Smart Cities

Tesla to Build the World’s Biggest Virtual Power Plant

Elon Musk and Tesla are never out of the news for long, their regular media coverage usually takes the shape of a world’s first, biggest, or fastest. So it wasn't a surprise, when late last week Tesla Energy announced their involvement in another mega-project - the biggest virtual power plant (VPP) in the world. “Supply and demand resources can work together rather than against each other in the modern energy system. New technologies and greater intelligence are redefining the supply – demand relationship; increasing efficiency, enabling distributed generation and reducing overall consumption. At the forefront of this evolution is the VPP,” we wrote in an article entitled: Virtual Power Plants: Our Energy Future is Distributed, Efficient and Intelligent. VPPs take advantage of information and communication technologies (ICT) to bring together multiple forms of distributed electricity generation, typically small-scale renewables. VPPs also utilize artificial intelligence to take greater control over demand, by continuously re-prioritizing and rescheduling […]

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Elon Musk and Tesla are never out of the news for long, their regular media coverage usually takes the shape of a world’s first, biggest, or fastest. So it wasn't a surprise, when late last week Tesla Energy announced their involvement in another mega-project - the biggest virtual power plant (VPP) in the world.

“Supply and demand resources can work together rather than against each other in the modern energy system. New technologies and greater intelligence are redefining the supply – demand relationship; increasing efficiency, enabling distributed generation and reducing overall consumption. At the forefront of this evolution is the VPP,” we wrote in an article entitled: Virtual Power Plants: Our Energy Future is Distributed, Efficient and Intelligent.

VPPs take advantage of information and communication technologies (ICT) to bring together multiple forms of distributed electricity generation, typically small-scale renewables. VPPs also utilize artificial intelligence to take greater control over demand, by continuously re-prioritizing and rescheduling demand activities to optimize the overall system. These dynamic systems are providing benefits to all stakeholders, from the utility to the end user, and truly represent a new era for energy.

The plan for this new VPP is to roll out a network of at least 50,000 home battery systems across South Australia. Tesla will be working alongside other firms and the State Government – who are providing a $2 million grant and $30 million loan from the Renewable Technology Fund. “Our energy plan means that we are leading the world in renewable energy and now we are making it easier for more homes to become self-sufficient,” said Jay Weatherill, Premier of South Australia (SA).

Beginning with a trial of 1100 Housing SA properties, a 5kW solar panel system and 13.5kWh Tesla Powerwall 2 battery will be installed at no charge to the household and financed through the sale of electricity. Following the trial, which has now commenced, systems are set to be installed at a further 24,000 Housing Trust properties, and then a similar deal offered to all South Australian households, with a plan for at least 50,000 households to participate over the next four years.

The project is expected to be welcomed by consumers. Analysis by Frontier Economics shows the 250MW plant is expected to lower energy bills for participating households by 30%. While a recent report by the Australian Energy Market Commission said that energy prices in South Australia are expected to fall by approximately $300 over the next two years for the average household. Additionally, all South Australians will also benefit from the increased generation in the South Australian energy mix, through lower energy prices and increased energy stability.

In September 2016, a “50-year storm” damaged critical infrastructure in the state of South Australia, causing a state-wide blackout and leaving 1.7 million residents without electricity. Further blackouts occurred in the heat of the Australian summer in early 2017. In response, the South Australian Government turned to Tesla last year, to build the largest lithium-ion battery storage project in the world. At 100MW / 129MWh, the battery system provides enough electricity to power more than 30,000 homes, and Tesla built it in just 100 days.

It seems that natural disasters are a common trigger for the establishment of large VPPs. The frequency of earthquakes has become a increasing concern in Japan after the Fukushima nuclear accident. However, physical space for new generation facilities are a problem in the densely populated Asia-Pacific archipelago. So instead of physical power plants, Japan is launching a number of VPP projects to answer to its electricity challenges.

On the December 11th, US based artificial intelligence-driven energy storage service provider Stem Inc, announced a partnership with large Japanese sogo shosha (general trading conglomerate) Mitsui & Co. Endorsed by the Ministry of Energy, Trade and Infrastructure (METI), the pair intends to build a VPP that will initially be deployed across more than 750 kWh at multiple sites.

Back in Australia, during the two months that Tesla’s 100MW battery system has been active, Tesla’s CEO Elon Musk was exposed to the pressure that Australia’s high electricity prices are putting on families and vowed to to something about it. In fact, South Australia has among the highest electricity prices in the world, averaging around 47.13¢ per kWh (against an EU average of 29.85¢, and just 15.75¢ in the US). So it seems logical that the state would be the one to pioneer a VPP project of this scale.

There is little doubt that our energy future will be distributed, efficient and intelligent, and these characteristics are epitomized by the Virtual Power Plant. The success of the project in South Australia, and other projects like Stem’s in Japan, mark a turning point for our energy system, redefining the supply – demand relationship. Off the back of these projects we should expect to see many more VPPs rolling out in the coming years.

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