California stops virtual power plant funding
California's governor has blocked funding for the Demand Side Grid Support program, a major virtual power plant.
California Governor Gavin Newsom's administration has prevented additional funding for the state's largest virtual power plant program. The Demand Side Grid Support program will not receive guaranteed money for next year, according to budget language finalized last week.
Brandon García, California policy director for the clean energy trade group Advance Energy United, reported the outcome. He stated that while the program was not outright dismantled, there is no guaranteed funding for it next year. Newsom's office did not immediately respond to a request for comment.
A spokesperson for Democratic state senator Josh Becker confirmed the situation. The $70 million that supporters hoped to use for DSGS over the next couple of years was not agreed upon in the final budget bills.
Program Scale and Performance
The DSGS program pays households and businesses to reduce power use or share stored solar power when the grid is stressed. Launched in 2022, it has grown significantly.
| Resource Type | Number of Homes |
|---|---|
| Homes with batteries | ~130,000 |
| Homes with smart thermostats & flexible load devices | ~75,000 |
A test in July 2025 demonstrated its capability. Rooftop solar-charged batteries in the program delivered roughly 476 megawatts of grid capacity over two hours. Utility Pacific Gas & Electric called it the largest test of its kind ever done in California, and possibly the world. García said the program has brought online more than a gigawatt of collective capacity to relieve grid stress.
Funding Challenges and Industry Impact
Without secure funding, it is unclear how participating companies will pay their customers. Companies like Sunrun, Tesla, Leap, and Renew Home are involved. Absent an intervention from lawmakers and the next governor in 2025, García does not anticipate more money for the program.
García expressed disappointment. "We're incredibly disappointed the administration rejected the legislature's proposal to fund DSGS. It's baffling," he said. He warned that participants might not wait long for a resolution. Even if a new administration wants to fund DSGS, waiting until June could mean few participants remain to enroll.
The program had its budget cut in 2024 and 2025. It was allocated no money in Newsom's January budget proposal, risking its ability to pay participants this year. Early this summer, lawmakers negotiated a transfer of $27 million from another program to keep DSGS running through 2026. However, they could not overcome administration opposition to secure funding for 2027.
Broader Grid and Cost Context
Sachu Constantine, executive director of Vote Solar, argued the state has largely failed to tap into its supply of rooftop solar-charged batteries and electric vehicles. He said DSGS stands out as a way to use resources customers have already invested in. "We should pursue every avenue available to use these resources that customers and companies have already invested in, that are already providing invaluable resources for the grid," Constantine said.
He connected the program to utility costs. A large portion of costs passed to customers of California's three major utilities are driven by the need to pay for fossil-fueled power plants and grid infrastructure for peak demand. These utilities now charge among the highest rates in the continental U.S.
Constantine suggested cutting DSGS funding undermines a more economical way to defer those costs. He pointed out this happens as utilities earn record profits, bills rise, and reliability is in question. Similar programs regulated by the California Public Utilities Commission and administered by utilities have largely failed to thrive. This includes the CPUC's Emergency Load Reduction Program, created alongside DSGS.
The final budget bills drafted by the legislature on Friday failed to include a Senate Democratic proposal. That proposal would have shifted $70 million from another California Energy Commission program to cover DSGS costs. The budget language also excluded Newsom's plan to shift control of the program from the California Energy Commission to the CPUC. Supporters feared that move could lead to the program being dismantled entirely.
Leaving the program under the California Energy Commission's control provides an opportunity. Becker's spokesperson said it allows the issue to be taken up early next year, potentially with a new administration.
