I’ve Seen The Future And It’s Tesla’s New UK VPP

Tesla UK virtual power plant - VPP

Late last month Tesla, in partnership with electricity retailer Octopus Energy, announced a new Virtual Power Plant (VPP) in the UK. Interestingly, Tesla’s UK VPP is a much simpler proposition than Tesla’s Australian VPP.

Tesla’s 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’s Australian VPP offers a 31.13 c per kWh usage tariff, a 10c per kWh feed-in tariff plus 19.8c/kWh “grid charging credit” 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’s VPP on Twitter and elsewhere, but I’m 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’s ultimate purpose: to accelerate the adoption of sustainable energy.

Tesla Car Owners Get A Lower Feed-in Tariff

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’s what confused me. Hang on? Why are they penalising Tesla drivers with a less generous feed-in-tariff?

Then it dawned on me.

Tesla Has Made Its UK VPP Super Simple

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’t 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 – if you want to be regaled with tales of me battling their old PR rep, buy me a pint someday. But I’ve gotta take my hat off to them – they’ve 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’ll 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’s 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.

How To Zero A British Electricity Bill With Tesla’s VPP

The average Pommie uses only 11 kWh per day. That’s 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’s UK VPP.

A VPP that encourages you to buy more solar – that’s smart. And even better: you don’t have to buy your solar power system from Tesla2.

When You Get An EV, Simply Add Solar To Cover All ‘Fuel’ Costs

If that household has a couple of electric vehicles (EVs) that drive a total of 17,000 km per year, they’ll need about 3000 kWh per year extra for ‘fuel’ – about 8 kWh per day. That’s 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’s gonna be a £25,000 – £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 – it’s that Tesla’s 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. I think consumers will consider that a bargain for all their electricity and ‘fuel’ going forward.

Over the next decade, if you own a modest-sized battery and a large solar system, you probably won’t have to pay for electricity or fuel. Smart energy companies – 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’ve just launched in the UK4.

Companies that try and push complexity onto the consumer – by for example exposing them to the constantly changing wholesale prices – or putting them on exorbitant demand tariffs in exchange for cheap off-peak tariffs – 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.

Footnotes

  1. Coincidentally at the same time that Tesla released their UK VPP, Tony Seba through his RethinkX organisation released a really interesting report that argues the most cost-effective way to get to 100% solar, wind and batteries is to throw out the conventional wisdom and massively ‘overbuild’ renewable generation to reduce the number of batteries required.
  2. While Tesla’s batteries and cars are excellent, in my opinion the way they currently sell solar leaves a lot to be desired  – as I may detail in a future blog post.
  3. According to Tony Seba – whose track record is excellent.
  4. When you consider how long and miserable the winter is in the UK, it is very impressive that they can make this offer work.
About Finn Peacock

I'm a Chartered Electrical Engineer, Solar and Energy Efficiency nut, dad, and founder of SolarQuotes.com.au. My last "real job" was working for the CSIRO in their renewable energy division.

Comments

  1. May i ask everybodys opinion of something?
    To do with hybrid cars……..You know that one is not supposed to let petrol lie in cars, as impurities do something and block something….
    So, if one has a hybrid car, and uses just the electricity mostly, would one run into problems with petrol lying unused?

    • Ronald Brakels says

      Most plug in hybrids will occasionally use the petrol engine with normal driving so fuel will gradually be used up. But those where it is possible to run entirely off electricity around town are programmed to turn the petrol motor on at times to make sure it’s maintained in good condition and prevent the petrol from getting too stale. I don’t know how long it will keep a tank for but I presume it’s less than half a year.

      • randy wester says

        I think a Volt will keep the fuel for 364 days, a Prius Prime might be 90 days.

        Our Prius Prime will also cycle the engine on and off for heat if it’s colder than the heat pump can manage – about minus 12 C.

        In any case there’s no reason to fill the tank all the way up to full unless you’re making a long trip.

    • Thank you, Ronald

  2. Michael Paine says

    This is a bit off-topic but…
    I have a plug-in hybrid car on order so Robyn’s question is highly relevant to me. That is because you will need a plug-in hybrid in order to run purely on electricity around the city (if you choose that mode). In theory this would mean minimal use of petrol and so it could deteriorate over time. This RACQ web page has some tips for storage of vehicles, which is a similar issue:
    https://www.racq.com.au/cars-and-driving/cars/owning-and-maintaining-a-car/car-maintenance/storing-your-car
    “As fuel has a definite shelf life, leave a minimal amount in the tank…” – this applies to storage for more than 4 weeks.
    I would expect the petrol engine to be used for a sufficient time during this period and so I don’t think any special precautions are needed. Maybe I could leave only a minimal amount of petrol in the tank but with PHEVs they generally have an electric-only range of around 50km so I might suffer from range-anxiety 🙂
    Finn – I assume that the UK VPP only works with Tesla Powerwall at this stage. Teslas cars don’t feed back into the grid?

  3. I have been telling our clients to ‘watch this space’.
    Western Power has proposed VPP for their network in 2021 which will make it more viable we hope for existing Powerwall owners.

    After reading of TESLA success in the UK in the recent month, this only fuels the flames for their retail model.

  4. For anyone interested in Tesla and Elon’s ultimate VPP plans, check out these two engineers’ podcast. In youtube search for Now You Know and choose ‘Top Secret’ and ‘No Tesla For You’ to get the full low down. Very interesting.

  5. Grandpa Chris says

    PSSST Ronald, You have $ in front of 10,000 & GBP after it in your article !!!

    • Ronald Brakels says

      It’s actually Finn’s article, but I will fix it up without telling him. Thanks for letting me know.

  6. Stuart Evans says

    Hullo Finn,
    Speaking of the future :- How about having two electric cars, both set up on v2h and only driving one car at a time? I have one ev at the moment, and this possibility keeps infecting my thoughts. If you can argue effectively against it, I may get some peace.

  7. Scoring points… at first glance –> ” 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.”
    Most of the endless calculations, however, overlook the mitigating ~ and obvious ~ realities.

    Firstly:- the insidious ‘service charge’ –> This SHOULD NOT be accepted as a separate item. It’s clearly a component of the ‘power-provider’s’ OVERHEAD COSTS and should be costed as part of the total cost of provision of the product. (and should most certainly NOT depend upon issues like the consumer’s postcode.) I can think of no other business that would get away with that sort of skullduggery. As a consumer I’m ONLY interested in the price of the product on MY side of the meter. This is an issue worthy of being taken up by industry organs like ‘SolarQuotes. (by instigating mass-action if necessary.)

    Secondly;- The endless twiddling with ‘prices/offers/comparisonsetcetcetc (whilst providing endless material or publications :-“…. price of electricity is about 30c and feed-in tariffs are 10-15c.) are rendered largely irrelevant when it’s remembered that sunlight is free, and the only way its use can be calculated into billable costs is with the ‘agreement’ of the customer. Why anyone would cop this finangling is beyond me ~ particularly since a solid case can be made for the ‘offgrid’ option (at least as a powerful bargaining-chip).

  8. greg cregan says

    in my experience except for execptions when you need your battery backup the australian system will not work.the grid goes down you go down.why is there not a simple isolater to your system that stops it feeding back to the grid an ensuring the mains are able to be worked on?

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