NSW boosts virtual power plant incentives as household battery uptake poised to surge

Households and small businesses that install a battery and join a virtual power plant will be eligible for increased subsidies to shore up the grid. This is on top a federal rebate scheme worth up to 30pc from July 1.

The NSW state Labor government will nearly double financial incentives for households and businesses that connect their batteries to a Virtual Power Plant (VPP), in a bid to shore up grid reliability and maximise the benefits of a looming national battery boom.

Households and small businesses that install a battery and join a VPP will now be eligible for payments of up to $1500 – up from about $800 – depending on the size of the battery. The government said the increase to incentives, which will be rolled out from July 1 for those who subsequently purchase and install their battery, would be funded by abolishment of its battery scheme made redundant by a federal Labor $2.3bn rebate that is expected to cut battery costs by up to 30 per cent from next month.

A Tesla Powerwall in action. Picture: AAP IMAGE / Troy Snook

The policy reset is designed to address persistently low participation in VPPs, even as battery uptake is set to accelerate under the Albanese government’s bonuses.

VPPs allow batteries to be aggregated and controlled remotely, so they can discharge energy into the grid during peak periods and improve reliability.

VPP participants are not physically connected, but rather loosely joined by an operator.

Energy companies like Origin and AGL will pool VPP participants across their customer base.

While more than four million homes now have rooftop solar, battery installations lag far behind as prohibitively high costs means there are fewer than 200,000 household batteries in service, the Clean Energy Council estimates.

Of those, energy consultancy SunWiz estimates just 15 per cent are connected to a VPP.

NSW Energy Minister Penny Sharpe said increasing VPPs are critical for future proofing the grid.

“We know the best benefit for the grid comes when these batteries are linked together, and NSW wants to be world-leading in encouraging households and small businesses to be a part of that,” said Ms Sharpe.

The shift underscores a broader challenge confronting Australia’s energy transition: while solar has seen runaway success, the integration of storage remains patchy.

The federal rebate programme is expected to see a spike in demand for batteries and the additional allure of the NSW scheme could be a boon for the likes of Origin and AGL – both of which are gearing up for the rise of batteries.

For governments, however, lifting VPP participation could be key to smoothing Australia’s transition away from fossil fuels. Labor has set a national target of 82 per cent renewable generation by 2030, a goal that will require a rapid build out of utility-scale wind and solar projects – but also significant investment in firming capacity.

If enough household batteries are orchestrated through VPPs, they could act as a virtual peaking plant, easing pressure on the system and reducing the scale of new grid infrastructure needed.

Increased battery deployment would also help absorb surplus solar generation during the day, reducing volatility in wholesale electricity markets. With solar now so widespread, prices regularly plunge below zero during daylight hours, forcing coal generators to sell at a loss and eroding their profitability.

While that dynamic is hastening coal’s exit from the system, it has also raised the risk of reliability gaps. NSW last year extended the scheduled closure of Eraring – the state’s argest coal power station – by at least two years, citing a lack of adequate replacement capacity.

But paying households – already wealthy enough to afford a battery – comes with political sensitivity. While proponents insist increasing the energy transition will be beneficial for all, critics oppose the suggestion that poorer taxpayers – which do not enjoy the benefits of solar and batteries that lower electricity bills – are having to pay for the installation of new infrastructure.

Originally published as NSW boosts virtual power plant incentives as household battery uptake poised to surge