Newsom budget defunds California virtual power plant
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- Newsom's May biennial budget revision zeroes out 2027 funding for the Demand Side Grid Support (DSGS) program, California's largest consumer demand response effort, after the state legislature already defunded it last summer amid projected budget shortfalls.
- The proposal would shift DSGS enrollees to the Emergency Load Reduction Program (ELRP), a 'last resort' grid-emergency program overseen by PG&E, SDG&E, and Southern California Edison that pays $1/kWh for residential load reductions and $2/kWh for nonresidential.
- More than a dozen clean energy groups — including Advanced Energy United, distributed energy providers, and demand response aggregators — signed a March 25 letter calling the shift 'detrimental to the state's energy reliability' and warning that re-creating DSGS elsewhere would waste public resources.
- A February trailer bill proposed redirecting funds from an expiring school energy efficiency program to keep DSGS running through the end of 2026, while a California Public Utilities Commission successor program could eventually take its place.
- A 2025 Brattle Group study commissioned by Tesla and Sunrun — the largest DSGS participants — found the program could yield up to $206 million in net system savings if allowed to run through 2028.
- Advanced Energy United's Brandon Garcia warned the CPUC transition would bring 'higher administration costs and lower enrollment capacity,' undermining efforts to ease what he called California's 'affordability crisis' driven by some of the nation's highest retail electricity rates.
Why it matters: The shift would move a program that dispatched 539 MW during July 2024 test events and could yield $206 million in net system savings through 2028 into a narrower 'last resort' program with lower compensation rates, potentially discouraging residential battery adoption in a state with some of the highest retail electricity rates in the country. Clean energy advocates say the CPUC-run replacement would carry higher administrative costs and slower enrollment, undercutting California's grid reliability and clean energy goals at the same moment behind-the-meter storage is projected to double to roughly 4 GW over the next decade.
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