The world’s largest battery storage “virtual power plant” is set to land in South Australia, boosting grid stability, reducing power price volatility and supporting renewable energy.

The Australian Renewable Energy Agency has conditionally committed up to $5 million funding for AGL to install 1,000 centrally-controlled batteries in South Australian homes and businesses with a combined 5MW/7MWh storage capacity.

ARENA CEO Ivor Frischknecht joined AGL CEO Andy Vesey and South Australian Treasurer and Minister for Mineral Resources and Energy Tom Koutsantonis in Adelaide to launch the project.

The $20 million project may reduce the risk of power price shocks in the state, ARENA said.

“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,” Frischknecht said.

“AGL plans to operate the batteries as a kind of virtual power plant, installing them alongside solar PV and linking all 1,000 systems with centralised monitoring and management software.

AGL has selected Sunverge batteries and control systems for phase one of the project.

The project will be rolled out in three phases over a period of approximately 18 months. In the first phase, running until April 2017, the first 150 customers in metropolitan Adelaide will be eligible to purchase a discounted Sunverge SIS 5kW/7.7kWh energy storage system for $3,500, which includes hardware, software and installation.

For customers with sufficient excess solar generation, this is expected to result in a seven-year payback period.

How a virtual power plant works

Using cloud-based software, a virtual power plant (VPP) directs energy storage units to operate in unison to meet peak energy demand across an entire community or service area, helping consumers utilize their own rooftop-generated solar or stored solar power during peak demand periods and reduce their power bills, says battery-maker Sunverge.

Energy storage systems not part of a VPP are unable to provide services to the grid or to benefit from the intelligent energy management provided by the grid. By contrast, when storage systems operate as part of a VPP the ultimate result is a stronger and more reliable power grid, more efficient energy management and greater value and long-term bill reductions for consumers, the company says.

More on the ARENA website