CALIFORNIA—Governor Newsom’s May Revision budget proposal released yesterday steps back dramatically on promised funding for the Demand Side Grid Support (DSGS) and Distributed Electricity Backup Assets (DEBA) programs at the California Energy Commission (CEC). By cutting the Greenhouse Gas Reduction Fund proposals for these programs and others, the Administration risks undermining DSGS and stalling DEBA before it can get off the ground. This is the wrong direction for our state, as both programs are integral to California’s strategy for maintaining grid reliability while advancing clean energy goals.
CALSSA executive director Brad Heavner released the following statement:
We are deeply concerned by the proposed cuts to the Demand Side Grid Support (DSGS) and Distributed Electricity Backup Assets (DEBA) programs. These programs are vital tools for ensuring grid reliability, advancing clean energy innovation, and protecting communities during extreme weather and grid emergencies.
Cutting funding for DSGS and DEBA undermines California’s progress toward a resilient and equitable clean energy future. At a time when climate impacts are intensifying and vulnerable communities need more support, the proposed reductions threaten to slow the deployment of local solar and storage solutions, limit job creation, and increase reliance on polluting fossil fuels.
CALSSA urges state leaders to prioritize investments in DSGS and DEBA to provide needed support for distributed energy resources and demand-side solutions that deliver reliability, affordability, and cleaner air for all Californians. We stand ready to work with policymakers to restore funding and ensure California remains a national leader in clean energy and grid resilience.
Background
DSGS and DEBA were established in 2022 and designed to work together to incentivize distributed energy assets that can serve as on-call emergency supply or load reduction during extreme events. DSGS is aimed at engaging existing distributed resources, and DEBA is aimed at bringing new distributed resources online. DSGS and DEBA offer energy resources that support a reliable, affordable, and clean energy system. These assets are intended to serve as on-call emergency supply or load reduction resources for California’s electrical grid during extreme events, such as heatwaves or grid emergencies.
DSGS is already showing remarkable progress in drawing on demand-side resources for reliability. In summer 2024, DSGS offered over 500 MW of enrolled capacity engaging over 260,000 customer participants. Notably, about half of that capacity was from behind-the-meter batteries enrolled through DSGS’s market-aware storage virtual power plant (VPP) option. DSGS needs to have sufficient funding so that providers and customers can be confident enrolling and committing resources to the program.
DEBA aims to provide incentives for the construction and enhancement of cleaner, more efficient distributed energy assets. To date, no DEBA funds have been used for demand-side resources, and a grant funding opportunity was put on hold when funding was reverted during the 2024-25 budget year. DEBA has halted in its tracks, and cannot meet its potential without a renewed commitment in this year’s budget process.
In last year’s budget process, the Governor and Legislature agreed to provide $75 million for DSGS and $200 million for DEBA from the Greenhouse Gas Reduction Fund (GGRF) this year. Also last year, California residents voted for the climate bond (Proposition 4), which includes $50 million that can be used for zero-emissions distributed energy resources, including virtual power plants and DSGS.
The Governor’s January budget proposal affirmed the GGRF funding commitments for DSGS and DEBA and allocated the climate bond funding to DSGS. The May Revise cuts all GGRF spending and leaves the future of those funds uncertain, and it shifts the climate bond funding from DSGS to DEBA where it will fund fewer projects.