Demand Side Grid Support (DSGS)

Join us to help prevent power outages this summer!

The California Energy Commission (CEC) Demand Side Grid Support (DSGS) Program is part of California’s Strategic Reliability Reserve, a suite of programs to alleviate tight energy supplies on the grid caused by heatwaves, wildfires, and other ongoing impacts of climate change. DSGS offers incentives to electric customers that provide load reduction and backup generation to support the state’s electrical grid during extreme events from May to October, reducing the risk of rotating power outages. The DSGS Program is open to eligible DSGS providers and participants and has three incentive structure options to choose from.

How DSGS Works

Enrollment

DSGS providers (retail suppliers, Federal Power Marketing Administrations, and aggregators) register with the California Energy Commission (CEC)
Customers enroll with DSGS providers (or directly with the CEC in limited circumstances) to participate
DSGS providers report participation to the CEC

Participation

Participants participate through one of the following Incentive Options:

Payment

DSGS providers submit claims to CEC for administrative costs (Option 1) and incentives
CEC validates claims and pays DSGS providers incentives and administrative costs
DSGS providers pay incentives to their participants

Eligibility Requirements

DSGS Provider

Providers are entities that manage groups of participants in the DSGS Program. Eligible DSGS providers include:

A retail supplier as defined in Public Utilities Code (PUC) Section 398.2
A Federal Power Marketing Administration (FPMA)
An aggregator of customers

For more information about DSGS provider responsibilities and additional requirements, reference the FAQ.

DSGS Participant

Participants are customers enrolled in DSGS through a provider, or in limited circumstances, directly with the CEC. Eligible DSGS participants include:

A customer of a Publicly Owned Utility (POU) or a FPMA
A customer of a Community Choice Aggregator (CCA), energy service provider, or electrical corporation AND
- Participating with backup generator(s), or
- Participating through Incentive Option 2 or Option 3, or
- A water agency, which includes water utilities, wastewater facilities, and irrigation districts.

Additionally, participants are not eligible to enroll in DSGS and receive incentives if their load reduction resource is:

Enrolled in the Emergency Load Reduction Program or Base Interruptible Program
Receiving payment or accounting for the same reduction in use of electricity, including energy export, through any other utility, CCA, or state program
A cogeneration facility with a power purchase agreement

Refer to the FAQ for additional eligibility requirements that apply to each Incentive Option. DSGS providers may include additional eligibility requirements for their participants.

Participants can enroll in DSGS through a Provider in any eligible option. Alternatively, non-residential participants can enroll directly with the CEC, but only under Incentive Option 1 and only if enrollment through the participant’s load serving entity (LSE) is not possible, such as if the LSE is not enrolled as a DSGS provider or is not offering DSGS Program participation for that type of customer or load reduction resource.

Incentive Options

The DSGS Program has three incentive structure options. DSGS providers may limit which incentive structure options are available to their participants. Participants may select a different incentive structure option for each load reduction resource enrolled, as long as each load reduction resource has fully separate metering. All load reductions that would not have occurred in the absence of the DSGS Program, including those that result in negative load at the meter (i.e., exports), are eligible for incentives.

Option 1. Standby and Energy Payment
Resources enrolled in Incentive Option 1 are dispatched to reduce electric load in response to Energy Emergency Alert (EEA) Watch, EEA-1, EEA-2, or EEA-3 notices issued by a California balancing authority. Participants enrolled in Incentive Option 1 are eligible to receive the following payments:

Energy Payment: Participants will earn an incentive of $2 for each kilowatt-hour (kWh) of load reduction relative to their resource’s typical energy usage during DSGS dispatch events.

Standby Payment: Participants using combustion resources that provide a standby commitment identifying their available combustion capacity upon notice of a DSGS standby event receive a standby payment of $0.25 per kWh for each hour their resource is not dispatched. For more information about how the Standby Payment is calculated, reference the FAQ.

Increased Customer Demand Charge: Participants can also be reimbursed for incremental increases in customer demand charges that result from participation in the program and are incurred during the billing period in which a DSGS Program event occurred, if any.

Controllable Generation Incentive: Backup generators powered by biomethane, natural gas, or diesel that are remotely controllable can receive a one-time bonus incentive of $2.00/kW or $1.50/horsepower (HP), as defined on the specification sheet of the generator. For more information on how to be considered remotely controllable, reference the FAQ.

Option 2. Incremental Market-Integrated Demand Response Capacity Pilot

Incentive Option 2 is available for DSGS providers or their authorized third party acting as demand response (DR) providers. Third-party DR aggregators and POUs are eligible to serve as DR providers. DR providers operating within the California ISO balancing authority area must have at least one proxy demand resource (PDR) registered to participate under the incremental market-integrated DR capacity pilot.

DR providers administering Option 2 receive incremental DR capacity incentive payments based on demonstrated capacity in excess of resource adequacy capacity commitments. Demonstrated capacity is calculated based on resource availability and performance during a defined daily availability window. The DSGS incremental DR capacity prices vary by month, ranging from $9,000 to $19,200. Reference the FAQ for the monthly prices. DR providers shall allocate incentive payments between the DR provider and its participants pursuant to the terms and conditions agreed upon by the DR provider and participants.

Bonus Payment: DR providers will be awarded an additional 30 percent bonus applied to capacity incentives for program years 2023 and 2024 for early participation in the program. Additional bonuses in future years may be provided at CEC discretion.

Additionally, DR providers are eligible to receive incentives for the months of May, June, and July 2023 on the condition that DR performance data from each month is included in the calculation of demonstrated capacity.

Option 3. Market-Aware Behind-the-Meter Battery Storage Pilot

Incentive Option 3 is available for DSGS providers, or their authorized third party, acting as behind-the-meter (BTM) battery virtual power plant VPP aggregators. Third-party battery providers, POUs, and CCAs are eligible to serve as VPP aggregators.

VPP aggregators administering Option 3 can be dispatched between 4 to 9 PM, seven days a week based on California ISO day-ahead locational marginal prices (LMP) for the default load aggregation point (DLAP). Aggregators receive incentive payments based on demonstrated battery capacity of an aggregated VPP. Different levels of incentives are available for VPPs of varying durations (i.e., 2, 3, or 4 hours). Aggregators are eligible for a payment for demonstrated capacity at the varying monthly rates based on the capacity (kW) and duration (hours) demonstrated by the aggregator in each month. Reference the FAQ for the monthly prices. VPP aggregators shall allocate incentive payments between the VPP aggregator and its participants pursuant to the terms and conditions agreed to between the VPP aggregator and participant.

Bonus Payment: VPP aggregators will be awarded an additional 30 percent bonus applied to capacity incentives for program years 2023 and 2024 for early participation in the program. Additional bonuses in future years may be provided at CEC discretion.

Additionally, VPP aggregators shall receive incentives for the months of May, June, and July 2023 based on their highest monthly demonstrated capacity shown in program year 2023.

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