The Australian Energy Market Commission (AEMC) has approved reforms allowing virtual power plants (VPPs) to compete directly with traditional power generators starting in 2027. The move aims to reduce energy prices, lower emissions, and improve market efficiency by enabling VPPs, aggregated batteries, and industrial demand response to participate in the wholesale electricity market.
Currently, the lack of mechanisms to predict how these resources will respond to price fluctuations has created challenges for the Australian Energy Market Operator (AEMO). As the rollout of batteries and electric vehicles accelerates, these challenges are becoming more significant and costly.
The new reforms introduce a “dispatch mode” that allows retailers to bid resources such as household batteries, backup generators, and large energy users into the market. This will improve flexibility and help balance supply and demand. AEMC’s modeling estimates that these changes could result in $834 million in savings between 2027 and 2050, and a $50 million incentive scheme will support early participants.
The reforms are expected to make the energy market more efficient, reduce system costs, and lower energy prices without requiring consumers to change their behavior. With implementation set for 2027 and incentives available from 2026, this initiative marks a significant step towards a more sustainable and cost-effective energy future.
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