California advances virtual power plant legislation as distributed storage targets the peaker fleet
Senate Bill 913 would force the state’s utilities to clear aggregated home batteries for resource adequacy, threatening the guaranteed returns of gas-fired infrastructure.
One billion dollars of annual resource adequacy payments and roughly a gigawatt of distributed capacity are colliding in the California legislature this month. Senate Bill 913, which cleared committee in April, attempts to force a structural reclassification of virtual power plants. The legislation does not subsidize new batteries; it simply mandates that the California Public Utilities Commission allow aggregated, customer-owned devices to compete directly against gas-fired peaker plants for the right to hold the state’s reserve margin.
The grid is a physical settlement, but its economics are defined by what is allowed to count as a reserve. Currently, California utilities rely heavily on aging gas peakers to meet their resource adequacy requirements — a regulatory mandate to secure enough capacity to prevent blackouts during peak demand. Utility customers pay for these plants to sit idle year-round. SB 913 uses the state’s Demand Side Grid Support program as a template to prove that aggregated residential batteries can reliably absorb that exact dispatch obligation.
The physical capability is no longer theoretical. During a two-hour test in July 2025, the DSGS program aggregated roughly 100,000 home batteries to deliver 476 megawatts of energy to the grid — the precise output profile of a mid-sized gas plant. Yet despite providing more than a gigawatt of total capacity statewide, the program faces defunding, prompting the legislative push to codify virtual power plants as a permanent, compensated fixture of the grid’s architecture capable of delivering $400–550 million in annual ratepayer savings.
The winners are the aggregators — companies managing millions of smart thermostats and residential storage units — and the ratepayers who currently fund the annual insurance policy on coastal peaker plants. The losers are the state’s three major investor-owned utilities: Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. While they have not formally opposed the bill, clearing distributed assets for resource adequacy directly undermines their ability to deploy capital into centralized grid infrastructure.
What the legislation forecloses is the argument that behind-the-meterEnergy generation or storage systems located on the energy consumer's side of the utility meter. Because they do not draw from the public grid, they bypass transmission fees and interconnection delays. assets are too fragmented to trust with the state’s baseline reliability. What it opens is a deeply contested transition period for the California Independent System Operator. If SB 913 passes, the system will increasingly depend on hundreds of thousands of residential batteries to balance the evening ramp, shifting the burden of grid stability from centralized generation to distributed dispatch.