Late last month Tesla, in partnership with electricity retailer Octopus Energy, announced a new Virtual Power Plant (VPP) in the UK. Interestingly, Tesla‚Äôs UK VPP is a much simpler proposition than Tesla‚Äôs Australian VPP.
Tesla‚Äôs UK VPP offers both a cheap usage tariff (11 pence per kWh) and a generous feed-in tariff (11 pence per kWh) for Pommies who have solar and at least one Powerwall installed on their homes. The VPP also comes with no daily charge which is refreshing, but it does not give any discount on the Powerwall.
In contrast, Tesla‚Äôs Australian VPP offers a 31.13 c per kWh usage tariff, a 10c per kWh feed-in tariff plus 19.8c/kWh ‚Äúgrid charging credit‚ÄĚ when the battery is discharged in times of grid demand. It has no daily supply charge and if you sign up you get a $2,200 discount off a new Powerwall.
Lots of Brits are crowing about Tesla‚Äôs VPP on Twitter and elsewhere, but I‚Äôm not sure anyone has realised quite how profound the UK deal is.
After I was initially confused by the offer, it quickly dawned on me how clever this VPP is and how it appears brilliantly designed to further Tesla‚Äôs ultimate purpose: to accelerate the adoption of sustainable energy.
I was initially confused by the fact that Tesla car owners earn a different feed-in-tariff to non-Tesla drivers. Non-Tesla car-owners on the VPP pay 11 pence to buy electricity from the UK grid and earn 11 pence if they sell energy back into the grid. Tesla car-owners pay 8 pence for grid electricity and earn an 8 pence feed-in tariff.
That‚Äôs what confused me. Hang on? Why are they penalising Tesla drivers with a less generous feed-in-tariff?
Then it dawned on me.
The most important feature of this VPP is that the feed-in-tariff is the same as the usage tariff. In other words: when selling into the grid you get the exact same rate as when buying from the grid.
This is tariff nirvana for solar lovers. The holy grail.
It means you can stop worrying about when you use your solar energy. You can stop worrying about your self-consumption ratio. You don‚Äôt need to invest in home automation, PV diverters, controlled loads, fancy tariffs that follow the wholesale price or any of that complicated stuff.
I am not a fan of how Tesla has conducted itself on many occasions over the past decade ‚Äď if you want to be regaled with tales of me battling their old PR rep, buy me a pint someday. But I‚Äôve gotta take my hat off to them ‚Äď they‚Äôve transformed solar and batteries into a simple proposition for the British homeowner:
They can now promise potential customers:
If you have a Powerwall, and you want a $0 bill, then all you have to do is install enough solar to cover your gross usage.
In Australia, this is how the cowboys often sell solar. They know how much energy a solar system should generate in one year. They ask how much energy you use in a year. If your system can generate as much solar energy as you use, they promise you‚Äôll have $0 bills. In Australia that is bullshit because the retail price of electricity is about 30c and feed-in tariffs are 10-15c. Also, you have a standing charge of about a dollar a day.
But Tesla‚Äôs UK VPP has no standing charge and the feed-in-tariff matches the usage tariff, so British Powerwall owners can now legitimately, quickly and confidently size their solar systems this way.
Unlike any other VPP I can think of, it encourages big solar with a modest battery; which is how it should be1.
The average Pommie uses only 11 kWh per day. That‚Äôs because they mostly use gas for heating and air conditioning is rare.
A solar system in my old hometown of York can expect to get about 2.8 kWh of energy for every kW of solar installed. So 4 kW of solar will generate about 11 kWh per day on average. Add a couple of solar panels on top, compensating for any battery inefficiencies, and that should zero out an average bill on Tesla‚Äôs UK VPP.
A VPP that encourages you to buy more solar ‚Äď that‚Äôs smart. And even better: you don‚Äôt have to buy your solar power system from Tesla2.
If that household has a couple of electric vehicles (EVs) that drive a total of 17,000 km per year, they‚Äôll need about 3000 kWh per year extra for ‚Äėfuel‚Äô ‚Äď about 8 kWh per day. That‚Äôs an extra 3 kW of solar. So a 7-8 kW solar system on a roof in the UK with the Tesla VPP should give a close-to-zero dollar bill and fuel 2 EVs to boot.
That‚Äôs gonna be a ¬£25,000 ‚Äď ¬£30,000 investment. Those two EVs should save the household around¬†¬£1,300 on fuel and maintenance annually. The solar and battery should save about¬†¬£700 on electricity per year. So the solar and Powerwall should have a simple payback of roughly 15 years.
That kind of payback period will appeal to early adopters who are rich and can pay cash, or those with a good credit rating to take advantage of cheap loans.
But the profound thing is not the cost in 2020 ‚Äď it‚Äôs that Tesla‚Äôs UK VPP is showing us what residential energy plans will look like in the future.
By 2030 solar will be 70% cheaper and batteries 80% cheaper3. So by then, the solar and battery system to cover an average house with electric cars will be closer to $10,000 GBP. I think consumers will consider that a bargain for all their electricity and ‚Äėfuel‚Äô going forward.
Over the next decade, if you own a modest-sized battery and a large solar system, you probably won‚Äôt have to pay for electricity or fuel. Smart energy companies ‚Äď such as Tesla and Octopus will absorb the complexity of the energy markets and show the consumer a really simple offer like the one they‚Äôve just launched in the UK4.
Companies that try and push complexity onto the consumer ‚Äď by for example exposing them to the constantly changing wholesale prices ‚Äď or putting them on exorbitant demand tariffs in exchange for cheap off-peak tariffs ‚Äď only appeal to tech-savvy early adopters (who love complexity because it shows how plugged into the future they are). Mass adoption requires simple and predictable plans. Australian electricity retailers must urgently simplify their offers if they want to compete over the coming decade.