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Tesla partners with California utility on virtual power plant

Tesla partners with California utility on virtual power plant


They’re offering Powerwall customers money to participate

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Solar Panel Installation in California
A contractor installs hardware for a Tesla Powerwall battery unit at a home in San Jose, California.
Photo by David Paul Morris/Bloomberg via Getty Images

Tesla and California utility PG&E launched a new program that will pay eligible Powerwall owners to send extra electricity to the grid when it’s vulnerable to blackouts. Working together, the Powerwalls create a “virtual power plant” that can help keep the lights on during emergencies or energy shortages.

By signing up, Powerwall owners will receive $2 for every additional kilowatt-hour they feed to the grid during designated “events” when the grid is under a lot of stress. That includes any time the California grid operator, CAISO, issues an energy alert, warning or emergency.

Tesla started a similar beta program with PG&E and a couple of other utilities last July, but that was a voluntary program with no payouts. Now, with a monetary incentive to entice participants, the program could grow large enough to become a significant backup energy source in California — and a clean one at that.

Participants would “help form the largest distributed battery in the world — potentially over 50,000 Powerwalls,” according to Tesla. That distributed battery — or virtual power plant, in other words — can replace gas-fired power plants that typically come online to provide extra juice whenever power demand starts to outpace supply.

Tesla already has experience with this in other places. The company has been building out a virtual power plant in Australia over the last several years. And it wants to expand more in the US. Tesla is pushing the grid operator in Texas to change rules that would allow its customers to earn money for participating in a virtual power plant program. The company launched a demonstration project earlier this year that asks Powerwall owners to volunteer to participate to show the grid operator how such a program might work. For now, without any rule changes, Tesla is offering the volunteers a $40 Tesla gift card “as a token of appreciation.”

In California, PG&E customers who own a Powerwall can sign up to join the virtual power plant through the Tesla app. Once they’re in the program, called the Emergency Load Reduction Program, they’ll start receiving push notifications ahead of events when the grid needs emergency support. To keep some backup power for themselves, they’ll be able to specify a “backup reserve level.” Tesla won’t discharge the battery below that level.

After accumulating $2 for every additional kWh sent to the grid, participants will receive payments from Tesla “on an annual basis, or on a more frequent basis as determined by Tesla.” For this season, participants can expect to be paid by the end of March 2023, according to Tesla.

California’s grid is particularly stressed this summer. Energy demand typically rises during hot months while people blast their air conditioners. To make things worse, an extreme drought is forecast to cut the state’s hydroelectricity supply in half this season. Hot, dry weather also raises the risk of wildfire, so PG&E has made a habit of implementing preemptive power outages in an effort to prevent live power lines from sparking blazes.