Tesla seeks buyer for Australian virtual power plant, as long as it can supply the batteries and software

Tesla has called for bids for its ground-breaking virtual power plant in South Australia – a network of about 7,000 household batteries that can serve the world’s most advanced renewables grid by helping it meet demand peaks and also by providing some essential system services.

The Tesla VPP – like the big battery that was built at Hornsdale in South Australia – was a landmark project, the first of its type in Australia and, Tesla insists, still the biggest in the country, despite the competing claims of big retailers such as AGL and Origin Energy that are relying on the concept to underpin their future business models.

A sales flyer sent out to prospective buyers – possibly those same big utilities or other companies that specialise in retail products and embedded networks – says the VPP has 35 megawatts of capacity, and most of it (70 per cent) is paired with rooftop solar (25 MW).

All of the systems are installed in public housing, as part of a deal with the state government.

Tesla says that there is an opportunity to grow the system. But it wants to remain as the supplier of the battery products – the newly relaunched Powerwall batteries that are now in their third iteration – and the Autobidder software system. And it wants to do the installations.

The sales flyer says there is huge potential for growth in VPPs as the country’s main grid surges towards high levels of renewables. South Australia is leading that process, already with some 75 per cent of its demand being met by wind and solar in 2023, according to the flyer, and with a target of 100 per cent net renewables for 2027.

Such high levels of renewables will require more storage. And while the state is rolling out more big batteries to help fill the demand gaps and provide the essential system services, VPPs and household batteries are also considered essential.

In South Australia already, the output of rooftop solar is sometimes sufficient to meet all the state’s demand.

Those occasions will increase as the capacity of rooftop solar PV continues to grow, and the market operator is anxious to have more ability to “orchestrate” or control those assets as the share of renewables grows. VPPS and household batteries are key to that, and could deliver significant returns to investors.

The decision to sell the South Australia VPP is not expected to have any impact on Tesla’s plans to launch its own retail energy business in Australia. It obtained a licence for that project from the country’s regulators in April and May, and this deal is said to be quite separate from those plans.

Tesla electric is being pitched as a retail offering for anyone with a Powerwall and part of the Tesla VPP, while the South Australia network is focused on housing trust tenants with systems owned by Tesla and operating under a separate VPP.

The big energy retailers are making a bigger deal about the growth of their VPPs – which is now a term often used to describe all the different consumer energy resources, such as rooftop solar, household batteries, electric vehicles and other appliances that can potentially be orchestrated and sell services and power to the grid.

The retailers like them because it provides a potentially closer link to their often fickle consumer base, a link that will be a lifeline to their future business models as they move away from centralised generation and seek a slice of the action is a distributed grid.

The sales process is being managed by Planum Partners, which is seeking non binding offers this month, and hopes to conclude a sale by the end of the year.

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