Repowering California

A new program to turn distributed clean energy investments into grid capacity

As we prepare to take the stage at Trellis 2025 in San Jose, CA to talk about how data centers can power energy innovation and community impact, we are excited to announce a first-of-its-kind program that provides data centers and other large loads with the ability to directly procure grid capacity from flexible load resources in their same communities. We call this Repowering California and are excited to launch it today.

Consensus is emerging that the deployment of demand-side energy resources is going to be the primary way in which large new electrical loads are going to be integrated into the grid. Even the current administration is asking grid operators to allow for expedited review for data centers that can accommodate requests for flexibility. The reason for this is simple. There are a handful of hours on a handful of days in which the expected demand for power is going to exceed the capacity of the grid to supply it. Something has to give, and since a single data center can use the same amount of power as a million homes, the data center is the obvious choice for curtailment.

However, the amount of capacity that needs to be made available can vary significantly. It may be that just a few megawatts need to be curtailed, in which case, even though the data center may be the largest single contributor to demand, the best available flexible resources may be found outside of the data center. A fleet of distributed batteries, controllable EV charging loads, or, on a more permanent basis, more efficient air-conditioners, are all capable of delivering the required capacity savings to the grid. Because there are a variety of resources that might be tapped, grid planners, DER developers, and policymakers are excited about the future of distributed capacity markets.

Unfortunately, current market solutions are proving inadequate. Wholesale capacity markets discriminate against DERs, and in large swaths of the country utilities are vertically integrated, meaning that they control both generation and distribution. Demand response programs are notorious for paying pennies on the dollar and even the most successful demand response programs, like DSGS in California, suffer from the unpredictability of political winds.

It’s time for a new approach to demand side energy markets. We need a system that prioritizes lower rates, more resilience, and a cleaner grid. To date, we’ve seen no evidence that the current system will yield any of these outcomes - in fact, utility bills are rising, the grid seems ever more fragile, and carbon emissions are back on the rise. We can do better.

PPAs for VPPs

Today, we’re excited to announce a first-of-its-kind program that will catalyze investments into distributed clean energy, bring lower electricity rates for all customers, and build resilience in our communities. We call it Repowering California.

While this initiative is designed to work within California’s unique system (more on this below), it can be deployed anywhere in the country and in most places on the planet. We are truly on the verge of a transcendent ecosystem of distributed energy resources enabling the grid to absorb the largest influx of new demand since the 1950s.

The mechanism is simple and takes most of its inspiration from the procurement of renewable energy on the supply side. We imagine a power purchase agreement (PPA) in which a large load, like a datacenter, can directly procure “negawatts” or “flexiwatts” from distributed energy resources on its same grid. In aggregate, this procurement would be thought of as a distributed capacity contract, or more commonly a “virtual power plant” (VPP). Load-shifting heat pumps, energy efficiency projects, and controlled devices will be deployed so that energy demand goes down when spare capacity on the grid is needed. The PPA contract will pay these resources for their ability to reduce demand during critical peak hours.

The goal is to allow California to double the utilization rate of its electrical grid while reducing rates on consumers in the process. This happens by more efficiently using existing grid resources (more energy consumption in the middle of the day when solar is abundant and at night when plenty of wind and hydro can be utilized) and using the additional revenue from serving new loads more efficiently to fund infrastructure investments. We want our utilities to invest in the infrastructure needed to power the electrified economy, but to do so without raising the costs of electrification for consumers. This is possible if we use our grids more efficiently.

How the Program Works

Repowering California invites large energy users, utilities, and DER developers to work together to provide the capacity needed to serve the entire state’s energy needs at lower cost with an eye towards resilience in the face of climate change and other challenges. It builds on California’s existing demand-side energy markets - collectively known as Market Access Programs - to recreate the same fundamental economic principles that allowed large-scale renewable projects to flourish in this state decades ago. And it uses WattCarbon’s unique data infrastructure - Aristotle and WEATS - to make sure that the savings are real and that they aren’t being double counted.

Here are the key pieces:

• Corporate PPAs for VPPs:

  • A PPA for a VPP allows a large energy user to provide financial support to the deployment of distributed energy resources. The animating principle of a PPA is the advance market commitment, which allows projects to be financed at lower interest rates. In essence, the large energy user is committing to buy the savings at a guaranteed rate. This guarantee allows the project developer to secure financing at favorable rates and lowers costs for consumers.

• Market Access Program Integration:

  • California currently operates a set of Market Access Programs (MAPs) in which energy efficiency savings are paid out to market aggregators on the basis of the “system benefit” value of energy efficiency projects - effectively the cost of generation, transmission, distribution, and overhead. These programs provide the critical connective tissue between corporate PPAs and the capacity credits that they need to be able to claim. Each one of the state’s investor-owned utilities plus several of its CCAs and RENs runs a Market Access Program. As a result, every project enrolled first gets credited by the state for its system benefit and certified by the utility for its capacity savings. This leaves the PPA offtaker with certified capacity credits that can be used as part of an agreement to site a new load or expand an existing service. In short, the Market Access Programs provide a framework where private companies can fund demand flexibility projects, submit them to their local utility, and have the capacity savings certified so that they can ensure no net new grid impacts.

• Customer Dividends:

  • Consumers are the ultimate winners here. Instead of just receiving the single stream of payments from the Market Access Programs, now consumers have the opportunity to monetize their investment through a PPA agreement as well. In some cases, the payment for the capacity might exceed the cost of the equipment in the first place! WattCarbon has been trialing this concept with its partners for the past few months. For the first time, these contractors and DER developers have access to automated measurement and verification of all of their projects. With access to a new revenue stream, projects that were formerly out of reach, suddenly become possible (see, e.g., link).

Program Vision & Next Steps

We are now opening up Repowering California to additional corporate partners, utilities, DER developers, and contractors who want to be part of the reimagining of our state’s energy future. Of course we couldn’t have gotten this far without our early partners like Harvest, QuitCarbon, Rewiring America, Northern Pacific Power, Powderwatts, Electrify My Home, Atrium, or the work done by so many to bring the market access programs to life. California is blessed with abundant natural resources that give us access to solar, geothermal, hydro and other forms of clean energy. But we also have aging infrastructure and fire risks that are being paid for through higher electricity bills. If our bills continue to rise, our economy will falter and our state will suffer. Giving large energy users the option to procure distributed capacity creates a financial incentive to better utilize existing grid resources, effectively reducing the burden on consumers. Plus, giving consumers another avenue for monetizing the investments they are making in their homes and businesses blows tailwinds into the state’s economy and unlocks the energy we need to stay competitive.

If you are a contractor or DER developer, learn more about how to participate at https://dividend.wattcarbon.com.

If you are interested in setting up a PPA for a VPP, please reach out directly.