While Californians are being told we need new gas plants to keep the lights on, a cheaper and faster solution is already sitting in homes and businesses across the state. Utilities just do not want to use it.

Virtual Power Plants, or VPPs, connect rooftop solar, batteries, and smart devices into a coordinated network that can act like a power plant. Instead of firing up a fossil fuel plant during peak demand, the grid can draw from thousands of distributed resources that already exist.

This is not theoretical. It is already happening.

In California, programs that aggregate distributed energy resources are already helping manage demand and reduce strain on the grid. The California Energy Commission has studied how demand response programs can shift energy use and reduce peak demand, showing that coordinated customer-side resources can play a meaningful role in grid reliability. These are the building blocks of Virtual Power Plants.

Private companies are scaling this model even further. Tesla’s Virtual Power Plant program connects home batteries so they can discharge energy back to the grid during periods of high demand. Instead of relying on a single centralized plant, thousands of homes work together to supply power when it is needed most.

Other regions are moving even faster. South Australia has deployed one of the largest Virtual Power Plants in the world, linking thousands of households equipped with solar and batteries. The system is designed to reduce energy costs, improve grid stability, and lower reliance on fossil fuels.

The conclusion is hard to ignore. Virtual Power Plants are not experimental. They are already working.

So why are utilities still pushing for new gas infrastructure?

The answer is not technical. It is financial.

Utilities like Pacific Gas and Electric, Southern California Edison, and the Los Angeles Department of Water and Power make money by building large infrastructure. Power plants and transmission projects generate regulated returns. The more they build, the more they earn.

Virtual Power Plants do the opposite. They rely on customer-owned assets. That means fewer large capital projects and less control for utilities over how electricity is generated and distributed.

A gas plant is a guaranteed investment. A Virtual Power Plant is not.

This financial reality helps explain a series of policy decisions that have slowed the growth of distributed energy in California.

The California Public Utilities Commission recently replaced traditional net energy metering with a new net billing structure. The change significantly reduced the compensation that rooftop solar customers receive for exporting electricity to the grid. Lower compensation weakens the economic case for installing solar and batteries, which in turn limits the growth of resources that could be aggregated into Virtual Power Plants.

At the same time, demand response and distributed energy programs are often kept small, fragmented, or overly complex. The California Energy Commission has identified the importance of effective program design in order to fully capture the benefits of demand-side resources. Yet many programs remain limited in scale, restricting participation and slowing adoption.

Utilities also continue to prioritize centralized solutions, including gas peaker plants and emerging technologies like hydrogen, even when distributed alternatives are available today. These projects are framed as necessary for reliability, but they also align with the existing utility business model.

The result is a system that favors large infrastructure over flexible, distributed solutions.

The consequences are not just financial

They are environmental and public health related.

Gas-fired power plants emit nitrogen oxides, which contribute to smog and respiratory problems. According to the Environmental Protection Agency, nitrogen dioxide exposure is linked to asthma and other serious health impacts. These plants are often located in communities that already face disproportionate pollution burdens.

Virtual Power Plants offer a different path. By reducing the need to run fossil fuel plants during peak demand, they can lower emissions and improve local air quality. They can also increase grid resilience by distributing energy resources across many locations rather than relying on a handful of centralized facilities.

There is also an equity dimension. Research from the Rocky Mountain Institute highlights how Virtual Power Plants can be designed to expand access to clean energy and deliver benefits to underserved communities. But that only happens if policies support widespread participation instead of limiting it.

California does not lack the technology to move in this direction. The pieces are already in place. Solar panels, batteries, and smart devices are being installed every day.

What is missing is the willingness to shift away from a system that prioritizes utility profits over public benefit.

Virtual Power Plants are already proving that a cleaner, more flexible grid is possible. They reduce costs, improve reliability, and cut pollution.

That is exactly why they are being resisted.

California does not have a technology problem. It has a power problem.

The question is no longer whether Virtual Power Plants work. The question is who is preventing them from replacing fossil fuel infrastructure, and why.