California Legislative Session Advances Important Clean Energy Initiatives But Misses Some Key Opportunities

Written by Caroline Grace | Sep 16, 2025

Many no-regrets bills passed in the waning days of session, but major affordability and clean energy gaps remain

SACRAMENTO, CA—During a busy last week of session in which high-profile energy deals were finalized on topics ranging from cap-and-trade reauthorization to replenishing the wildfire fund, California lawmakers approved many clean energy bills and made progress in addressing the ongoing energy affordability crisis, but also fell short on other key solutions.

Lawmakers sent Governor Newsom legislation supporting distributed energy resources, virtual power plants, geothermal, solar, storage, load shifting, clean energy tax initiatives, local government electrification, and a robust western power market. Together, these measures represent meaningful steps to lower costs, enhance reliability, and accelerate California’s clean energy transition.

In addition, the legislature advanced some key investments in clean energy and clean transportation programs, including appropriating $46 million for the Distributed Electricity Backup Assets (DEBA) program to fund new clean distributed energy assets like batteries and microgrids, $38 million for charging infrastructure for heavy-duty zero-emission vehicles, and $25 million for the Clean Cars 4 All program.

However, these investments fall well short of the need for clean energy resources and zero-emission vehicles (ZEV). The Demand Side Grid Support (DSGS) program, the largest virtual power plant program in the nation, which provides clean emergency backup power, was completely defunded and is set to run out of funds this year. In addition, key clean transportation programs like the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) largely went unfunded, falling well short of a $1.5 billion need to restore California leadership in ZEV leadership in the face of federal rollbacks.

“This was a consequential year for California in energy policy. Several major bills were passed by the legislature unlocking the benefits of virtual power plants, federal clean energy tax credits, geothermal energy, and an effective west-wide energy market – and we urge Governor Newsom to sign these bills into law,” said Leah Rubin Shen, Managing Director at Advanced Energy United. “However, California also missed significant opportunities that will hamper the state’s affordability, clean energy, and clean air goals, such as defunding the nation’s largest virtual power plant program and significantly underfunding key zero-emission vehicle programs. At a time of federal rollbacks, California must lead with bold, nation-leading policies and programs that keep energy costs down while building a cleaner, more resilient grid.”

A review of our priority bills that passed and now await the Governor’s signature:

AB 39: Requires cities and counties to develop plans to meet their electrification goals, including identifying opportunities to expand zero-emission vehicle (ZEV) charging infrastructure, building electrification, and distributed energy resources.
AB 44: Streamlines how utilities use distributed energy resources (DERs) and take advantage of existing VPP programs to reduce electricity demand and lower costs for ratepayers.
AB 527: Exempts exploratory geothermal projects that meet environmental stewardship standards from the California Environmental Quality Act (CEQA).
AB 531: Enables geothermal projects to take advantage of the California Energy Commission’s AB 205 “one-stop shop” process for permitting, siting, and environmental review.
AB 740: Unlocks the full potential of distributed energy resources (DERs) like smart thermostats, EVs, and home batteries to improve reliability and lower ratepayer costs.  
AB 825: Enables California to participate in an independently governed Western electricity market.
AB 1408: Streamlines surplus interconnection, allowing new solar, wind, and energy storage resources to connect to the grid infrastructure in places already served by existing energy infrastructure.
SB 302: Aligns the state’s tax code with federal law, unlocking billions in clean energy tax incentives.
SB 541: Directs the CEC to estimate the potential for load-shifting for each electricity supplier and makes that information public.
SB 787: Creates a new Senior Advisor position at the CEC to coordinate supply chains for accelerated deployment of renewable energy and cleantech.

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