California withdraws financial support for the globe's leading virtual power facility
California's Energy Package Approved, but Funding for Grid Reliability Programs, including National Grid's Virtual Power Plant, Left Out
California lawmakers have approved an energy package that aims to bring down energy costs, expand the Western grid, and codify virtual power plants in long-term planning. However, the package does not include funding for two grid reliability programs, including a virtual power plant believed to be the largest in the world, run by National Grid.
The Demand Side Grid Support (DSGS) and Distributed Electricity Backup Assets (DEBA) programs were expected to receive over $400 million through at least 2028, primarily from California's Greenhouse Gas Reduction Fund. The reauthorization of cap and trade was a "great achievement," according to Perez, but it did not include funding for grid reliability programs.
The DSGS program, run by the California Energy Commission, offers compensation to customers, utilities, and/or aggregators in exchange for allowing their resources to be dispatched at times of grid stress. The program alone has over one gigawatt of enrolled capacity, with about 750 MW being batteries. In a test event in July, over 500 MW of battery energy was dispatched to the grid for two hours through the DSGS program.
The Brattle Group, commissioned by Sunrun and Tesla Energy, concluded that the taxpayer-funded virtual power plant could save ratepayers $206 million between 2025 and 2028. The energy package's omission of funding for the DSGS and DEBA programs could potentially undermine California's progress towards a more resilient grid that can respond to system stress.
Edson Perez, senior principal at Advanced Energy United, expressed disappointment that the grid reliability programs seemed to have been left out of the energy package amid intense negotiations and budget constraints. Perez expressed hope that legislators would find another way to fund the programs early next year.
The fate of the DSGS and DEBA programs rested on the reauthorization of California's cap and trade program, which was rebranded as "cap and invest" but did not include funding for grid reliability programs. The two programs were in limbo due to a $12 billion budget shortfall in California.
Kate Unger, senior policy advisor for the California Solar and Storage Association, stated that there is a risk that DSGS providers and customers could participate in 2026 and not get paid due to the lack of funding. The spokesperson for Gov. Gavin Newsom stated that he is committed to building a more reliable, affordable, clean, and safe power grid for California.
The energy package is awaiting Gov. Gavin Newsom's signature after the legislative session closed on Saturday. If signed, the energy package will move forward without the necessary funding for the DSGS and DEBA programs, potentially leaving the programs in limbo and the future of California's resilient grid uncertain.
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