Earlier this month, Tesla announced that it reached a deal with the South Australian government to install solar arrays and Powerwalls on 50,000 homes to create the biggest virtual power plant in the world.

Now a new report shows just how economically viable this project could be for those 50,000 families who many of which live in Housing Trust properties, which is for lower-income households.

Australian electricity rates are among the highest in the world and that’s especially true in South Australia.

After Tesla installed the 100MW/ 129MWh Powerpack project in South Australia last year, Tesla CEO Elon Musk gave an interview during which he was informed of the significant pressure that Australia’s high electricity prices are putting on families.

Visibly affected by the issue, Musk vowed that Tesla will “work harder” to help solve the problem.

Now the new virtual power plant seems to be the result of that effort, but just how much of an impact it could have on the price of electricity for those 50,000 homes?

It turns out that it can make an important difference.

Each home will be equipped with a 5 kW solar array and a Tesla Powerwall 2 home battery pack. The economics of combining the two technologies and connecting them to the South Australian grid has improved tremendously over the last year thanks to cheaper solar installations and a better use of energy storage.

Australia’s Reneweconomy published a comparison of how the cost of such a system has improved compared to energy solely provided by the grid for an average household from 2016 (left) versus now (right):

Electrek’s Take

This is a remarkable difference in pricing that certainly explains the new virtual power plant initiative.

It shows good thinking on the government’s part to support the project since the families who need lower electricity rates the most often can’t afford the cost of installing a solar array and home battery pack even though the long-term impact is clearly beneficial.

Now the $800 million project and the large upfront cost are starting to make more sense thanks to those charts.

I think it also gives us a glimpse at the future of electricity around the world. While right now there are not many places where it makes sense economically outside of Australia, that will change as the technology becomes even cheaper.

South Australia’s high electricity rates are pushing homeowners toward solar and batteries at a crazy rate. So much so that South Australia’s consumers bought 20% less electricity from the grid in 2017 than they did in 2010.

That trend is going to continue and it is exciting to watch it happen.

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