Toward a more resilient grid

Our national grid faces mounting challenges. Electric vehicles are proliferating, increasing grid demand at hours when renewable energy is less readily available. Demand for AI is skyrocketing, requiring vast amounts of power. And extreme weather events like heat waves and rain storms are becoming more frequent and severe.

We’ve long relied on so-called “peaker plants” to avoid blackouts when energy demand peaked. Fueled by natural gas and used for only a few hundred hours per year, peaker plants no longer make sense economically or environmentally.

We at SIP are heartened to see the public sector instead look to technology and innovation to help solve this problem. In 2022, the California Energy Commission (CEC) began developing the Demand Side Grid Support (DSGS) program, a first-in-the-nation incentive for customers who provide load reduction and backup generation to support the state’s electrical grid during extreme events. DSGS will help move California beyond its historical approach of developing new, costly, fossil fuel-based power plants to achieve a total capacity goal. Instead, recognizing the need to better align incentives for flexible power generation and consumption, the CEC has begun modifying DSGS to reward exceptional performance, which will help both strengthen the grid and enable the shift to renewable energy.

California is also the first state to set an ambitious goal for shifting electricity demand from times of day with peak grid demand to times with lower demand. To achieve this goal, the state is incentivizing the growth of demand response programs, which facilitate shifts in demand by engaging consumers and aggregating them into virtual power plants (VPPs).

VPPs can consist of thousands of private homes or small businesses connected through their electrical infrastructure. Think solar panels, electric vehicles, home batteries, HVAC systems, and industrial equipment that can be harnessed to provide power to the grid or reduce demand when needed.

This will improve the grid’s flexibility, sustainability, and affordability. A recent study by the Brattle Group found that VPPs can provide for adequate resources at only 40-60% of the cost of alternative options.

OhmConnect, a company SIP backs through our Resilia platform, has been focused on demand response and VPPs for years. It has consistently demonstrated that these programs can provide cost savings for consumers and governments while significantly strengthening the grid. For instance, the VPP that SIP and OhmConnect created together, which is one of the largest residential VPPs in North America, played a key role in averting dangerous blackouts in California during the state’s recent heat waves.

California’s new policy builds on the momentum of residential-focused VPPs to encourage the growth of VPPs that aggregate much larger consumers of power, such as data centers. Data centers, factories and other heavy industrialized users were previously reliant on large, centralized power plants. This new model is enabling a fundamental reimagining of that approach.

We believe California is taking a critically important step toward the future of our country’s electrical grid – and toward SIP’s vision for a bi-directional and distributed relationship between consumers and the grid. We hope to see other states and municipalities adopt similarly innovative approaches to using technology to strengthen the electrical grid. Here at SIP, we are excited to partner with the ones that do.