California’s New Demand Side Grid Support Program


Californians have an ever-evolving landscape of energy incentives to consider, particularly during the summer, when power demands push the grid to its limit. “The risk for outages is real and it’s immediate,” said Governor Gavin Newsom in a video urging people to lower their energy use during California’s 2022 heatwave.

The Demand Side Grid Support (DSGS) program is a California Energy Commission (CEC) energy reserve strategy — it aims to lower the risk of rolling power outages by easing grid stress during heatwaves, wildfires, and other emergency response situations.  

The program runs from May 1 to October 31 each year and has three incentive structures, including a new (July 26, 2023) “Option 3,” which explicitly focuses on behind-the-meter storage. The PowerFlex team worked with the CEC to help develop the policy, providing data on how battery storage could alleviate grid strain and benefit Battery Energy Storage System (BESS) owners.

Let’s examine why participating in DSGS is a good choice for PowerFlex customers.

What Makes This Demand Response Program Different?

The DSGS program allows BESS owners to make money using their existing battery assets while upholding California’s grid resiliency. Program participants must enroll through an approved virtual power plant (VPP) aggregator like PowerFlex. The VPP (PowerFlex) then works directly with the CEC to manage the stored energy and distribute payment incentives to participants. When discussing the new DSGS program, Jonathan Hart, Public Policy Manager at PowerFlex, explains, “Besides the fact that customers can make additional revenue on the batteries they already have, there are a lot of aspects of this program that are much more advantageous than traditional demand response programs.”  Here is a breakdown of some of those additional benefits:

Customers Paid for Exports

In most demand response programs, there is no reward for sending power back into the electrical grid. However, in the new DSGS, participants are paid for the energy they export during an event, given they have an interconnection agreement that allows for exports.

This system is an improvement over the traditional approach, as it provides an important (and not insignificant) financial incentive to PowerFlex customers who act to support the stability of California’s electrical grid.

Geared to Battery Energy Storage

A behind-the-meter incentive approach is a big first step towards uniting battery storage systems across California in order to support grid resiliency. Battery energy storage is ideal for demand response, as the software that manages the system also collects the data required for DSGS participation.

Energy management systems like PowerFlex’s PowerFlex X use advanced algorithms to forecast battery reserves and energy discharge with high confidence. Most of our customers with batteries already have all the required equipment to make revenue from the DSGS incentives.

No Traditional Baselines

Demand response programs in California typically use baselines to compare energy use during a demand response event to the site’s average energy use on non-event days. This technique is imperfect and imprecise, potentially not reflecting the true value a site provided during a demand response event.  

The updated DSGS is different because participants receive payment for the amount of energy the battery discharges during an event as measured at the battery itself. This approach eliminates generalizations and rewards participants with precision.

Participation is Simple

PowerFlex is an approved VPP through the DSGS program — we handle all the required administration, coordination, reporting, and data management. Participating in the DSGS is low-risk (there are no penalties for under-providing) and almost completely hands-off for our BESS customers.

Powering the Future of Energy Storage in California

DSGS contributes to a more dependable electrical grid for all Californians. And it allows battery storage system owners an opportunity to receive financial incentives for providing critical energy support.  

Contributions from many stakeholders, including PowerFlex, helped form the new policies, and we’re excited to help battery owners engage with the program. This effort is just one of the ways we advocate for our customers and the clean energy industry as a whole.  

California’s Demand Response season runs from May to October — Contact PowerFlex to take advantage of the DSGS battery storage incentives.