The South Australia Labor government has unveiled plans to build a 250MW “virtual power plant”, linking household rooftop solar and battery storage, in what it says will be the world’s biggest.

The project aims to connect at least 50,000 households, beginning with low-income Housing Trust (social housing) properties, which will be each fitted with 5kW of rooftop solar and one 13.5kWh Tesla Powerwall 2 battery system.

The involvement with Tesla further strengthens the links between the US solar, storage and Electric vehicle company, but this project will be significantly bigger than the s0-called Tesla big battery next to the Hornsdale wind farm.

The $800 million project (see more details here) will ultimately bring together 250MW of capacity and 650MWh of storage, allowing the combined resource to be pooled to help provide grid stability and extra capacity when supply is short.

The project easily dwarfs the 5MW AGL virtual power plant being put together by AGL – the scene at its launch of a clash between state premier Jay Weatherill and federal energy minister Josh Frydenberg, and the 250-home Reposit Power-led project in the ACT.

“My government has already delivered the world’s biggest battery, and now we will deliver the world’s largest Virtual Power Plant,” Weatherill said in a statement issued on Sunday.

“We will use people’s homes as a way to generate energy for the South Australian grid, with participating households benefitting with significant savings in their energy bills.

“Our energy plan means that we are leading the world in renewable energy and now we are making it easier for more homes to become self-sufficient.”

The project will begin with a trial 1100 Housing Trust properties, which will have the solar and storage installed at no cost, funded by the state government’s Renewable Technologies Fund, where the Tesla proposal emerged. Around 100 homes have already or are being installed and Tesla has the contract to install all 50,000 homes, but insists it will not cause delays to deliveries to other customers (as occurred when the Tesla big battery was being built. Its own technology will be used to “aggregate” the systems.

An initial $2 million will be provided as a grant and a further $30 million as a loan. The government is seeking investors in the program. The second state will see installations at a further 24,000 Housing Trust properties, and then a similar deal offered to all South Australian households over the next four years. Private households will need to pay for the installation but should see a significant (30 per cent) saving on their power bill. The government will seek an electricity retailer to deliver the program, and appears determined to bring in a new player to increase competition in the state market, which has suffered from its dominance by two or three major players. Tesla will be responsible for the installation. “When the South Australian Government invited submissions for innovation in renewables and storage, Tesla’s proposal to create a virtual power plant with 250 megawatts of solar energy and 650 megawatt hours of battery storage was successful,” Tesla said in a statement. “A virtual power plant utilises Tesla Powerwall batteries to store energy collectively from thousands of homes with solar panels. At key moments, the virtual power plant could provide as much capacity as a large gas turbine or coal power plant.” Tesla said it will install Powerwall and solar panels on up to 50,000 homes in South Australia by June 2022, starting with 600 homes in 2018. “Residents will enjoy lower bills and backup storage from their Tesla Powerwall battery, and the broader community will benefit from a more reliable grid that can better cope with peak demand.” The announcement confirms South Australia’s status as not just a global leader in renewable energy, but also in storage. The 100MW/129MWh Tesla big battery is already operating, and starting to change the way the industry thinks about the grid, the the 150MW, 800MWh Aurora project, using solar tower and molten salt storage is also due to begin construction this year. On top of this, a battery storage facility will be delivered in May at the Wattle Point wind farm, a smaller battery is to be built at the new Lincoln Gap wind farm, and Sanjeev Gupta has plans for both battery storage and pumped hydro to help power the Whyalla steelworks. At least two other pumped hydro projects, including Cultana, are also in planning stages. The announcement also comes ahead of the state election, where Labor is in a three-way battle for power with the Coalition and Nick Xenophon’s SA Best party. The Coalition last October proposed a $100 million household battery fund, which would provide means-tested grants averaging $2,500 to 40,000 homes to help them buy batteries. “All South Australians will also benefit from the increased generation in the South Australian energy mix, with lower energy prices and increased energy stability,” the government said in its statement.