What Is a Virtual Power Plant (VPP) and How Does It Work?

As electricity prices rise and more Australians install solar panels and home batteries, a new way to save money and support the grid is becoming popular—Virtual Power Plants, or VPPs. You might’ve heard the term thrown around by energy providers or battery companies, but what exactly is a VPP, and how can it help you save on your electricity bill?

This guide will break it down and show you how it works.

What Is a Virtual Power Plant (VPP)?

A Virtual Power Plant (VPP) is a network of homes and businesses that are connected through a smart system, working together like one big power plant.

Each participant has things like:

• Solar panels to generate power

• Batteries to store energy

• Smart meters or AI to manage when to use or share electricity

Instead of one big coal or gas plant supplying energy, a VPP brings together lots of smaller energy systems and controls them through cloud software. This helps make the energy grid more stable, efficient, and cheap to run.

How Does a VPP Actually Work?

VPPs operate by integrating various Distributed Energy Resources (DERs)—such as rooftop solar panels, battery storage systems, electric vehicles, and smart appliances—into a unified network. This integration allows for coordinated energy production, storage, and consumption, optimising the balance between energy supply and demand.

Key Components of VPPs:

1. Energy Generation: Utilising renewable sources like solar and wind to produce electricity.​
2. Energy Storage: Storing excess energy in batteries for later use.
3. Energy Consumption: Managing the demand side by controlling smart appliances and industrial processes.​
4. Centralised Control System: An intelligent platform that monitors and optimises the performance of all connected DERs.​

By leveraging advanced communication and control technologies, VPPs can respond dynamically to grid conditions, dispatching stored energy during peak demand or absorbing excess energy during low demand periods.

Think of a VPP as a community energy team. Each home or business in the VPP plays a part by either:
✅ Sending excess solar power to the grid when demand is high
✅ Using stored energy during peak times when prices are high
✅ Charging their battery when energy is cheap

Let’s break it down with an example.

A Day in the Life of a VPP – Real Example

Name: Mark
Location: Adelaide, SA
System:

• 6.6kW rooftop solar system

• 10kWh home battery

• Enrolled in his electricity retailer’s VPP program

Daily Solar Generation:
During the day, Mark’s solar panels generate electricity. His home uses what it needs first, and any excess goes into his battery.

VPP Controls His Battery:
Because he’s enrolled in the retailer’s VPP, the energy company can remotely access his battery and use stored energy when the grid needs extra support (usually in the evening).

Grid Events:
On hot days when air conditioners drive up demand, the VPP discharges energy from Mark’s battery to support the grid. Mark is compensated with credits on his electricity bill.

Set and Forget:
Mark doesn’t need to monitor anything—his retailer manages the system and notifies him when his battery is used in a grid event.

Benefits of Joining a Virtual Power Plant

1. Lower Your Electricity Bills

VPPs help you use more of your solar power and sell excess energy when prices are high. This means bigger savings.

2. Earn Money or Credits

You can get paid for sending energy back to the grid—especially during high-demand events.

3. Support a Greener Grid

Using stored solar power and sending clean energy to the grid helps reduce reliance on coal or gas.

Redx AI vs Traditional VPP – What’s the Difference?

While both Virtual Power Plants (VPPs) and Redx AI help you save on electricity bills, Redx AI goes a step further. It doesn’t just connect your battery to the grid—it actively trades energy based on real-time wholesale prices, unlocking more value from your system.

Standard VPPs – A Good Start

Most VPPs operate using set rules and are controlled by energy retailers or networks. They focus on helping the grid when needed, and in return, participants receive credits or small payments.

✅ Helps the grid
✅ Some bill savings
❌ Limited control
❌ No real-time optimisation

Redx AI – Smarter, More Profitable Energy Use

Redx AI is more than just a VPP. It gives you full automation and real-time energy optimisation.

Here’s what makes it different:

🔍 Access to Wholesale Energy Prices
Redx AI monitors the National Electricity Market (NEM) in real time. It knows exactly when energy is cheap or expensive and can make smart decisions on when to charge, use, or sell electricity.

💸 Energy Trading for Profit
Because Redx AI has access to wholesale pricing, it can buy energy when it’s cheap (sometimes even negative pricing) and sell it back when prices spike—turning your battery into a money-making asset.

⚙️ Fully Automated
No need to lift a finger. Redx AI automatically manages your battery based on price forecasts, solar output, and your energy habits.

📈 Bigger Savings & More Earnings
Redx AI customers don’t just save—they often end up with credits on their electricity bills, and in some cases, even make money from energy trading.

Summary Table – Redx AI vs Traditional VPP