Meet the Power Plant Tucked into Garages and Basements

Each morning after waking up, Ivan Israel Amezcua heads to his kitchen to prepare mate for himself and his husband. He fills a black teapot, sets it on their sleek, flat induction cooktop and presses a button. The water quickly warms, and he pours it over crushed green leaves tucked into an hourglass-shaped mate gourd on the counter.

Israel Amezcua does not light a flame or burn any planet-warming gases in the process. The only flames in the couple’s three-bedroom North Richmond home dance atop scented candles.

That’s because the home is fully electric and then some. Each appliance is connected to the couple’s phones, as well as a software that can respond to the needs of the larger electricity grid — what energy nerds call a “virtual power plant.”

If weather reports forecast extreme heat and people crank up their air conditioners in the afternoon, Israel Amezcua’s water heater will warm its tank in the morning. His showers will still be hot. Israel Amezcua avoids pulling power from the grid during the hours when it is expensive and in high demand. His backup battery can power his home during peak energy demand, too.

On a bright day, when solar power is abundant and cheap, his home appliances will turn on and the battery charges.

Now imagine many homes, with many electric water and space heaters, induction stoves, smart thermostats, electric vehicle chargers, solar panels and backup batteries. When directed through a command center with software, the potential is enormous to cut demands on the grid or feed power back to it.

In some ways, it is like adding a large-scale power plant without the time-consuming task of constructing and running a polluting behemoth.

Advocates of virtual power plant technology argue it will grow exponentially, modernize and strengthen California’s grid and avoid burning gases that harm the planet. Skeptics see the technology as repackaging what already exists and point out that it can be expensive for customers.

Still, California’s lawmakers are introducing bills to build virtual power plants in hopes of lowering soaring electricity costs.

But none of this was on the minds of Israel Amezcua, a hairstylist, and his husband, Ramon Heredia, when they toured the home they bought last summer. To Heredia, it was just “the most beautiful house in the area.”

“When I saw that this house had air conditioning, that was my number one,” said Heredia, who manages inventory at a manufacturing company. “I didn’t know we had solar panels, I didn’t know this was a carbon-free home, I didn’t understand any of that. All I knew was it had air conditioning, and I was going to sleep so comfortably.”

The couple also had no idea that dozens of scientists, housing advocates, energy professionals, and journalists — even Eduardo Martinez, Richmond’s mayor — pressed into the “home of the future” for a media event days before it went on the market.

A typical power plant might make you think of smoke stacks or Homer Simpson juggling a glowing tube of nuclear waste. A virtual power plant is mostly invisible, said Alexandra McGee, a vice president at MCE, a nonprofit energy provider serving Marin, Napa, Solano and Contra Costa counties.

“There’s these small pockets of power tucked into garages or basements or homes and businesses,” McGee said of the distributed appliances that make up the virtual power plant.

California’s grid, abundant with solar power in the middle of the day, often experiences a strain between 4 p.m. and 9 p.m., as the sun sets and people return home from work and begin using their electric appliances. To compensate, energy providers can ramp up a gas-fired power plant.

However, a virtual power plant could relieve that evening power grid strain: backup batteries, fully charged from midday, could power not only the homes they are attached to but also others nearby.

While virtual power plants are still in their nascency, they could power roughly 1 million homes during times of peak energy use last year.

The volume could grow fivefold by 2035, saving ratepayers around $550 million each year, according to a report by research firm the Brattle Group. The extra power could prove significant, as California’s energy needs are anticipated to grow by close to 30% in the next decade.

State Assemblymembers John Harabedian, D-Pasadena, and Nick Schultz, D-Burbank, as well as state Sen. Josh Becker, D-Menlo Park, have introduced bills to help deploy virtual power plants.

MCE heads a pilot in Richmond, which includes the home of Israel Amezcua and Heredia.

It kicked off in 2024 and will be fully operational at the end of this year. The pilot includes roughly 100 homes with low-income residents and two businesses. For participating, residents earn up to $50 off of their monthly energy bills, and businesses can earn up to $350. In return, MCE software will communicate with and direct hundreds of appliances, including backup batteries and heat pump water heaters.

MCE is one of several community energy providers in California that generate or purchase power, using PG&E’s infrastructure to deliver it to customers. The virtual power plant cuts down on the costs of buying energy. MCE won state funding to build out the pilot for all the communities it serves over the next four years.

“It saves MCE money because we’re the ones who are procuring the energy to serve that customer load,” McGee said. “So if collectively we’re shifting everyone out of the more expensive times, then our contracts get cheaper and we can pass along those bill savings for the customers.”

PG&E spokesperson Paul Doherty said the utility has been using virtual power plant technology for roughly 15 years. He said the company has enough energy to power more than 500,000 homes at any given time.

This year, PG&E, Sunrun, a San Francisco-based solar company, and SPAN, a San Francisco-based electric panel company, launched a project in the South Bay and Central Valley that harnesses more than a thousand residential backup batteries and smart panels to reduce strain on the grid. Smart panels connected to the internet allow people to manage how their homes use energy, such as prioritizing when certain appliances run, turn off or charge.

Apart from reducing the probability of outages and saving money, virtual power plants allow PG&E to “get more out of our existing infrastructure,” Doherty said.

If several people adopt new electric vehicles, heat pumps or other technologies in one neighborhood rather than upgrading wires and transformers to accommodate the need for more electricity, a virtual power plant can help balance energy demand. Software can help stagger when EVs charge, for example.

While some utilities have struggled to interest customers in virtual power plants, representatives of Sunrun think they know how to explain the technology and enroll people. Customers pay no upfront costs to install solar and batteries on their homes. Instead, they contribute a monthly payment. Sunrun manages the software that connects equipment and the logistics of being part of the virtual power plant.

Sunrun’s Chris Rauscher said their biggest dispatch this year was “enough to power the city of Santa Monica during the evening peak.”

However, researchers warn that significant barriers, both technological and behavioral, stand in the way of growing virtual power plants.

“The scaling is really hard,” said Ram Rajagopal, professor of civil and environmental engineering at Stanford University, adding that virtual power plants are less reliable than natural gas generators.

While Israel Amezcua and Heredia moved into a home with gadgets ready to switch on, most people would need to upgrade their existing appliances and electric system to participate in a virtual power plant. Increasing the amount of electricity a panel can handle could cost thousands of dollars.

“Even if it is economically viable for you to adopt it, there’s so many barriers: financing and installation and the panel upgrades, utility approvals, going through all these hoops just demotivates people,” Rajagopal said.

To succeed, Rajagopal said federal electric codes need updating. “If you’re clearly connecting things that are flexible to your panel, you shouldn’t be required to do panel upgrades.”

Duncan Callaway, professor of energy and resources at UC Berkeley, said the technology helped keep the lights on during an extreme heatwave in September 2022 when California’s grid nearly shut down and caused blackouts. Utilities controlled the energy use of appliances remotely, which some would call a virtual power plant. Callaway said utilities have done so for decades, and, before the internet, they used radio signals to turn down air conditioners en masse.

He is not yet “convinced that this is a new idea versus taking an old idea and just wrapping it into a cool name that you can get funding for.”

And the issues utilities faced decades ago remain. “Folks are very reluctant to have somebody else controlling how much electricity they consume,” Callaway said.

When they moved into their home, Israel Amezcua and Heredia bought new pots and pans that work with their induction stove, which requires magnetic materials like iron or steel.

“I never thought I was going to pay that much for my pans,” Heredia joked, adding that their food tastes better now than before. “This house opened up the opportunity to live differently and to get a better quality of life.”

That includes paying no gas bill and $11 monthly for electricity.