Let's talk about how Tesla energy is going to save the state of Texas. A little bit dramatic, but not too terribly far off from the truth, really. Over the past year, Tesla's energy division has been making some moves into the Texas energy market, and this ranges from creating their own utilities company in the state, Tesla Energy Ventures, to recently gaining approval for their first virtual power plant network in Texas. There is a golden opportunity here for Tesla to show a reluctant state government what they are really capable of when it comes to energy delivery, and at the same time bring some much needed stability to an electrical grid that has struggled to deal with the unpredictable nature of our modern climate. This is what Tesla can do for Texas.
The potential game changer that Tesla is currently introducing to the Texas market is called a virtual power plant. This is basically a method where Tesla can draw energy from individual batteries all across the state into the grid, with the goal of increasing the total amount of electricity available. This can have a positive effect in two key areas. For one, this excess power flowing into the grid can very quickly help to prop up the delivery system during periods of high stress when the supply of energy is lower than the demand, and second, an adequate volume of battery storage can actually eliminate the need for natural gas fired peaker plants, which are the current solution for dealing with these intermittent periods of high energy demand.
The Tesla Virtual Power Plant converts individual home power wall batteries into one giant battery by remotely taking control over the power wall and discharging the entire network into the grid simultaneously. Tesla has recently been granted approval to commence a statewide market design pilot, Virtual Power Plant in Texas. The pilot will involve power wall owners, pooling their stored energy together, and supplying the grid while getting paid for the energy they send. Each power wall holds around 13kWh of energy, which itself is about enough to power an average home for a day. Not a particularly large amount of energy, but when you start to combine hundreds or even thousands of these small batteries together, you get the effect of one large grid scale battery.
Tesla has already deployed their virtual power plant in California, but they even have one of these networks operating in Japan. The California VPP has reached over 3000 households participating and the Japanese project in Okinawa has grown to over 300. And to run some numbers, even if those 3000 houses in California only had one single power wall each, that would total around 39 megawatts worth of electricity, which is the equivalent of 10 Tesla megapack units, which would represent over 10 million dollars worth of battery storage. And that's on the low end. It's likely that many of these houses would have two or more power walls active. You can have up to 10 connected at one house. Not every house with a power wall is instantly part of the VPP. Individual owners have to opt in first, and they receive a kickback for the energy they contribute at $2 per kilowatt hour, which is not much, but the more useful the VPP becomes, the more profitable. For example, some users in the California group are finding that in the summer months, when demand is at the peak, they can make enough money through VPP sessions to cover their monthly payment of the power wall and Tesla solar hardware. So we're talking about a very significant potential here, both in value and in functionality.
Though so far, Texas has proven to be a much more difficult market for Tesla to break into. The Texas power grid actually functions as an open market, so you get dozens of power companies competing in the state for customers. There are multiple entities handling power generation and utility retail. The Texas grid itself is completely independent of the rest of the country, and that plus the deregulated grid makes it a little difficult for a newer company to squeeze into that market. So Tesla had to deploy the lobbyists in Texas to help get their plan authorized through the state government, likely taking advantage of the disastrous power grid failures in 2021 to make the point that a more cohesive system would help in extreme weather events. Lobbying efforts from earlier this year got approval to run a demo VPP using 200 participants back in June 2022, which is reportedly what finally got Tesla their authorization to expand to the rest of the state. By the way, if you're enjoying the content we create here on the Tesla space and would like to support us, check out our Patreon page. We've got some exclusive perks for our Patreon supporters, and it helps us grow the team and continue producing this content.
Now here is the million or maybe even billion dollar question. Would a virtual power plant actually be able to prevent the kind of grid failure that Texas saw in February 2021? In hindsight, we know that the primary reason for the Texas freeze of 2021 was a failure in their natural gas delivery system. The majority of energy in the state comes from burning natural gas, but when the temperatures suddenly dipped down to lows of negative 2 Fahrenheit or negative 19 Celsius, the pipes froze and the gas stopped flowing, which led to the power generation coming to a grinding halt.
This is actually the most ideal scenario for a Tesla big battery or virtual power plant to save the day. Most blackouts are going to be caused by a physical disruption to the distribution system, like storm damage to the power lines. If the cable connecting your house to the grid is broken, then a VPP isn't going to be of any use. That's when having your own power wall at home is key. But in the case where a power generation plant just goes down for whatever reason, that's when a battery storage system can come online and maintain the flow of electricity with a really good integrated system. This transition can be nearly seamless. Now, those batteries on their own are only going to hold out for a few hours, so it's not a total solution independently, but it can buy the power generation company some time to get things back up and running while keeping the lights on. Again, this would have been very beneficial in 2021 when the cold presented one big struggle for the natural gas distribution system, and then losing power on top of that made the problem infinitely more difficult to solve.
Battery storage does still have the potential to replace conventional power plants entirely, as long as you properly integrate storage with renewable energy generation. In the wake of the Texas blackout, a number of state officials and media pundits quickly jumped on the opportunity to blame renewable energy for the failure. Texas Governor Greg Abbott told Fox News, it just shows that fossil fuel is necessary for the state of Texas, as well as other states, to make sure we will be able to heat our homes in the winter times and cool our homes in the summer times. Then Fox TV host Tucker Carlson piled on by claiming the windmills froze so the power grid failed, and yes, windmills did freeze, but wind energy across the entire state only makes up about 7% of the total power generation, so it's unlikely that they were the straw that broke the camel's back. All of the accounting done after the fact points to a cold weather failure of the natural gas supply chain as the primary factor.
Though this does highlight the major flaw in the way that we have been using renewable energy so far, because it is true that as soon as the windmill freezes or the solar panel gets buried in snow, the flow of energy comes to a halt, and that is a problem. That's why it's very important that we learn how to better integrate battery storage into green energy, so that on windy days, when the demand for electricity is lower, all of that excess energy generated by the windmill is being held in storage. So when the time comes, that windmill stops spinning, the battery kicks on and the electricity continues to flow. Now, that is going to take more than a few thousand people with power walls in their garage to make that happen on a statewide scale. It's going to take major utility companies to invest in grid level storage solutions like the Tesla megapack installations that we've seen in places like Australia, California, and Hawaii.
And this is likely a driving force behind why Tesla chose to launch their own retail electricity business in Texas, Tesla Energy Ventures. Since the Texas utility market is open to anyone, Tesla made the decision to throw their own hat into the ring. This way, they can work to ensure that more grid scale megapack installations arrive in Texas, and they can be used to form a strong backbone to the virtual power plant system as it continues to expand across the state.
One of the first things that the company did after announcing their plan to enter the Texas energy market was confirm a massive 250 megawatt battery installation for the city of Austin. So we know that they are not messing around, and this is likely just the first of many grid scale energy projects to come.
As always, we'd be very curious to hear from anyone out there who has participated in the Tesla virtual power plant, or anyone from Texas who's been using Tesla energy to try and secure their power supply. Let us know about your experiences down below in the comments section.
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