California Legislature Advances First of Two Bills to Reduce Energy Rates with Virtual Power Plants

CALIFORNIA-The California Senate Committee on Energy, Utilities and Commerce today voted to approve a bill to reduce electricity rates by turning networks of customer energy devices into "virtual power plants" that can compete with large power plants in statewide reliability markets. The Clean Local Power Act, SB 913, introduced by Senator Josh Becker (Menlo Park), would give solar-charged batteries, electric vehicle chargers, heat pumps, and other onsite energy devices greater access to California's Resource Adequacy program so they can help meet peak demand and lower costs for everyone.

"Californians are struggling with rising electricity bills, we need to use our grid more intelligently and cost-effectively," said Senator Josh Becker (D-Menlo Park). "Instead of always building expensive new infrastructure to meet just a few peak hours of demand, we should be making better use of the resources we already have in our homes. Millions of Californians already have tools like smart thermostats, home batteries, and electric vehicles that can help support the grid. SB 913 ensures we can use those resources to lower costs, reduce pollution, and improve reliability."

Current CPUC programs aimed at ensuring the state has enough generation capacity to meet peak energy demand and utilizing alternatives to traditional power sourcing during the hours of greatest demand exclude the majority of California's growing fleet of customer-sited batteries. The CPUC does not count any electricity exported to the grid from customer sites. Batteries in homes and businesses can only get credit for reducing a customer's individual electricity consumption, and no incentive is available for electricity the device could send back to the grid. That limits the ability to create virtual power plants that could replace more expensive, and often polluting, power plants to provide peak generation.

SB 913 provides a commonsense solution by enabling networks of customer batteries to offer more of their energy into virtual power plants. It requires the CPUC, in consultation with the CAISO and the California Energy Commission, to develop a methodology that will give credit for energy exported to the grid from customer devices.

This will allow California's growing fleet of flexible, exporting customer energy devices to provide local, clean, affordable energy at times when it is needed most. It will also help reduce California electric rates by tapping more of the energy in consumer devices when it is available at lower cost than other resources.

"Tapping solar-charged batteries and other customer devices when they are the cheapest option is an essential strategy for making energy affordable in California," said CALSSA Policy Director Jon Hart. "California now has 300,000 solar-charged batteries installed on garages, campuses, and farms throughout the state, with 2,000 more added every week. They are already reducing costs for everyone, but we're not using them to their fullest extent."

The legislature this year will also consider the Grid Utilization Act, AB 1975, introduced by Assemblymember Nick Schultz (Burbank). This bill will help reduce energy rates in California by requiring utilities to make better use of the grid capacity the state has already built and paid for.

Utilities have traditionally expanded the electric grid whenever they estimate there may be a need to deliver more energy. With increased electrification and more data centers, the need for grid capacity will grow much faster than ever before. Expanding substations and upsizing other components on the electric grid are expensive and slow, pushing energy rates higher. Utilities may simply not be able to expand the grid fast enough, at any cost, to enable transportation and building electrification at the needed scale.

The traditional approach is favored by utilities because their profits are based on a percentage of dollars spent on the grid.

AB 1975 offers a modern solution to handle our increasing electrical needs at the lowest cost and at a pace that works. Customer devices can be operated in coordinated fleets to balance electricity supply and demand within the constraints of the grid. The timing of electric vehicle charging can be flexible without impacting the needs of drivers. Batteries installed on houses, campuses, and other buildings throughout California are networked and can be dispatched remotely in response to grid needs. Building energy controls can adjust the timing of electricity consumption. These combined assets create grid flexibility.

Maximizing existing energy sources is also more efficient. Many circuits operate significantly below capacity most of the time and at full capacity only a small number of hours per year. Expanding the size of grid equipment to serve a small number of hours of higher usage wastes ratepayer dollars. California can get more out of the grid it already has by harnessing batteries and appliance controls in the hours when usage peaks.

AB 1975 would require the CPUC to create a grid utilization metric and to establish minimum standards for PG&E, SCE, and SDG&E under that metric each year. To meet an increasing standard, the utilities would establish load flexibility programs that encourage customers to shift their consumption of electricity from the grid to off-peak hours.

"Building highways large enough so there is never a rush hour slowdown would be extremely expensive, but that is essentially what the state is currently doing with the electric grid," said Hart. "California can increase electricity consumption without a corresponding increase in grid costs if the utilities make use of load flexibility tools that are available today."