A statement from Energy Minister Angus Taylor said the trial was meant to understand how to manage grid stability and bring down costs.
The project, which will cost $9.9. million in toto, will set up a virtual power plant to aggregate the electrical load of hot water heaters and also cut electricity usage at peak times or provide network services to the grid.
This will make it possible for both customers with and without solar panels to participate. The money will be routed through the Australian Renewable Energy Agency, with the South Australian Government matching the Federal contribution.
"Australia is experiencing a solar installation boom which is driving the creation of record new renewable capacity,” Taylor said.
“This project will help South Australia to get the most out of this boom and maximise the use of renewables in the grid, reducing pressure on the electricity system.
“Already, one in four Australian homes have solar – the highest uptake of household solar in the world. This is helping to reduce household energy bills and emissions.
“As more Australians turn to solar to power their homes, it is important that we manage this.
“Solar power can only be used when the sun is shining, which is why we need to find more ways to use it when it’s available to stop it going to waste.”