After California officials chose not to provide more funding, the state's leading virtual power plant program is in question, putting at risk payments that have gone to households helping the grid during peak-demand stretches.
The program links equipment such as home batteries, smart thermostats, and other flexible energy devices, enabling residents to collectively reduce stress on the power system and help head off blackouts.
Here's what to know
According to Canary Media, the final state budget did not set aside new funding for the Demand Side Grid Support program, known as DSGS. State lawmakers also did not adopt Gov. Gavin Newsom's proposal to move the program from the California Energy Commission to the California Public Utilities Commission.
Under DSGS, homes and businesses are paid either to use less electricity or to send battery-stored solar power back to the grid when California's system is under strain. That has made it one of the largest virtual power plants in the country.
Advance Energy United's California policy director, Brandon García, called the result mixed, saying that "there is no guaranteed funding for the program for next year, at the very least it wasn't outright gutted."
A spokesperson for Democratic state Sen. Josh Becker said that "the $70 million we were hoping to use for DSGS over the next couple of years was not agreed on" in the final budget bills.
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The spokesperson said keeping the program with the commission "does allow us an opportunity to take this issue up early next year, potentially with a new administration."
More background
DSGS launched in 2022, and enrollment now stands at about 130,000 homes with batteries and nearly 75,000 more with smart thermostats and other flexible-load devices, as Canary Media reported.
In a July 2025 trial, the program supplied about 476 megawatts of capacity over a two-hour period. Pacific Gas & Electric called it "the largest test of its kind ever done in California and maybe the world."
García said the program has added more than a gigawatt of combined capacity to help relieve pressure on California's power system.
If dependable funding does not materialize, companies such as Sunrun, Tesla, Leap, and Renew Home may have a harder time continuing payments to participating customers.
What's being done?
Backers are trying to keep the program in place long enough to revisit funding in a future round of state action. Because DSGS was not moved out of the California Energy Commission, the commission still sees an opportunity to protect it and possibly restore support for it.
The next governor and state lawmakers could still bring back DSGS or establish a similar funding stream.
Devices such as batteries, smart thermostats, and flexible appliances can cut costs for families and make communities more resilient during grid emergencies, but wider adoption often depends on supportive policy.
Advocates say California will need programs that pay residents to participate if the state wants a clean energy system, such as wind or solar, that is reliable and affordable, rather than leaving proven efforts without clear backing.
García summed up the near-term outlook by saying, "We don't anticipate there being any more money for this program."
Where can I learn more?
California's funding fight is part of a broader effort to leverage home batteries and other flexible devices to stabilize the grid.
• In Puerto Rico, sonnen is expanding the first virtual power plant built around home batteries.
• In California, one of the largest solar farms now pairs with battery storage.
• In San Diego, developers erected one of the biggest battery storage projects in the region.
Utilities and policymakers continue to invest in distributed batteries and storage because they can bolster reliability during demand spikes. But how fast that progress continues can depend heavily on programs that keep residents involved and compensated.
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