Australia's AGL Energy has launched what it claims to be the world's largest virtual power plant project.

The A$20m ($14.9m) project will see 1,000 connected batteries installed in homes and businesses in South Australia.

Together they will have the capacity to store 7 MWh of energy and provide 5 MW of peaking capacity.

The project is backed by the Australian Renewable Energy Agency (ARENA), which has conditionally approved A5m in funding.

It will be undertaken in three phases over about 18 months.

The virtual power plant works by leveraging cloud-based software, which directs energy storage units to operate simultaneously and meet peak energy demand across entire community or service area.

AGL managing director and CEO Andy Vesey said: “This project is the world’s largest, the first of its kind and an innovative solution to both help customers manage their energy bills and at the same time contribute to grid stability.

“This project is core to AGL’s strategy of being a manager of distributed energy resources. It also leverages our investment in Sunverge and helps us to continue to improve the digital customer experience.”

During the first phase, 150 eligible customers in metropolitan Adelaide will be given discounts to purchase Sunverge’s energy storage system for AU$3,500 ($2,665). The first phase will run until April 2017.

Taking into account solar generation efficiency, the payback period is expected to be in seven years. During the later phases, narrow zones in the metropolitan Adelaide region will be covered, where peak demand management and other network support services can be installed.

Image: Sunverge, AGL and ARENA to develop virtual power plant in Australia. Photo: Courtesy of PRNewsFoto/Sunverge Energy.