California is ignoring a key solution to soaring rates and blackouts

OPINION – Imagine having a fully stocked modern toolkit in your garage but opting to pay extra for rusty, outdated tools for home repairs. That’s what’s happening in California’s power system. Despite skyrocketing electricity costs, the state is paying for outdated, expensive, and inefficient fossil gas power plants (also known as “peaker” plants) to provide power on hot days, instead of paying everyday Californians to take advantage of the smart clean energy technologies already in many of our homes.

Much of the energy bills Californians pay go toward peaker plants, which run only during high-energy demand periods and sit idle most of the time. The state has committed $1.2 billion from 2024 through 2026 just to keep these peaker plants on standby.

As California summers get hotter and electricity demand increases, the power grid will face even more stress, escalating the risk of blackouts and increasing the need for quickly deployable energy sources.

Conveniently, a better solution to this problem is all around us. Distributed energy resources (DERs) like electric vehicles (EVs), home batteries, heat pumps, and rooftop solar panels, can power the grid more efficiently than gas peaker plants, making everyday Californians the power providers instead of dirty energy.

Together, the energy from thousands of these devices, aggregated through advanced software, can prevent blackouts by acting as a massive, flexible energy resource. These “Virtual Power Plants” (VPPs) enhance grid reliability and efficiency—and their benefits are real and measurable. A recent study found that VPPs could save Californians over $750 million annually on electric infrastructure upgrades and traditional power plant costs, redirecting that money to ratepayer savings and to Californians with DERs.

This is not a futuristic proposition. DERs are already widespread in California, and their increasing affordability is driving even higher adoption rates. In 2023, there were approximately 1.8 million EV registrations in the state, with 18% of all new cars sold being EVs. To date, there are about 1.8 million rooftop solar systems.

Unfortunately, despite this high-tech toolkit, California refuses to let go of its rusty old tools.

Key state programs designed to incentivize DERs and VPPs to relieve grid strain with clean energy, like the Demand Side Grid Support (DSGS) and the Distributed Electricity Backup Assets (DEBA) programs, are proposed to be cut in this year’s budget.

These cuts follow a series of blows to distributed energy in California. Within the past year, state regulators have cut incentives for rooftop solar-plus-battery system installations; prevented schools from fully utilizing their own solar power; and rejected a viable community-solar program. Further, legislators recently gutted several measures that would have supported stronger use of DER technologies.

We cannot continue ignoring the powerful new technologies in our homes and businesses. California leaders must adopt proactive policies and a comprehensive vision to unlock the full potential of DERs and VPPs.

First, policymakers must stop the bleeding by restoring funding to the DEBA and DSGS programs and reversing harmful regulatory decisions through legislation like Senate Bill 1374, which allows schools and other non-residential customers to fully use their own on-site solar energy.

Second, they must advance policies that recognize the true value of DERs and VPPs. This includes setting clear standards for how utilities are credited for using DER programs that help balance the energy load.

Finally, Governor Newsom and state agency leaders at the CPUC, CEC, and CARB must provide a unified vision for an energy future that fully leverages these revolutionary consumer technologies and charts a pathway to get there. The state’s SB 100 Joint Agency Report, due in 2025, is a key venue to make these assessments.

California stands at a crossroads. We can continue down the path of skyrocketing costs, unreliable power, and environmental degradation, or we can embrace the future with DERs and VPPs, creating a resilient, affordable, and clean energy grid. The power is in our hands—it’s time to use it.

Edson Perez is a Senior Principal at national business association Advanced Energy United where he leads the organization’s advocacy work in the state of California.