What PG&E customers need to know about Tesla’s virtual power plant program

California has had a lot of power outages in the past few years. In 2019 alone, there were over 11,000 total blackouts that impacted 13.6 million Californians. This is because grid failure is becoming more common. So it's no surprise that more and more homeowners are installing energy storage, like the Tesla Powerwall, to keep their lights on during an outage.

Now, thanks to a joint venture by utility giant Pacific Gas & Electric (PG&E) and Tesla, Powerwall battery owners can make money while helping their community. PG&E customers who own Powerwalls can allow the utility access to the energy stored within their batteries. This will help meet energy demands and prevent widespread blackouts.

There are already over one thousand homes participating in the program, and Tesla estimates there are about fifty thousand Powerwall batteries eligible within PG&E's territory. But what exactly is a virtual power plant? How much money can you earn through the program? And is it even worth it to join?

What is Tesla’s virtual power plant and how does it work?

Before we get into the specifics of Tesla and PG&E’s new program, we have to answer the obvious question: What is a virtual power plant? Virtual power plants aggregate individual home energy systems so they can work together as one unit and deploy stored energy as a way to reduce demand on the grid.

The Tesla and PG&E program creates a network of Powerwall batteries that PG&E can use to help with increased stress on the grid. This is done as part of a statewide initiative called the Emergency Load Reduction Program (ELRP). The goal of this program is to reduce energy consumption and increase electricity supply in order to improve grid reliability.

When you join the Tesla VPP, you allow Tesla and PG&E access to your battery and the energy stored in it. When a grid emergency occurs, PG&E will issue an ELRP alert to let you know when the energy in your battery will be used. Using the energy from customers’ Powerwalls decreases stress on utility infrastructure and helps prevent widespread power outages. In exchange for using your Powerwall, you receive payment from Tesla.

Here is a basic overview of the program. However, it is not as simple in practice. There are a few key details you need to know about how the program works to get a better understanding.

Payment

People who participate in Tesla's VPP program are paid $2 per extra kilowatt-hour that their Powerwall discharges. This is important to remember - you will only be paid for the energy that is discharged from your battery that is above the amount of electricity the battery would release on a normal day.

Here is an example to help you understand how this works. There is an ELRP event from 5 PM to 6 PM and your Powerwall is fully charged. Normally, your Powerwall supplies your home with 2 kWh of electricity per day. However, during the event, 5 kWh are released from your battery. Because the Powerwall normally supplies you with 2 kWh, you will only get paid for the additional 3 kWh used:

• 5 kWh total - 2 kWh normal use = 3 kWh additional
• 3 kWh additional x $2 per kWh = $6 incentive payment for event

You will receive incentive payments from Tesla, not PG&E. Tesla has said that the payments will go out before the end of March 2023 and could be issued on an annual basis, or a more frequent basis determined by Tesla.

Event duration and frequency

Tesla's VPP program runs from May 1 to October 31. Events only occur from 4 PM to 9 PM. If you're a part of the VPP program, you'll be notified of the time of the event via the Tesla app. Each event will last a minimum of one hour and a maximum of five hours.

You may be notified one day before the event, but some events will have much shorter notice. When you're notified, your battery will prioritize charging itself so that you're ready for the event.

What is the frequency of these events? This is unclear. However, PG&E and Tesla note that there will be between 20 and 60 hours of these events.

Opt-out

Homeowners have the option of not supporting the grid during certain events. They can also suspend their enrollment if necessary, but they don't have to terminate it completely.

Backup Reserve

You don't have to give PG&E access to all of the energy stored within your Powerwall. The Powerwall has a "Backup Reserve" mode that allows you to set aside a certain portion of your stored energy. This serves as a limit on how much power PG&E can use during ELRP events. So, if you want to have at least 5 kWh in your battery, simply set that as your backup reserve and PG&E must leave at least 5 kWh in your battery during an ELRP event.

How much money do you earn from the PG&E Tesla VPP?

How much money you get from the VPP program varies based on a lot of factors, such as:

• How much energy your battery typically provides.
• How many Powerwall batteries you own.
• How much energy can safely be released from the battery.
• How much energy is in your Backup Reserve.
• The duration and frequency of the events.
• How much energy is stored in your Powerwall battery during an event.

It is very hard to know how much money you will get. But you can make a guess for each event. Here is an example:

If your one Powerwall is fully charged for the ELRP event and you don't have a Backup Reserve set, then PG&E will discharge all 13.5 kWh of electricity from your battery. Normally, during this time your battery provides your home with 3 kWh of energy, so you would get paid for 10.5 kWh, which is $21 for this particular event.

The amount you get paid depends on the duration of the event, the battery's state of charge, or the Backup Reserve limit you set.

Do you want to participate in PG&E and Tesla's virtual power plant?

Joining the virtual power plant gives you a lot of benefits. You get paid extra money, you help your community by providing power and preventing blackouts, and you help decrease reliance on fossil fuels assuming your Powerwall is charged with solar panels.

There are some things you need to keep in mind when using your Powerwall. If you're using your Powerwall to prepare for an upcoming event, you have to pay for the extra electricity. The incentive rate is higher than the price of electricity, so it will cover those costs, but only if PG&E discharges all of that energy during the event. You also need to think about why you got your battery. If you were looking for independence from the grid, you might not want to let the utility company use your Powerwall.

Tesla has a poor reputation for being reliable. Some people say that you might not get your payments on time. Tesla is also wishy-washy about the payment schedule. You might have to make annual payments or multiple payments, it all depends on Tesla's decision. The good news is that the VPP is part of the state-run ELRP program, so we can trust them to get the payments out on time.

Overall, PG&E customers with Powerwalls should join the VPP. The program has a lot of flexibility for individuals, thanks to the Powerwall's Backup Reserve and the ability to choose what events you participate in. Plus, it has a positive impact on your community and your wallet too.

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