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Senate bill 913 would require state regulators to enhance pathways for aggregated distributed energy resources to qualify as resource adequacy capacity by mid-2028.

The bill would also require the state public utility commission to make sure that net energy metering customers and net billing tariff customers do not receive duplicate compensation.

Generators, distributors and community choice aggregators could include aggregated distributed energy resources in resource adequacy filings and procurement.

Community choice aggregators are cities and counties that buy power for their residents, and third-party energy service companies are often contracted to run their programs.

Renewable energy has a sizeable footprint in California, but barriers to profitability persist even as the state’s generation needs grow.

“Getting distributed resources into resource adequacy is necessary, but it does not by itself create what project finance needs, “said Gaurav Shah, managing partner at consultant Trident Renewables. “An aggregator is still underwriting a revenue stream with no observable forward price.”

Senate bill 913 cites increasing peak and net peak electricity demand due to continued growth and higher temperatures as a reason to stream VPPs into the grid. The VPPs are generally fed by solar power and batteries, meeting the state’s desire to reduce the need for fossil fuels.

The language of bill, sponsored by Sen. Josh Becker and known as the Clean Local Power Act, added that the amount of demand response participating in the resource adequacy program of the California Independent System Operator (ISO) has declined in recent years.

The bill said state regulations will allow aggregated distributed energy resources to combine different types of distributed resources and technologies.

Multiple devices can participate behind the same utility point of interconnection if they are not double counted.

Capacity determinations are technology neutral, based on measured performance, and weather normalized.

Senate bill 913 would have the utility commission work with the state energy resources conservation and development commission and the ISO. The bill omits mention of the California Energy Commission.

Another law sponsored by Becker, Senate bill 905, would establish a grid utilization metric measuring the load factor across each segment of California’s distribution network.

The metric would identify which circuits and substations can accommodate substantially higher energy throughput without upgrades by redistributing demand away from peak periods.

The utility commission is supposed to be able to mandate annual improvements in utilization rates with the results. Utilities are expected to respond by incentivize customers to shift electricity consumption to off-peak hours.

Observers suggest Newsom may sign the bills, which passed the legislature earlier this year, or let them become law without his signature.

In California, a bill passed and sent to the governor before September 1 becomes law without his signature if he does not return it by September 30.

Shah said that Newsome vetoed VPP-related legislation last year based on the cost to the energy commission and misalignment with the utility commission’s ongoing resource adequacy reform.

“SB 913 is drafted around both objections,” Shah said. “A second consecutive year of vetoing virtual power plant bills while retail rates climb is a difficult headline to carry into an election autumn.”

“The state has too much pressure on peak demand, wildfire-related resilience, and distribution grid cost to ignore a model that can unlock capacity from assets already sitting in homes and commercial sites,” said Dieter Blom, director at Versys Media, an artificial intelligence integration company.

The state already has many commitments to support VPPs, some of which complement each other.

Changes to the state’s net metering rules in 2023 reportedly slashed the value of excess residential solar being sent to the grid by 75%, making a battery a necessity to optimize solar panels.

The state’s largest electric distributors, Pacific Gas & Electric and SoCal Edison, participate in and facilitate VPP programs. Third-party providers install solar panels and batteries at residences, discharging them when an hour-ahead signal indicates local grids are stressed.

The state budget for the coming fiscal year contains no expenditures for an existing VPP program called demand side grid support.

The program encouraged consumers to export stored energy during extreme demand in the summer months in exchange for payment, and was operated by the energy commission.

Sunrun and Tesla said that the companies’ fleets of home batteries dispatched more than 580 MW on September 9, the largest distributed power plant dispatch event.

The commission told MAGNIFYI that it takes several months to process and post this data, so it will likely be validated in early 2027.

Funding for the program runs out on December 31, Shah said, and the utility commission tariff that is supposed to replace it is years away.

“That gap is where a gigawatt of enrolled capacity either holds or walks,” he said. “If the payment stops, households un-enroll, aggregators lose the revenue that justified acquiring them, and the installed telemetry goes cold. You rebuild from a smaller base at higher cost.”

Tesla stopped accepting new enrollments for demand side grid support in March.

For a time, SoCal Gas distributed state government rebates for customers to install batteries in a self-generation incentive program, but funds are no longer available.

The ISO is considering a proposal to allow aggregated behind-the-meter batteries from utility-authorized end-use customers to participate in the energy market as demand response, provided that a resource does not net export.

The proposal, still in the discussion stage, allows the customers to contribute their actual performance while maintaining demand response as a load curtailment product.

Many in the state are looking beyond end-users.

“There is a real role for independent aggregators and software platforms that can combine batteries, electric vehicles, thermostats, water heaters and commercial loads from different manufacturers, then forecast, dispatch and settle that capacity into utility and ISO programs,” said Tapas Peshin, Product Lead at PCI Energy Solutions, an energy software company. “That aggregation and market-integration layer could ultimately be where a lot of the value sits.”

“California’s virtual power plants will keep growing because the economics finally work for households,” said Gang Xiong, founder of EcoSwatt, a residential solar and home energy review site.

“Longer term, I expect aggregated home batteries to undercut gas peakers on two- to four- hour evening peaks purely on cost.”

Another expert pointed out that batteries eventually expire.

“If VPPs realize the scale this bill anticipates, California will have a lot more lithium storage coming to end of life at the same time, and there is no clear standard yet as to what responsible decommissioning will look like at that scale,” said Puneet Gupta, CEO at MG Environmental Consulting.