The Secret Weapon California Is Using To Prevent Blackouts

Firefighters plan strategy in the evacuation zone of the Dixie Fire, in Twain, California on July 26, 2021. After battling increasingly large and deadly wildfires non-stop for weeks, and with no respite in sight, firefighters in California are admitting they are burnt out. “After a point, you start getting a little screwy, your mental health doesn’t do well,” said 55-year-old fire captain David Tikkanen. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)

AFP via Getty Images

California is testing a new approach to managing electricity: virtual power plants, which are networks of residential batteries and smart devices that work together as a single, dispatchable generator. Early results indicate that these distributed systems could transform how utilities balance supply and demand on a grid increasingly powered by solar and wind energy.

VPPs coordinate thousands of behind-the-meter batteries, smart thermostats, and other connected devices to act collectively as a single grid resource. The idea is straightforward: if each home battery or smart device contributes a small portion of its stored energy at the right time, the combined output can be enormous.

In a test in July, California’s three major utilities coordinated hundreds of home batteries through Sunrun, forming a 500-megawatt virtual power plant—enough to rival half of a Diablo Canyon nuclear reactor. The experiment demonstrates that consumer-owned systems, when combined, can provide real-time grid flexibility and help prevent blackouts during peak demand.

“When aggregated, these batteries can be dispatched to help the grid at critical moments, providing both reliability and potential financial benefits to participants,” Paul Dickson, chief executive of Sunrun, told me. While Sunrun sells solar panels and battery systems, Dickson said he sees traditional fuels playing a supportive role. “We don’t advocate for the elimination of all fossil generation. This is about creating flexibility and resilience.”

PG&E aims for 7,000 MW of flexible load by 2040—a 14-fold increase from July’s test. Utilities, tech companies, and policymakers are facing a challenge that is both unprecedented and urgent: balancing electricity supply and demand to ensure California’s solar energy continues uninterrupted.

Virtual power plants can only succeed if consumers are involved. Industry data shows that residential battery installations rose 35% year-over-year in 2024 across the U.S., and Sunrun reports that about 70% of its customers are choosing battery systems along with solar panels.

The state’s infamous “duck curve,” a term developed years ago to describe the sharp drop in net demand during the midday solar peak followed by a steep evening increase, has become even more pronounced. In other words, California generates so much wind and solar energy during the day that this power must be stored and then released at night when those resources dwindle. Enter VPPs.

Utilities Coordinate VPPs to Manage Peak Demand

That’s the core idea behind PG&E’s collaboration with Southern California Edison and San Diego Gas & Electric. Coordination is essential. Unlike flipping a light switch, activating a VPP requires careful planning. Tesla and Sunrun, which control a large share of the distributed battery capacity, synchronize their systems to ensure all resources discharge at the same time.

In the July demo, all batteries were turned on at 7 p.m. and off at 9 p.m., a two-hour window chosen to test peak-load management during the evening demand spike. The result, according to Kendrick Li, director of PG&E’s clean energy programs, was “a new high-water mark that’s never been achieved before,” demonstrating the VPP’s ability to act as a substantial, flexible generator in California’s energy mix.

“Every battery we can dispatch helps reduce strain on the system during peak hours, especially when the sun sets, and solar generation drops off,” Li told me. “Historically, utilities have relied on peaker plants—often gas-fired—to meet peak demand. Batteries allow us to manage demand without firing up additional fossil generation.” The data so far suggest that the system is particularly effective during heat waves and other high-demand events.

The scale of impact is both symbolic and practical. A half-gigawatt contribution accounts for just over 1% of California’s total load on a heat wave day—modest in percentage but vital in operational terms. VPPs are at the bottom of the resource stack that system operators use before resorting to mandatory curtailment, which triggers rolling blackouts when supply can’t meet demand. In other words, if a VPP is called upon, neighborhoods will remain lit during peak demand. Otherwise, they might experience rolling outages.

The economic argument for VPPs is also evolving. Unlike traditional grid infrastructure, which is financed and maintained collectively by all ratepayers, home batteries and connected devices are privately purchased.

For consumers, the financial benefit is simple: they can sell stored electricity back to the grid or earn credits for cutting demand during peak times. However, the technology itself is complicated. Batteries need to communicate instantly with utility control systems to respond to electricity surges, and software algorithms forecast both energy use patterns and renewable energy output.

“It’s a massive coordination problem,” Li explains. “You’re not just dispatching one battery; you’re dispatching thousands simultaneously.

“No utility customer has been subsidizing another one,” he adds. “Customers themselves spend the dollars to install these technologies.” These privately owned devices now work together to create a collective grid value that can be used without adding extra costs to ratepayers’ bills.

Cost, Scale, and Consumer Access Remain Hurdles

The size of home batteries is surprisingly manageable. Tesla’s Powerwall, one of the most popular models, is about the height of an adult and rests flat against a wall. While Sunrun offers solar-plus-battery packages, the batteries can store energy from any source —solar or grid power—giving more options for both users and grid operators.

Scaling these systems remains the next hurdle. Today, a home battery costs roughly $20,000, excluding installation, and such maintenance requires a professional technician. Li argues that for VPPs to optimize California’s renewable energy, batteries must become dramatically cheaper. Comparisons with electric vehicle batteries suggest that technological advancements could drive down costs over time, potentially making home storage a mainstream and affordable appliance.

Regulators and consumer groups are closely monitoring the situation. The California Public Utilities Commission is cautiously optimistic about VPPs, viewing them as a means to enhance grid reliability. The CPUC has stated that VPPs can help integrate various energy sources, making the grid more flexible and resilient. Consumer groups are on board, but they want to make sure that everyone can participate and get the benefits of VPP programs without paying too much.

While lithium-ion batteries show promise, there are still some challenges to overcome. They have a limited storage capacity, and a lot of people must still participate if we are to scale virtual power plants to match the power of traditional generation. Also, connecting them to existing utility systems can be tricky.

“Our control systems weren’t originally designed for two-way energy flow at this scale. We’ve had to upgrade software and communications infrastructure to manage thousands of distributed assets,” notes PG&E’s Li.

California’s experiment with virtual power plants is more than just a technical exercise; it reflects a broader shift toward a renewable-dominated grid. By utilizing privately owned batteries, smart devices, and coordinated control systems, the state is trying to maintain balance, reliability, and resilience in a grid where supply and demand patterns no longer follow traditional trends.

The lessons extend beyond the Golden State. As other states and nations ramp up solar and wind capacity, they will encounter the same challenges and opportunities that California faces today. Indeed, utilities in 34 states and Puerto Rico have launched or expanded VPP programs.

America’s grid is at an inflection point. It requires flexibility, reliability, and resilience. If California succeeds, it won’t just keep its own lights on. It could pioneer a model for clean, reliable power—one that the global community may soon adopt.