AGL Energy Limited (AGL) has announced the launch of what will be the world’s largest virtual power plant (VPP), ultimately involving 1,000 connected batteries installed in homes and businesses in South Australia, providing 5 MW of peaking capacity and offering customers the opportunity to save on their energy bills.

Partnering with AGL in the demonstration project is the Federal Government via its renewables funding agency, The Australian Renewable Energy Agency (ARENA), and leading US-based energy storage and management company, Sunverge.

Joining AGL Managing Director & CEO, Andy Vesey, at an event in Adelaide to announce the initiative was South Australian Treasurer and Energy Minister Tom Koutsantonis and ARENA CEO Ivor Frischknecht.

“This project is the world’s largest, the first of its kind and an innovative solution to both help customers manage their energy bills and at the same time contribute to grid stability,” said Mr Vesey.

“It offers consumers the opportunity to be part of the world’s largest virtual power plant, giving them greater ability to consume more of the energy generated from their own rooftop solar systems, lowering power bills, reducing emissions and purchasing a battery at a significant discount.

“The virtual power plant will be capable of storing 7 MWh of energy, with an output equivalent to a 5 MW solar peaking plant. We believe it will demonstrate alternative ways to manage peaks in energy demand, contributing to grid stability and supporting the higher penetration of intermittent, renewable generation on the grid,” he said.

The project will cost approximately $20 million, with ARENA providing conditional approval of $5 million.

“This project is core to AGL’s strategy of being a manager of distributed energy resources. It also leverages our investment in Sunverge and helps us to continue to improve the digital customer experience,” said Mr Vesey.

South Australian Treasurer and Energy Minister Tom Koutsantonis, said “The State Government congratulates AGL for looking at innovative ways to use batteries to increase the penetration of renewables.

“We encourage others in the private sector to also consider how dispatchable renewable energy technology can be used to deliver electricity around-the-clock.”

ARENA CEO Ivor Frischknecht added the project could point to solutions to South Australia’s grid challenges and reduce the risk of power price shocks in the state.

“Australia is on the cusp of a battery storage revolution as technology costs continue to fall. ARENA is at the forefront of figuring out how batteries can best support renewable energy to provide affordable, reliable and sustainable power.

“ARENA expects virtual power plants to play a significant role in the future as more renewable energy is connected to our power networks. The approach can ease local network constraints in South Australia, displace gas power and complement the Victorian interconnector, especially during times of peak demand,” said Mr Frischknecht.

The project will be rolled out in three phases over about 18 months. Customers participating in the project will be able to purchase a heavily discounted 5kW/7.7 kWh energy storage system including hardware, software and install. In the first phase, running until April 2017, the first 150 customers based in metropolitan Adelaide will be able to purchase a Sunverge 5kW/7.7kWh energy storage system.

For customers with sufficient excess solar generation, this is expected to result in a seven year pay-back period. Consumers who don’t have solar already will be able to purchase an appropriately-sized solar system packaged with their battery.

Later phases will see an offering to narrower zones within metropolitan Adelaide where peak demand management and other network support services can be demonstrated.

It’s also hoped the project can demonstrate how relationships between electricity networks, retailers, consumers and the market operator can create new sources of value and stability in a renewable energy future.