California passed two virtual power plant (VPP) bills that streamline how utilities use distributed energy resources (DERs) and use VPP programs to reduce electricity demand and lower costs for ratepayers. The bills now await Gov. Gavin Newsom’s signature.
VPPs are a system of distributed energy resources like rooftop solar, battery energy storage, bidirectional EV chargers and more. VPPs enable a flexible, resilient grid that can adapt readily to shifting electricity demand on a more localized basis than centralized power. Flexible energy resources can both dispatch power and reduce power usage from specific locations at peak electricity demand hours, delivering electricity when it is needed most.
AB 740 requires the California Energy Commission to collaborate with the Public Utilities Commission and the California Independent System Operator (CAISO) to develop a comprehensive VPP deployment plan, which will enable DERs, such as smart thermostats and home batteries, to coordinate together into a flexible power source.
The bill requires the California Energy Commission to include the VPP deployment plan in its integrated energy policy report, the requirements of which will be subject to available funding.
“Virtual power plants can respond quickly to deliver power or shift load, making the most out of our existing grid, giving consumers new ways to benefit from the clean energy technologies they’ve already invested in, and lowering costs for everyone,” Edson Perez, California lead at Advanced Energy United, in a statement. “AB 740 will unlock this potential and turn these virtual power plant networks into a consistent, everyday source of affordable and reliable power that keeps costs down for all Californians.”
Utility bills in California have risen an average 127% over the past decade, Assemblymember John Harabedian (D), AB 740’s author, wrote in a petition urging Newsom to pass the legislation.
The Climate Center said VPPs can help reduce costs for all ratepayers by reducing the need to build poles and wires to accommodate growing electricity demand.
Reducing the need to build poles and wires is important, as distribution was the largest source of capital expenditure in 2023, accounting for 44% of the total capital expenditure, according to the Lawrence Berkeley National Laboratory.
Image: Lawrence Berkeley National Laboratory
“California is leaving millions in energy savings on the table by shutting out demand-side resources like batteries, EVs, and smart thermostats from energy planning with opaque rules,” Perez said.
The Assembly Committee on Appropriations said AB 744 would create “significant new analytical work” for the California Energy Commission, and therefore, “it will need significant new resources for a limited time, likely in the hundreds of thousands of dollars.”
The California Energy Commission estimated one-time costs of $191,309 and ongoing costs of $114,976 annually, which will go toward a temporary and a permanent position to execute the required analysis. The energy commission said it has an ongoing structural deficit within the Energy Resources Program Account fund, its main operational funding source.
A study by GridLab and Kevala foud that applying California’s load management standard peak reduction in low to high scenarios decreased the overloaded feeder count by over half compared to other load management standard scenarios.
In 2023, the California Energy Commission established a statewide goal of 7 GW of load shift by 2030, estimating that roughly between 3.1 GW to 3.6 GW of load was shifted the prior year.
The California Energy Commission said at the time, “The proposed target is aspirational but achievable with robust policy support,” and made 18 policy recommendations for reaching the goal. These recommendations included allocating funding for the commission to supplement demand response, reforming availability rules and resource adequacy requirements, and promoting load-modifying program development and measurement, including reducing resource adequacy requirements on load-serving entities with these programs.
AB 44 requires the California Energy Commission to adopt a set of requirements to enable load-serving entities to use these demand-side resources to reduce their demand forecast. However, an assembly floor analysis said, “Caution may be in order, as these demand-side resources can vary greatly in their design – from virtual power plants to aggregated residential thermostats – and vary in their visibility to the state agencies and California′s energy market.”
The analysis said AB 44 seems to recognize this caution by not mandating adoption of these technologies, but rather enables state agencies and CAISO to set every requirement and protocol.
AB 44 garnered wide support, with proponents saying the bill will ″allow for more predictable and timely participation, reduce risk for those investing in load flexibility, and ultimately deliver savings to customers.”
Neither AB 44 nor AB 740 received any opposition on file.
AB 44 unanimously passed both the Senate and the Assembly. AB 740 unanimously passed the Assembly after it passed the Senate 39-1, with Sen. Brian Jones (R) casting the only vote in opposition.
(Also read: Newsom orders agencies to fast-track clean energy projects before federal tax credits expire)
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.