Early in February 2018, the South Australian government announced they had signed a deal will Tesla, to deploy the largest virtual power plant in the world. The project will use solar photovoltaic systems and Tesla Powerwall batteries across 50,000 households, using information technologies to aggregate their capacity and operate them like a single utility-scale power plant.
This project could be ground breaking for the Australian electricity sector, since it would demonstrate that a reliable power supply is possible with distributed generation and energy storage systems in homes and businesses. In addition, by generating and storing electricity at the point of consumption, the transmission burden on the power network is reduced. Any innovations that reduce dependence on the network are welcome in Australia, since transmissions and distribution costs represent nearly half of the power bill paid by homes and businesses.
To deploy the virtual power plant, Tesla will equip 50,000 households with solar power and battery systems. Each photovoltaic array will have 5 kW of capacity, and each Powerwall unit can store 13.5 kWh of electricity. In addition, the Powerwall can deliver a continuous power output of 5 kW and a peak output of 7 kW. When the total capacity is added together, the project specifications are impressive:
Tesla recently delivered the Hornsdale Power Reserve, the largest battery in the world as of early 2018, with 100 MW of power and 129 MWh of storage capacity. The system has already demonstrated its capacity to respond to faults in a matter of milliseconds, and it was able to earn over one million dollars in a few days through automated electricity trading. However, the proposed virtual power plant is of a much larger scale, and is characterised by using distributed assets instead of a centralised system. Since the underlying technology of Powerwall batteries is the same used in the Hornsdale Power Reserve, the project is very promising.
Another advantage of the virtual power plant is that it will equip multiple households with electricity storage, making them less reliant on the power network. Residential and commercial solar power systems often produce surplus electricity around noon, and it must be exported to the power network in exchange for a feed-in tariff that is much lower than the retail kWh price. On the other hand, with batteries it is possible to store that electricity for later, allowing users to save the full price of each kWh generated.
The Tesla virtual power plant will receive $2 million as a government grant, plus a $30 million loan from the Renewable Technology Fund. All installations will be managed through a smart platform, and the project cost will be recovered by selling the electricity generated.
The first step of the virtual power plant will cover only 1,100 households, who will get the system for free, expanding to 24,000 households in a second stage. The project is expected to reach 50,000 households by 2022, and at this point it will generate enough electricity to cover 20% of total consumption in South Australia.
For participating homeowners, electricity expenses are expected to decrease by more than 30%. This is a very attractive benefit from the financial standpoint, considering that Australian electricity bills have doubled in less than a decade.
Although the Tesla virtual power plant targets the residential sector, the concept could be deployed in the future for commercial facilities as well. Due to differences in how businesses are charged for electricity, there are additional ways to reduce power bills not possible in the residential sector.
The first difference lies in electricity usage patterns: residential users tend to be more active after sunset, when they are back home after work and academic activities, while businesses tend to have a high daytime consumption. Of course, there are commercial and industrial sectors that operate 24/7, and in these cases electricity consumption remains high at night as well. Commercial solar arrays can be sized larger if they are complemented with energy storage and integrated into a virtual power plant:
Commercial and industrial energy consumers are also subject to capacity charges, which are not present in the residential sectors. A virtual power plant can be used to minimise capacity charges for participating buildings:
There are also opportunities for collaboration, since some companies may produce surplus energy from commercial solar arrays, while others may be unable to generate enough electricity to fill up their storage systems. Surplus energy from one company can be sent to another, ensuring all storage systems in the virtual power plant are filled up.
Virtual power plants can meet growing demand for electricity, with no need to invest in centralised power plants and expensive network upgrades. A conventional power plant typically involves upgrading transmission lines to deliver its power to surrounding towns and cities, but a virtual power plant can be deployed in the form of distributed assets at the point of consumption, making it much less demanding for the power network.
The Power Purchase Agreement business model has been successful driving growth in the solar industry, providing a method to deploy residential and commercial solar arrays at zero upfront cost. The concept can be expanded to include battery storage, allowing a wider range of services, such as integrating the system as part of a virtual power plant.