirate — was late to the party and is well behind.

A VPP is a collection of distributed energy assets — from solar panels and batteries to EV chargers and “controlled loads” — that can be orchestrated or turned up and down to maximise benefits for customers, suppliers and the grid. The expressions are often used interchangeably.

But the numbers from the big three don’t tell us much at all about distributed batteries under orchestration, or in VPPs.

That’s because they include other assets, such as controlled load hot water systems, EV chargers and industrial & commercial demand response. This last category accounts for the bulk of AGL and Origin’s claimed VPP capacity. AGL’s includes the Tomago and Portland aluminium smelters — the largest consumers of power in their respective states. Origin's includes big customers Coles and Sydney Water. And they don’t break their aggregate VPP numbers down.

These other assets are important too, but home batteries are of special interest now because their sales are booming thanks to the battery subsidy and they are poised to become a much bigger thing.

*If the rate of battery installs since July 1 is sustained, home battery capacity will double and the annual rate will increase four to six fold. Source: Sunwiz*

This chart, based on data from Sunwiz, shows how batteries took off very slowly when they first came onto the market because they were too costly and the economics didn’t stack up.

Sales had started to shift up a gear as rooftop solar boomed, flooding the grid during the day, and feed-in tariffs for solar households plunged. Batteries can store solar energy to be used later in the day — avoiding peak tariffs by self-consuming, or exploiting peak tariffs by injecting power into the grid when it’s in short supply as part of a VPP.

The rate of installs had increased to 852 MWh across 72,500 premises by calendar 2024 (Sunwiz data is for calendar years). A rough estimate of 550 MWh from 41,000 households for the six months to June 30 can be inferred for comparison purposes, says Sunwiz boss Warwick Johnston.

On 1 July the government’s subsidy lit the spark, and a further 532 MWh — more than half the figure for the whole of 2024 — was signed up in roughly six-and-a-half weeks to August 14, according to Tristan Edis of Green Energy Markets. And the rate is still accelerating — over the four weeks from July 16 to August 14, 447 MWh of batteries were signed up.

It's early days but if those rates are sustained, the next year could see 4200 MWh to 5400 MWh of small batteries installed. That would not just exceed the cumulative total to the end of June 2025, it would represent a four to sixfold increase in the annual rate of installations.

That would put home batteries in the same ballpark as grid scale batteries before the boom of the last couple of years. Home batteries look set to make a big contribution to grid stability and optimising rooftop solar.

At least 1000 MWh of grid scale batteries have been committed in each of the last nine quarters.
Source: Clean Energy Council

Bragging rights

Amber Electric, one of the upstart retailers celebrated by Cass-Gottlieb, claims them.

As at 18 August, Amber had 15,000 automated home batteries with 237 MWh of energy and 89 MW of power to train at the grid, and is on track to pass 100 MW in the coming weeks, according to co-founder and CEO Dan Adams.

That’s more than doubled in each of the past two years, and Adams said two weeks ago he expected to pass 500 MW within two to three years.

“We are confident that Amber is now running the largest fleet of automated home batteries in the country,” Adams says. For corroboration, he points to data from MAC Trade Services on a NSW battery incentive scheme showing Amber has 68% of that segment, up from 52% previously.

Amber charges customers a monthly fee and trades their batteries (and EV chargers and other “consumer energy resources”) in the wholesale market, selling high and buying low to maximise returns and minimise bills.

That means every customer is signed up to a VPP, policymakers’ preferred outcome. Historically only about a fifth of battery customers have signed up for VPPs, although AGL says 93% of its battery customers are joining its VPP.