South Australia’s Virtual Power Plant - Observatory of Public Sector Innovation

SA VPP is the largest network of home solar and battery systems lowering energy costs for thousands of public housing tenants while providing critical energy network services.

SA VPP has developed innovative approaches to:
Significantly reduced energy bills for vulnerable South Australians
Providing more access to renewable energy for more people
Proving new commercial models for financing renewable energy assets
Driving regulatory reform that accelerates Australia’s energy market transition

Innovation Summary

Innovation Overview

South Australia (SA) has transformed its energy system from 1% to over 60% renewable energy in just over 15 years. More than 40% of homes in SA have solar photovoltaic (PV)--meaning solar panels combined with an inverter to generate electricity--systems installed along with one of the highest uptakes of residential batteries in the world.

This has presented both a need and opportunity for the evolution of Australia’s energy market and technology innovation to manage the challenges associated with bi-directional flow on Australia's electricity grid.

Despite the high rates of adoption in SA, lower income and vulnerable South Australians are still “locked out” of realising the savings and energy autonomy benefits now synonymous with renewable energy technologies. In most cases due to high upfront capital costs or lack of property ownership.

Consequently, South Australia’s Virtual Power Plant (SA VPP) was conceived as an innovative approach for reducing the energy bills of vulnerable South Australians, by constructing a decentralised power plant using the roofs and walls of public housing assets across the State.

While installing solar PV and storage is not new or innovative, SA VPP orchestrates these behind the meter solar and storage assets to autonomously send electricity into energy markets when prices are high and pull electricity from the market when prices are low or even negative. This autonomous trading at scale enables revenue streams that then allow for highly competitive retail electricity offers to be provided to customers, at rates lower than any other offer in the market. As importantly, the trading also provides critical system security services to help keep the grid stable and the lights on.

SA VPP is now operating commercially, following the success of two trial phases which demonstrated the technical capability and the viability of the commercial retail model.

The primary objectives agreed between the Government of South Australia and Tesla at inception remain valid, and continue to guide the evolution of SA VPP:
- Realise significant electricity cost savings for low-income households
- Provide system security services to the state’s electricity distribution network
- Improve electricity market competition through downward pressure of the wholesale electricity prices
- Fast-track South Australia’s energy transformation.

Public housing tenants who elect to join SA VPP receive a 5kW solar PV system and a Tesla Powerwall home battery installed and maintained at their home at no cost to them, battery back-up in the event of an outage, and the cheapest residential electricity rates in SA. Access to the Tesla Application (App) also enables the tenant to monitor and better understand their electricity usage, and become more educated about their energy needs, allowing them to make choices about how and when they consume electricity to maximise their savings.

All South Australians also benefit from SA VPP as it supports the reliability and security of energy supply on the distribution network while placing downward pressure on electricity prices through increased retail competition.

The South Australian government’s Public Housing Authority has also (unexpectedly) benefited from material improvement and upgrades to the electrical infrastructure on many of their aging housing assets.

Technically, SA VPP is demonstrating how VPPs and other distributed energy resources can operate in the future, by providing important grid services that until now have only been possible through centralised, more traditional thermal generation assets (Coal and Gas).

Being the first VPP in Australia to help stabilise frequency levels in the grid, SA VPP has already demonstrated the value of its capabilities through its response to a number of very significant network events, including:
- a power station trip in Queensland;
- disconnections of the grid between South Australia and Victoria, and
- providing power to regionally isolated residents during outages as a result of catastrophic fire conditions.

Continued expansion of SA VPP is currently under development, with augmented asset combinations such as battery only systems already being trialled to enable households to join without the need for solar panels, therefore improving equity of access across the program.

The experience gained from SA VPP is driving the of growth of VPPs in both Australia and internationally to deliver reliable, affordable, and clean energy and accelerate the global transition to renewable energy, while, critically, demonstrating this can be achieved without leaving anyone behind.

Innovation Description

What Makes Your Project Innovative?

SA VPP has been pioneering in the following ways:

• Largest residential VPP (and growing), and first VPP in Australia registered to provide market and ancillary grid services, demonstrating the future of a modern energy system.
• Ensures the most vulnerable energy consumers can share in the benefits of the transition to renewable energy. Low socio-economic households can voluntarily opt in with no up-front costs.
• Innovative government financing de-risked the project initially to secure equity and third-party investment. Subsequent government support was structured to incentivise the development and commercialisation of new grid services previously not valued by the energy market.
• SAVPP has been used to demonstrate new technical capabilities, and drive market reform and associated regulatory changes to open up new revenue streams for distributed energy resources that have previously only been accessible to centralised, traditional thermal generation assets.

What is the current status of your innovation?

SA VPP is currently in the implementation phase.

Trial Phases 1 and 2 developed and demonstrated the technology, streamlined customer acquisition and deployment, and proved the retail model and commercial business case, which were pre-requisites to continue to scale the project to full commercial operation.

Phase 3 is now scaling up SA VPP to install home energy systems on over 4,000 public housing assets across the state; enabling private customers to enroll their home energy systems into SA VPP through a separate retail plan; and exploring augmentation options to allow a greater number of public housing households to participate.

Innovation Development

Collaborations & Partnerships

- Tesla: owner and operator of SA VPP
- Clean Energy Finance Corporation (CEFC) and Australian Renewable Energy Agency (ARENA): investors
- SA Power Networks (SAPN) and the Australian Energy Market Operator (AEMO): co-design of trials and commercialisation of new market and grid services provided by SA VPP
- Energy Locals: electricity retailer of SA VPP

Users, Stakeholders & Beneficiaries

- Public Housing tenants joining SA VPP receive the cheapest residential electricity rates in SA and battery backup.
- Citizens of South Australia benefit from a more secure and reliable electricity network and from downward pressure on electricity pricing.
- Tesla benefits through access to a commercial fleet of solar and storage assets to develop, test and commercialise new market and grid services.
- SAPN and AEMO gain critical insight from greater integration of DER on the grid.

Innovation Reflections

Results, Outcomes & Impacts

- A typical customer joining SA VPP is saving A$423 off their annual electricity bill - 23% below the reference price for electricity in the State.
- 4,000 tenants in public housing have had solar and storage assets installed on their homes at no charge to them.
- Participation in market operator trials have shaped national electricity market reforms such as new Market Ancillary Service Specifications.
- Development and commercialisation of frequency and ancillary services, and voltage control are now recognised and valued by the national electricity market, paving the way for additional VPP retail offerings for private customers.
- Loan financing originally provided by the SA government to launch SA VPP has been repaid 10 years early.

Challenges and Failures

SA VPP has faced challenges including:

- Less than anticipated public housing stock was suitable for solar installation. Future expansion of the SA VPP will look to site specific solutions such as battery only installations to ensure greater equity and inclusion.
- Engaging public housing tenants on the benefits of SA VPP has been difficult given the complex nature of the technology and commercial arrangements. Customer communications have regularly been reviewed and updated to support provision of information to customers and customer acquisition.
- The electricity market is dynamic and constantly evolving, and critical revenue streams throughout the trial phases have been prospective, which has been challenging to de-risk SA VPP sufficiently for investors.
- Electricity market rules and regulations were not intended to govern VPPs making it onerous for the SA VPP to be compliant. A series of market reforms are underway.
- COVID19 interruptions delayed deployment schedules.

Conditions for Success

Conditions for success include:

- (State) government leadership and co-design, commitment to policy certainty (and bi-partisan support) given tenor of project linked with government-owned assets, and ongoing administrative support.
- Early seed funding (by government) to accelerate deployment and de-risk the project until prospective revenue streams were able to be commercialised.
- Regulatory certainty, and a firm commitment and partnerships with the electricity market operator and distribution network to innovate, enabling the trial of new technologies and services required to overcome technical and market barriers.
- Project partners willing to be pragmatic and flexible and accept and share risks associated with highly innovative and prospective projects.
- Qualified and experienced skills tradespeople; important to provide program certainty through pace of deployment and approval of future expansions in a timely manner to retain skilled trades.

Replication

The experience gained from SAVPP has driven the of growth of VPPs in both Australia and internationally.

Tesla has now launched a retail plan “Tesla Energy Plan” for private customers in multiple jurisdictions in Australia, and also in California, USA.

SA now has eight (8) other commercially operating VPPs available for private customers, however these require customers to have their own solar and storage assets installed, and do not provide an option for renters.

Lessons Learned

Lessons learned can largely been extrapolated from the “Conditions for Success” and “Challenges and Failures” questions above.

However, the key lesson for success would undoubted be the selection of project partners willing to be pragmatic and flexible and accept and share risks. Free flowing information, a high degree of trust, and strong alignment and a shared commitment to outcome!