South Australia's Labor Premier Jay Weatherill has unveiled what he expects to be a vote-winning power policy before the March state election — 'free' solar panels and Tesla batteries for 50,000 homes.

And it's all thanks to the guy on the right. Yep, it's the latest gift in the ongoing bromance between Mr Weatherill and billionaire Tesla boss Elon Musk, after the pair teamed up to help fund the world's biggest lithium-ion battery (which is already producing power in the South Australian grid).

"Free?" I hear you ask. They say nothing is certain but death and taxes.

This deal will involve some of the latter (a $2 million taxpayer-funded grant and $30 million loan to Tesla), plus a significant catch — the power generated by the solar panels and the batteries will not be owned directly by the households, but may well be sold back to them via a retailer.

First things first. What is a 'Virtual Power Plant'?

A VPP is trendy terminology for distributed electricity generation. It's a bit like the internet. Or bitcoin.

The idea is that by sharing surplus energy produced by rooftop solar panels when not being used, all consumers can benefit.

Tesla's Powerwall is a rechargeable lithium-ion battery that stores energy generated from solar panels. ( Supplied: Tesla Motors )

Key to these systems are smart meters and other clever technology which can figure out automatically which system is producing surplus power and whether that can be stored or moved to another customer.

The South Australian scheme will see the homes of each participant installed with a 5kw solar system paired with a 5kw/15kwh Tesla Powerwall 2 battery.

Why hasn't anyone done this before?

They have. There are several virtual power plant trial schemes operating around Australia, including one in South Australia run by AGL and subsidised by the Federal Government.

Remember that press conference where Jay Weatherill tore strips off federal Energy Minister Josh Frydenberg?

That was at the launch of the AGL scheme, which included 1,000 homes.

What makes this latest proposal different is the sheer size of it.

According to the SA Government, the Tesla scheme will eventually be widened to some 50,000 homes — making it about 50 times bigger than the AGL scheme, and by far the biggest in the world.

In total, the distributed energy system would be capable of outputting about 250 megawatts of power, making it more than double the size of South Australia's grid-scale Tesla battery, and almost as powerful as the temporary diesel generators installed by the SA Government.

What's the catch?

Well, these "free" solar panels and batteries won't be owned by the participating householders.

In the first instance, the systems will be installed on the rooftops of 25,000 SA Housing Trust properties owned by the SA Government.

The Tesla systems will be installed to thousands of homes over four years. ( ABC Radio Adelaide: Brett Williamson )

And unlike those people who go out and pay for their own solar panels and batteries, the scheme participants will not be able to benefit from the zero-cost power provided by their solar panel and storage system.

Instead, an electricity retailer will be engaged to run the scheme, and sell the power generated by the solar panels and stored in the batteries back to the householders at a discounted rated.

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In effect, the householder is simply leasing Tesla and another power company some spare roof space and garage space in return for a discount on their power bills.

According to preliminary analysis for the SA government by Frontier Economics' Danny Price, the retailer should be able to offer participants a power price of around 27c/kWh. That's about a 30 per cent saving based around a current residential average retail cost of about 40c/kWh.

What isn't clear is whether those households who opt in to have the systems installed at their properties will be forced to purchase their power through the chosen retailer, and if so, for how long they will be locked into a contract.

Either way, it spares Housing Trust tenants the huge upfront costs of installing their own solar panel and battery systems.

What's more, the SA Government says every one of the state's 37,000 Housing Trust tenants will be able to benefit from the retailer's discount offer — whether or not they have the solar panels and batteries installed at their property.

What about other households?

Sorry, this video has expired The world's biggest lithium battery

After testing the system on Housing Trust homes, the Government wants to broaden the scheme to other households from July 2019.

It's not yet clear whether households who've already installed their own solar panels and battery systems will be able to opt in, or whether their own initial cost outlays will result in further discounts.

Nonetheless, the scheme should help all consumers, whether or not they sign up as participants or not.

The retailer which runs the new system will have up to 250 megawatts of power that it can sell into the grid at times of peak demand, adding competition into the market.

Danny Price estimates that could drive down wholesale power prices by about $15/MWh, saving electricity consumers across the state about $180 million a year on their power bills.