CPUC decision essentially requires PG&E, SCE and SDG&E to establish residential virtual power plants

The California Public Utilities Commission (CPUC) recently launched new programs to reduce energy demand and increase energy supplies during critical hours on the state’s power grid. These decisions were made in response to the Gavin Newsom government ruling in July 2021 Emergency Proclamation urging all government agencies to ensure there is enough electricity to meet demand.

Credit: SunCommon

A CPUC analysis found that adding 2,000 to 3,000 MW of new supply sources will help address grid reliability under the most extreme conditions (wildfires, heat waves) in 2022 and 2023. To address this shortfall, CPUC announced:

  • Compensation from residential customers to save electricity – Adoption of a new program within the Emergency Tax Reduction Program (ELRP) that will pay residential customers $2/kWh to reduce energy consumption at critical times, with special outreach to low-income customers and customers in underserved communities. With this new offering, residential customers can be paid in the same way as business customers to reduce energy demand at key moments.
  • Adapting and expanding existing demand response programs – Doubling the compensation rate for customers who save electricity during grid stressful conditions under the ELRP to $2/kWh for the duration of the ELRP pilot (the ELRP pilot is authorized until 2025). Enables electric vehicle customers to participate in ELRP by shifting or discharging their charging behavior from the vehicle’s battery. Changes have also been made to improve the participation and performance of other existing demand response programs. These programs provide incentives for commercial and industrial customers to reduce their electricity consumption when the grid is live.
  • New Incentive Program for Smart Thermostats – Providing $22.5 million in incentives to install smart thermostats in hot climate zones. The smart thermostats allow customers to reduce air conditioning usage by a few degrees in critical times and get paid for the energy savings, with special protections for low-income customers eligible for the CPUCs California Alternative Rates for Energy (CARE) or Family Electric Rate Assistance (FERA) Programs.
  • New Energy Efficiency Programs – A new energy efficiency program for the summers of 2022 and 2023 for rapid deployment of energy savings during peak or grid peak times, with payments to consumers on a performance basis and energy savings measured by the meter; and extending several existing energy efficiency programs that have been proven to deliver savings quickly and reliably.
  • New dynamic rate plans – Adopt two pilot dynamic tariff programs to test the effectiveness of customer response to electricity tariffs that change rapidly during grid emergencies. One pilot will move farm water pumping to off-peak hours in response to price signals, while the other pilot will test how dynamic tariffs affect customer end-use, such as charging electric vehicles.
  • Flex Warning – Continuation of the Flex Warning media campaign in 2022 and 2023 to make consumers aware of the need to reduce electrical loads during periods of system stress, and expand the focus of the program to cover the new residential portion of the ELRP pilot program.
  • Micro grids – Up to four new energy storage microgrid projects for San Diego Gas & Electric Company (SDG&E) to deliver a total of 160 MWh of capacity to fill projected electricity shortages in the summers of 2022 and/or 2023.
  • Temporary Generation – Authorization for Pacific Gas and Electric Company (PG&E) to study potential expansion of its temporary generation program by identifying sites that can be securely connected to address system capacity shortage.
  • Increased overall supply and demand side procurement requirements for utilities – To ensure that sufficient electricity sources are available to service customers during times of peak and net peak energy consumption, utilities are being instructed to purchase additional supply and demand sources for summers 2022 and 2023 of 900-1,350 MW each for PG&E and Southern California Edison (SCE), and 200-300 MW for SDG&E (for a total of between 2,000 and 3,000 MW). The existing authorization to purchase additional supply-side resources, such as storage, import and efficiency of gas plants, will be extended. The utilities can count tenders under the other programs addressed in these proposals towards the objectives. Essentially, this requires the three utilities to set up virtual power plants (VPPs).

News item from CPUC

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