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

California has experienced a record-breaking number of power outages in the past few years. There were over 11,000 total blackouts that impacted 13.6 million Californians in 2019 alone. With grid failure on the rise, it's no surprise that more and more homeowners are installing energy storage, like the Tesla Powerwall, in an attempt to keep their lights on.

Now, thanks to a joint venture by utility giant Pacific Gas & Electric (PG&E) and Tesla, Powerwall battery owners have the chance to do good not just for themselves, but for their entire community. PG&E customers who own Powerwalls can make extra money by giving 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 50,000 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.

For the Tesla and PG&E program, the companies work together to create a network of Powerwall batteries that PG&E can call on when there is increased stress on the grid. The VPP is part of a statewide initiative called the Emergency Load Reduction Program (ELRP) that aims to reduce energy consumption and increase electricity supply to increase grid reliability.

When you participate in the Tesla VPP, you give 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 inform you 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.

That’s the basic gist of the program, but it isn’t that simple in practice. There are a few key details you need to know about how the program works to get the full picture.

Payment

Participants in Tesla’s VPP program are paid $2 per additional kilowatt-hour (kWh) discharged from the Powerwall. The word additional is key here - you will only be paid for the energy deployed from your battery that is above the amount of electricity the battery would release on a normal day.

Let’s look at an example to get a better idea of how this works. An ELRP event is taking place from 5 PM to 6 PM and your Powerwall is fully charged. On a normal day during this period, your Powerwall supplies your home with 2 kWh of electricity. During the event, however, a total of 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 states that 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. VPP participants will 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 can be notified as early as one day before the time of the event. But, some events will have much shorter notice. When you’re notified, your battery will prioritize charging itself to prepare for the event.

How often do these events occur? The answer to that is unclear. However, PG&E and Tesla note that they will call at least 20 hours worth of events, but no more than 60 hours.

Opt-out

Homeowners can opt-out of supporting the grid during particular events. You can also suspend your enrollment without terminating it completely if necessary.

Backup Reserve

You don’t have to give PG&E access to all of the energy stored within your Powerwall if you don’t want to. The Powerwall comes with 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 is stored in your Powerwall battery during an event

• How much energy your battery typically provides

• How many Powerwall batteries you own

• How much energy is in your Backup Reserve

• How much energy can safely be released from the battery

• The duration and frequency of the events

It’s almost impossible to figure out how much money you’ll get in total, but you can make a rough estimate for individual events. Here’s an example:

Your one Powerwall is fully charged for the ELRP event and you don’t have a Backup Reserve set. PG&E discharges all 13.5 kWh of electricity in your battery. Typically, your battery provides your home with 3 kWh of energy during this time. That means you would get paid for 10.5 kWh, for a total payment of $21 for this particular event.

Depending on the duration of the event, the battery’s state of charge, or the Backup Reserve limit you set, the incentive amount would be lower.

Should you participate in PG&E and Tesla’s virtual power plant?

Joining the virtual power plant comes with 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.

While all of this is great, there are still a few things to keep in mind. If your battery is charging to prepare for an upcoming event, you have to pay for that additional 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 have to think about why you got your battery. If you were seeking independence from the grid, you probably don’t want to give the utility access to your Powerwall.

Another thing to note is that you’re dealing with Tesla, and it doesn’t have the best reputation regarding reliability. While they say payments go out in March 2023, we wouldn’t be totally surprised if that timeline gets stretched out a bit. Plus, Tesla is wishy-washy about the payment schedule - it could be an annual payment or multiple payments, it’s entirely up to Tesla’s discretion. The saving grace here is that the VPP is part of the state-run ELRP program, so maybe we can trust them a little bit more to get payments out on time.

Overall though, PG&E customers that have Powerwalls should definitely consider joining the VPP. The program does offer quite a bit of flexibility for individual participants, thanks to the Powerwall’s Backup Reserve and the ability to choose what events you participate in. It can also help you recoup the cost of a Powerwall quicker. Plus, it has a positive impact on your community and your wallet too.