California’s grid reliability and premier virtual power plant (VPP) program are in limbo as the state faces a $12 billion budget shortfall and has just weeks until its legislative session comes to close.
Advocates hoped lawmakers would enable the Demand-Side, Grid-Support (DSGS) program to expand by boosting its funding. But the program’s funding was whittled down throughout the budget’s drafts until the boost eventually became a cut to the tune of $18 million. The DSGS program is funded through California’s Greenhouse Gas Reduction Fund.
When Gov. Gavin Newsom approved the budget, he deferred decisions on most Greenhouse Gas Reduction Fund investments until later in the year. Lawmakers also deferred decisions on the Distributed Electricity Backup Assets (DEBA) program, which funds new distributed batteries and microgrids.
Now, a coalition led by Advanced Energy United said the DSGS program will run out of funding by the end of the year. In a letter sent to the governor last month, the coalition said the DSGS program needs at least $75 million to remain operative in 2026. The coalition said the $50 million allocated to DEBA through Proposition 4 must be appropriated this year for DEBA to get off the ground.
“Defunding or delaying either program at this crucial juncture would not only undermine affordability and reliability, but also damage California’s credibility as a reliable partner for the businesses driving clean energy forward at a time when we should be leveraging their innovation and investment,” the coalition said.
The DSGS program was established in the wake of its blackout and near-blackout grid events in 2020 and 2022.
California has managed to avoid similar grid emergencies since then despite rising electric demand. During the summer of 2024, the California Energy Commission said the DSDG program helped stabilize California’s grid during four separate heatwaves. The VPP part of the program was called upon 16 times during summer 2024, and its non-combustion demand-response option activated one time.
As part of California’s Strategic Reliability Reserve, the DSGS program provides incentives for residents to reduce electricity usage or to send energy to the grid during periods of high electric demand. This compensation rate is less than the cost of new incremental resource adequacy capacity costs, which have been exponentially increasing over the past several years, according to the California Public Utilities Commission (CPUC).
The DSGS program leverages different resources to manage demand, offering four different enrollment options:
- Option 1: Emergency Dispatch
- Option 2: Market-Integrated Demand Response Incremental Capacity Pilot
- Option 3: Market-Aware Storage Virtual Power Plant Pilot
- Option 4: Emergency Load Flexibility Virtual Power Plant Pilot
The emergency dispatch option pays participants $2 for each kWh of incremental load reduction from their typical energy usage during DSGS dispatch events.
The DSGS program includes one of the largest VPPs in the world, with more than 200 MW in capacity, according to the California Energy Commission. Since its launch, the program has enrolled 720 MW of customer battery capacity, according to the California Solar Storage Association (CSSA).
The program’s battery VPP option could grow to 1,300 MW in the next three years if the program is funded and able to continue, according to a Brattle Group report commissioned by Sunrun and Tesla Energy, both of which are DSGS participants.
The Brattle report also said the DSGS program could provide up to $206 million in net cost savings to all Californians. Additionally, every dollar put into the DSGS program results in up to two dollars in customer rate reduction, according to CCSA.
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Remember when there were heatwaves and local municipalities would ASK that we reduce power consumption to help out the grid? And we did it?
Now, we heat and cool entire McMansions with 9-foot ceilings to 70 degrees and then complain about the costs.
In the winter…bring it down to 65 degrees and put on a sweater. In the summer…keep it at 75 and take off a layer of clothes.
My goodness, have we gone soft?