California’s power grid is under intense financial pressure — and so are the people who depend on it. The cost of keeping the California power grid up and running has climbed sharply in the past decade, sending household energy bills higher and forcing utilities to spend billions on poles, wires and transformers.

A new study from GridLab, produced with grid-data startup Kevala, suggests that virtual power plants — networks that combine rooftop solar panels, home batteries, electric vehicles and smart appliances — could be one of the most effective ways to control rising distribution grid costs.

Story Highlights

• Distribution grid spending in California reached 44% of total utility budgets in 2023.

• GridLab and Kevala say prioritizing lightly loaded circuits with VPPs could save $13.7 billion by 2030.

• “Load flexibility” programs pay customers to reduce use or inject power at key times.

• Utilities still struggle to integrate VPPs and DERs into investment plans.

The Rising Price of Electricity Delivery

For utilities, much of the spending now goes to the distribution grid — the poles, wires and transformers that deliver electricity from substations to homes. In California, that cost is even higher because of wildfire-prevention projects and the state’s push to electrify cars and buildings.

Ric O’Connell, founding executive director of GridLab, said delaying some of those upgrades could save consumers real money.

“That’s where the money is,” O’Connell told the newspaper. “Deferring the greatest number of highest-cost grid upgrades will save the most money.”

How Virtual Power Plants Fit In

Virtual power plants (VPPs) are designed to do exactly that. By pooling thousands of small energy resources — from rooftop solar to EV chargers — a VPP can act like a flexible power plant, reducing demand or sending electricity back into the system. This “load flexibility” lets utilities avoid or defer expensive upgrades.

California hopes to add 3.5 gigawatts of such “load shift” capacity by 2030. To test how best to deploy it, Kevala compiled data on every feeder line, transformer and substation of the state’s three largest utilities.

A Counterintuitive Result

The study ran three scenarios: spread VPP capacity evenly, target the most overloaded circuits first, and target the least overloaded circuits. The last option — focusing on lightly loaded circuits — produced the biggest savings.

It could reduce distribution grid costs passed to customers by $13.7 billion through 2030, about $10 billion more than the other approaches.

O’Connell said the result surprised his team:

“At first, we thought you’re going to start with the most heavily overloaded circuits and allocate flexibility to those,” he said.

“But we found you basically exhaust your flexibility on a handful of circuits — and you’re basically not saving a lot of money. For those instances, maybe it makes sense to spend real money on poles and wires.”

Focusing on lighter-loaded circuits spreads the benefit over more of the low-voltage grid, especially in urban areas where equipment is buried underground and upgrades are costlier.

Lessons From “Non-Wires Alternatives”

The study’s conclusion upends a decade of “non-wires alternatives” policy. Since 2014, California regulators have asked utilities to use distributed energy resources (DERs) — like batteries and smart devices — to avoid building new grid infrastructure. But few proposals have moved beyond the planning stage.

“Nothing’s really happened,” O’Connell said.

Utilities often selected projects that DERs could not solve within time or cost limits. By contrast, lightly overloaded circuits might need only small amounts of DERs to solve short-term overloads on hot days.

Customers Need Flexibility Too

Another challenge is customer participation. Most people install batteries for backup or to store their own solar power — not to hand full control to the utility. Past programs show that customers stick with virtual power plants only if they can “opt out” of certain dispatches, such as when they need to charge an EV quickly or keep their home cool for elderly relatives.

By targeting lightly loaded parts of the California power grid, utilities might relax control requirements and still achieve savings.

“They’re always worried about, ‘What if the DERs don’t show up?’” O’Connell said.

Planning and Data Gaps

Aram Shumavon, CEO of Kevala, warned that utilities have not yet built VPPs and DERs into investment planning. Without that, the traditional grid upgrade remains the default choice.

“We’re spending a lot of time right now on what feels like baby steps compared to how this market as a whole will need to function,” he said.

Getting the necessary grid data is also difficult. A recent bill provision that would have required California’s three major utilities to share data for VPP planning was stripped out.

Political and Financial Pressure Mounts

For decades, utilities had little incentive to support alternatives to grid spending. But rising demand from the AI boom and climbing rates nationwide have changed the equation. Shumavon said the risk now is that utilities cannot raise rates enough to cover new investments, putting political pressure on them to cut costs.

O’Connell agreed that utilities are more open to virtual power plants now.

“They’re seeing rate pressure being a much bigger deal for them,” he said. “Anything they can do means that billions less in capital spend will show up.”

Next Steps

The GridLab-Kevala study does not lay out program designs or payment schemes. Instead, it shows that California power grid costs can be cut significantly by strategically deploying load flexibility.

“You can do this — let’s figure it out,” O’Connell said.

This version keeps the same facts but lengthens the story, separates quotes, and repeats the main keywords (“California power grid,” “virtual power plants,” “load flexibility,” “distribution grid costs”) naturally for search visibility.

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