South Australian Virtual Power Plant

South Australian Virtual Power Plant could be 30% cheaper than grid power, says report

Tesla and the South Australian government announced in early February that they were planning the largest “virtual power plant” (VPP) in the world. The VPP brings together 50,000 homes, each equipped with solar panels and lithium-ion battery energy storage, to function as a unified power generator.

A new report from Australian clean energy publication Reneweconomy shows just how financially attractive the proposal has become. In 2016, Reneweconomy stated that in some cases solar-plus-storage costs were on par with grid power – now, they can be up to 30% cheaper.

The cost savings are especially important for both Australia and the Tesla project in question. Electricity rates across the country and the state of South Australia are some of the highest in the world, and the first phase of households participating in the VPP project are Housing Trust properties set aside for lower-income residents.

The total generating capacity of Elon Musk’s VPP project is 100MW, with 129 MWh of battery storage. To make up this total, a 5 kW solar panel array and Tesla Powerwall 2 lithium-ion home battery will be deployed in each individual home.

The reason for the sharp drop in price between 2016 and today is due to the reduced cost of solar installations and storage technology as well as more efficient energy storage usage. Total costs for the virtual power plant project are estimated to be approximately $800 million – Musk is betting that the energy savings will be worth the upfront costs.

South Australian power costs are so high that residents have been turning to solar and battery storage at unprecedented rates. Last year, 20% less electricity was bought from the grid than just 7 years ago as more and more people rely on self-generation and self-consumption.

While this level of difference may be exclusive to Australia and its dizzyingly high electricity rates, it signals the shape of things to come.

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