California is making enormous strides in its race to 100% clean energy, but rapidly rising energy prices are threatening to hold us back.

Electricity prices have surged 127% over the past decade, with some customers seeing increases of over 60% just in the last four years. These rising costs put a significant strain on household budgets, especially in disadvantaged communities, and pose a growing threat to the success of California’s clean energy and electrification goals.

The root of the problem? We’re paying billions to build and maintain grid infrastructure that sits mostly idle. In fact, about two-thirds of the costs that California utilities recover through rates are spent on grid infrastructure that operates at just 30% of its capacity most of the time. This wasteful status quo occurs because the whole system is built to handle peak demand—the few times each year when electricity consumption reaches its highest levels. What’s worse, those peaks will get increasingly taller and steeper if consumption keeps growing during specific times of day, leading to expensive, ever-increasing overbuilding. 

Figure 1. Conceptual representation of CAISO forecasted increase in peak demand. (Source: California Energy Commission)

Instead of continuing to overbuild in this way, we can—and must—get smarter about how we use the grid we already have.

That’s where demand flexibility comes in. 

What is Demand Flexibility – and Why Does It Matter?

Demand flexibility means using smart technologies and incentives to manage energy demand by shifting energy usage to off-peak times, when electricity is cheaper, cleaner, and more available. Instead of overbuilding our way out of rising demand, we can optimize our use of what we already have.

This strategy, also called “load shifting,” reduces peak demand—the most expensive and polluting part of our power system—and improves the overall efficiency of the grid. That means lower costs for everyone.

That’s why the California Energy Commission (CEC) has set an ambitious state goal of achieving 7,000 MW of load shifting by 2030 and is convening state and industry leaders at a Demand Flexibility Summit on May 22 to collaborate to achieve this goal. This isn’t some futuristic pipe dream. Demand shifting is already taking place through existing successful strategies: 

1. Demand Response

Demand Response (DR) programs offer financial rewards to customers who reduce energy use during grid emergencies or high-demand hours. Smart thermostats, EV chargers, and other connected devices can automatically respond to DR signals (while retaining the owner’s ability to manually adjust use as needed), keeping the lights on and lowering household energy bills.

2. Virtual Power Plants (VPPs)

VPPs are made up of thousands of distributed energy resources (DERs), such as home batteries, electric vehicles, rooftop solar, smart thermostats, and heat pumps, that can be directed through software to change their energy demand in unison.

Together, these aggregated DERs can provide as much energy capacity as a traditional power plant, using clean energy and producing it locally, removing the need to transmit the energy from hundreds of miles away. In doing so, VPPs could save Californians $550 million per year in traditional power system costs —$500 million of which could go directly to customers who participate, and another $50 million in system-wide ratepayer savings.

3. Managed Charging

Across the country, consumers are adopting new, more efficient, and cleaner devices that replace older, polluting, and less functional devices. From electric vehicles to heat pumps and induction stoves, these devices not only reduce pollution and costs, but can also be managed to reduce their impact on the grid and increase consumption of renewable energy when it is cleanest and cheapest.

Electrification paired with managed charging could be an enormous benefit to all ratepayers – if load flexibility is used. More electricity flowing through the same wires means costs are spread more widely and can reduce rates for all customers. The CPUC’s Public Advocates Office found that beneficial electrification, paired with load flexibility, could reduce rates by 2 to 12% from what they otherwise would have been. NRDC found that every 10% increase in residential electricity consumption through beneficial electrification could decrease all ratepayers’ rates by 4-7%. Electric vehicles in particular could have a significant positive impact, because charging can be managed to ensure customers’ needs are met while maximizing cheap and clean renewables and increasing grid utilization.

4. Time of Use Rates

“Time of Use” (TOU) rates are a type of electricity pricing where the cost of power varies depending on the time of day.  Electricity costs more during periods of high demand—typically in the late afternoon and evening—and less when demand is lower and renewable energy is more abundant—like midday when solar generation peaks.

By encouraging customers to shift energy use—such as running appliances or charging electric vehicles—to off-peak hours, TOU rates not only help households lower their energy bills, but also reduce strain on the grid, cut emissions, and improve overall system efficiency. As more customers take advantage of TOU pricing, the collective benefits grow—delivering a more affordable, reliable, and cleaner energy system for all.

How Active Policies Can Move Us Forward

To be able to handle today’s energy needs, policymakers must create a supportive policy and regulatory environment that promotes all types of load flexibility strategies. Thankfully, some forward-thinking California legislators are seeking to make progress through bills this year: 

• AB 740 by Assemblymember Harabedian would require the CEC to develop a statewide implementation plan for scaling up Virtual Power Plants.

• AB 44 by Assemblymember Schultz would clarify and streamline how demand management technologies, like behind-the-meter batteries and thermostats, can reduce a utility’s procurement obligations, unlocking savings for customers 

• SB 541 by Senator Becker would add accountability to California’s load-shift goal by assigning portions of the target to energy providers and requiring them to report on their progress. The bill also directs the CEC to develop a better way to value flexible demand that reflects where and when load shifting delivers the most benefit—a necessary tool to maximize load shifting opportunities.

These bills present practical steps we can take today to save Californians money, reduce emissions, and avoid wasteful overbuilding of costly grid infrastructure. 

California’s energy affordability crisis won’t fix itself. But demand flexibility offers a clear, proven path forward—one that’s cleaner, cheaper, and more equitable. With the tools already in place and policy momentum building, now is the time to act.

Figure 2. Ways in which DERs can shape demand on the grid (Source: Pathways to Commercial Liftoff)