Tesla Inc.’s (TSLA) Virtual Power Plant (VPP) initiative has got a strong start with its successful first trial, according to RenewEconomy, an Australia’s leading portal covering clean energy and climate policy.

Tesla’s VPP is an ambitious project set up in the state of South Australia, which will be comprised of 50,000 residential homes fitted with solar panels and Powerwall 2 home batteries. It is expected to generate 250 MW (megawatt) of solar power and 650 MWh (megawatt per hour) of battery storage capacity. Tesla’s VPP would provide the solar panels as well as the Powerwall 2 batteries free of cost to low-income households involved in the project. Once completed, it will be the world’s largest VPP system. The massive system is expected to support local energy requirements, reduce electricity bills for the residents and generate surplus capacity to the power grid. (See also: Tesla to Build World's Largest Virtual Power Plant in South Australia.)

The project secured the state government's approval in May and was then promised a $2 million grant and a $30 million loan from the government. The VPP had two trial phases. They jointly involve installation of home energy systems on a total of 1,100 Housing South Australian homes. Under phase one, around 100 homes received installation of the 5 kW (kilowatt) of rooftop solar panels and the 13.5 kWh Tesla Powerwall batteries. The experiment was successful, which demonstrate that distributed Powerwall technology can increase the supply of energy during peak periods.

The Changing Local Government

Remaining 1,000 homes under phase two are expected to secure the necessary equipment under an agreement signed by the previous state government led by the Labor party. The project is currently underway for phase two.

With phase one being a success and phase two underway, the final rollout to remaining homes under phase three is subject to the success of phase two and funding from the private sector. This funding is estimated to cost a total of $800 million when complete. (See also: Tesla Re-enters Australia, Promises to Solve Grid Problems.)

However, the project hit a roadblock when the government changed in March. The new Liberal party government suggested an alternative plan based on offering subsidies to the 40,000 homes to buy the home battery systems. It made the option nonviable for the low-income families as they were expected to pay for the equipment. Facing public backlash, the government announced support to Tesla’s VPP while the alternative battery storage subsidy plan also continues in parallel. Apparently, the new government is attempting to connect the two programs so that both could serve as a type of virtual power plant.

In a statement Sunday, the state government hailed Tesla’s first VPP trials for “delivering cheaper energy to South Australians who need it most,” and increasing the reliability of the state’s energy network, RenewEconomy adds. (See also: Tesla Unveils Solar Roof and Next Generation of Powerwall.)