“California is really excellent at deploying DERs, but really lags in DER utilization,” said Gabriela Olmedo, regulatory affairs specialist at EnergyHub, a company that manages demand-side resources and virtual power plants in the U.S. and Canada. Many of those programs have grown to play a significant role in reducing stress on utility grids during peak demand, she said, including a large-scale initiative in neighboring Arizona. But California’s “fractured, overlapping, and confusing load-flexibility programs really preclude scale,” she said.
DSGS, one of many programs created in response to California’s grid emergencies in 2020 and 2022, has broken that pattern, said Ben Hertz-Shargel, global head of grid-edge research for analytics firm Wood Mackenzie and lead author of a recently released report on virtual power plants. In particular, DSGS has avoided the types of problems that have limited customer participation in other VPP programs, he said.
First, under DSGS, customers can be paid for sending power to the grid from their home batteries that have been charged up by rooftop solar, he said. Most other VPPs in California only allow homes to reduce their consumption from the grid to zero, not to send power back to the grid. That’s a legacy of these programs’ genesis as traditional demand-response offerings that reward customers for reducing power use.
DSGS is also superior to the Emergency Load Reduction Program (ELRP), the other large-scale VPP program created as a response to California’s grid emergencies, Heavner said. One of the biggest differences is that ELRP is triggered only during specified grid alerts, warnings, or emergency declarations by the California Independent System Operator, which manages the state’s energy markets. Those emergencies are relatively rare, so participants are idle most of the time.
DSGS, by contrast, is triggered whenever wholesale prices on the state’s transmission grid exceed a threshold of $200 per megawatt-hour, so it plays a more active role in suppressing the price spikes that drive up costs for utilities and customers, Heavner said.
DSGS is also open to customers of all utilities in the state, unlike ELRP and most of the state’s other VPP programs, which are managed separately by each of California’s three large investor-owned utilities. Companies that have participated in both sets of programs say it’s easier to sign up customers and get them paid promptly under DSGS than under utility-managed efforts.
Killing California’s most promising VPP right as it’s getting big
A set of laws passed this year instructs state regulators to develop new VPP plans and programs, which could augment the current limited options. But “it will take years to establish that,” Heavner said. Meanwhile, “companies that have invested in dynamic grid response are left holding the bag right now.”
California may miss out on big money-saving opportunities as a result, he said. A 2024 analysis from The Brattle Group found that VPPs could shave more than 15% of the state’s peak demand by 2035, saving utility customers about $550 million each year.
The loss of funding for DSGS is particularly galling given the scale it has achieved, Heavner said. In a July test of the DSGS and ELRP programs, California’s three major utilities were able to dispatch about 540 megawatts of power from Sunrun and Tesla batteries, in what utility Pacific Gas & Electric described as “the largest test of its kind ever done in California — and maybe the world.”
Most of those batteries were enrolled in the DSGS program. Sunrun batteries alone accounted for at least 360 megawatts of capacity. As Sunrun CEO Mary Powell pointed out in a LinkedIn post, that’s more capacity than many of the state’s fossil-gas power plants provide.
Sunrun had enrolled more than 56,000 customers with solar-battery systems to participate in California VPP programs as of May, the majority of them in DSGS. The company offered participants up to $150 per battery enrolled in the 2025 season.
“We are concerned that California is walking away from its leadership position running the largest and most successful distributed power plant in the country,” Lauren Nevitt, Sunrun’s senior public policy director, told Canary Media.
Great Job Jeff St. John & the Team @ Canary Media Source link for sharing this story.
