South Australia will spend $550 million to strengthen its electricity system, including $360 million on a new gas-fired power plant and $150 million on a battery storage facility.

The state will source gas from South Australia to augment supply to the plant and will pay landowners 10% of royalties for new production.

Premier Jay Weatherill and Energy Minister Tom Koutsantonis say the arrangement will put the state’s needs before the national gas market.

“If you want our money, the gas will be sold to South Australians first,” Koutsantonis said.

The 250MW gas-fired peaking plant would supply electricity when generation from existing sources was insufficient.

The 100MW grid-scale battery – price to be determined – will be privately-owned but be “on call” when the state requires it.

The facility would be built before next summer, Weatherill said.

Premier Weatherill and Koutsantonis also announced an energy security target for South Australia which will compel retailers to source up to 36% of energy from local cleaner generators and not coal from generators in Victoria.

Tesla on Twitter

The conversation about finding a solution to South Australia’s energy troubles was given a major boost last week when Tesla CEO Elon Musk and Atlassian co-founder Mike Cannon-Brookes took to Twitter to hash out a plan.

Cannon-Brookes suggested the problem could be solved within 100 days with a grid-connected battery solution, to which posted his agreement in principle with the offer of Tesla supplying 100MWh of battery storage within the 100-day deadline “or it’s free”.

AGL Energy welcomed the plan for South Australia.

“Whilst national reform of the energy market architecture is urgently required, these South Australian reforms will address some key issues required for the more cost effective integration of increasing renewable energy generation and the foreshadowed integration into a national Energy Intensity Scheme is welcomed,” a statement from AGL read.