March 3, 2026
This article is the second installment in our new State Profile Series, examining where bidirectional charging and V2G are most likely to move beyond demonstrations and into durable market structures. If Connecticut offered a model for how to experiment and then integrate, California presents a different case study: a state that has spent more than a decade building the policy and technical foundations for vehicle-grid integration, yet still finds itself largely in pilot mode. With the highest EV adoption in the country and some of the most advanced regulatory frameworks, California’s next step will determine whether V2G becomes embedded infrastructure or remains an extended demonstration.
No state has done more to promote electric vehicles than California. EVs now represent more than a quarter of new light-duty vehicle sales, and the state has aligned climate policy, transportation electrification, and grid modernization around a 2045 carbon-neutrality target. For more than a decade, regulators and utilities have acknowledged a simple truth: electric vehicles are not just new load, they are potential grid assets.
And yet, bidirectional charging in California remains largely confined to pilot programs.
The state has built regulatory frameworks, hosted annual Vehicle-Grid Integration (VGI) forums, funded technology demonstrations, and created interconnection pathways under Rule 21 for both DC and AC vehicle-to-grid (V2G) systems. But despite that early leadership, California has not articulated a long-term vision or target for scaling V2G into a durable grid resource. The result is a paradox: the largest EV market in the country is still experimenting with how to use those vehicles as grid infrastructure.
A Decade of Policy Development
The modern phase of California’s VGI policy began in 2019 with Senate Bill 676, which directed the California Public Utilities Commission (CPUC) to maximize achievable vehicle-grid integration benefits by 2030. The legislation required the Commission to develop strategies and quantifiable metrics to promote cost-effective VGI.
In the CPUC Decision 20-12-029, the CPUC defined VGI broadly: “…any method of altering the time, charging level, or location of EV charging or discharging to optimize grid interaction and provide net ratepayer benefits.” The Commission also authorized the large investor-owned utilities, PG&E, Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E), to propose VGI pilots.
At the same time, California updated Rule 21, its interconnection tariff, to clarify treatment for bidirectional EV charging. Two approaches took shape. DC-based systems use an external inverter in the charger and follow established grid standards. AC-based systems rely on the vehicle’s onboard inverter. Because AC standards were still being finalized, regulators created a temporary pilot pathway in 2020 to allow AC V2G projects to move forward while permanent rules were developed.
PG&E’s V2X Pilots: Comprehensive Design, Limited Participation
Of the three utilities, PG&E has advanced the most visible and structured V2X effort. Pursuant to Commission authorization, PG&E launched three pilots: residential, commercial, and microgrid-focused programs.
The residential pilot offers a $2,500 upfront incentive, $3,000 for customers in disadvantaged communities, plus a $1,500 early adopter bonus for the first 250 participants. Customers may also receive interconnection fee rebates and ongoing participation incentives. Program rules require enrollment in the Emergency Load Reduction Program (ELRP) discussed below, installation by Electric Vehicle Infrastructure Training Program (EVITP)-certified electricians, and, in many cases, a Rule 21 interconnection agreement.
The commercial pilot provides similar infrastructure rebates, scaled by charger size, and supports both vehicle-to-building and vehicle-to-grid applications. The microgrid pilot, now concluded, focused on resiliency, particularly in areas subject to Public Safety Power Shutoffs.
On paper, these programs are robust. They incorporate dynamic pricing, interconnection reform, technical eligibility requirements, and stacked incentives. PG&E’s Hourly Flex Pricing (HFP) pilot applies day-ahead marginal cost signals and offers a subscription-based shadow billing model to reward customers for flexible behavior. But the enrollment numbers tell a different story. As of mid-2025, participation remains extremely limited:
- Residential pilot: 15 customers
- Commercial pilot: one fleet customer (74 chargers)
- Microgrid pilot: single V2G demonstration at airport microgrid site (2 Nissan LEAF vehicles)
After multiple advice letters, extensions, and modifications, California’s flagship V2X pilot remains small. This is not a scaling challenge driven by technology immaturity alone. It reflects the structural complexity of program participation and the absence of a long-term market signal.
The Broader Utility Landscape: Still in Pilot Mode
SCE and SDG&E have pursued VGI through managed charging programs, dynamic rate pilots, and Electric Program Investment Charge (EPIC)-funded research. However, their bidirectional deployments remain limited and largely embedded in demonstration frameworks.
The June 2025 Vehicle-Grid Integration Forum report captures the state’s current posture. Panels were explicitly framed around questions such as “How Do We Value VGI?” and “Crossing the Chasm from Pilot to Programs.” Utilities acknowledged uneven maturity across value identification, technology readiness, and scaling mechanisms. Regulators emphasized affordability and the need to avoid cost shifts in a state already burdened with high retail rates.
The discussion was candid. California is still in the learning phase.
That caution is understandable. Rate design in California is complex. Distribution cost allocation is contentious. Dynamic pricing reforms are still evolving. Regulators have made clear that VGI must reduce costs, not increase them. But incrementalism has consequences. While California refines pilots, other states are pursuing scalable pathways to durable programs.
Emergency Programs & the Limits of Pilot Funding
California’s V2G efforts are embedded within a broader set of emergency reliability programs created after the 2020 rolling outages. Two are particularly relevant: the CPUC’s Emergency Load Reduction Program (ELRP) and the California Energy Commission’s Demand Side Grid Support (DSGS) program.
ELRP is a five-year pilot designed as a last-resort reliability tool. It is triggered only after the California Independent System Operator declares an Alert, Warning, Emergency, or issues a Flex Alert, and it operates during the critical 4 p.m. to 9 p.m. window from May through October. Participants are paid $2 per kilowatt-hour for verified reductions relative to a baseline, with no penalties for non-performance. Aggregators of vehicle-to-grid resources are explicitly eligible to participate. Notably, PG&E’s V2X pilot requires customers to enroll in ELRP, reinforcing that V2G in California is currently structured primarily as an emergency response asset rather than a routine market resource.
DSGS, created under Assembly Bill 205, operates as a statewide incentive program to secure dispatchable load reduction and backup supply during extreme events. Unlike ELRP’s purely event-based compensation, DSGS includes a capacity-style construct, commonly referred to as “Option 3”, under which participants make upfront capacity commitments in exchange for reservation payments, along with performance-based compensation when dispatched. This structure is designed to provide greater revenue certainty for aggregators and customers willing to stand ready as emergency resources.
Bidirectional electric vehicles are eligible to participate as dispatchable distributed energy resources under DSGS, provided they can meet telemetry, dispatch, and performance requirements. In principle, this creates a pathway for V2G fleets to receive capacity-style payments for being available during extreme grid conditions. The program has enrolled more than one gigawatt of capacity overall, including substantial battery participation, and recent test events have demonstrated meaningful dispatch capability. Analysts estimate the broader virtual power plant enabled by DSGS could reduce reliance on gas peaker plants and generate significant ratepayer savings.
Yet both programs share a structural limitation: they are not permanent market constructs. ELRP is explicitly a pilot running through 2027, and DSGS depends on legislative appropriations, including from California’s cap-and-trade revenues. In 2025, lawmakers reauthorized cap-and-trade but did not guarantee continued funding for grid reliability programs, underscoring how participation remains subject to budget negotiations.
For V2G, that uncertainty matters. California has built emergency demand-side tools capable of dispatching distributed resources at scale. But until bidirectional EV capacity is integrated into long-term resource adequacy and distribution planning frameworks, rather than tied primarily to emergency pilots and fluctuating funding, it will remain positioned as a contingency resource, not core infrastructure.
Dynamic Pricing: Ambition Meets Complexity
California’s dynamic pricing reforms are not isolated experiments. They are part of a broader structural effort under the CPUC Energy Division’s Flexible Unified Signal for Energy (CalFUSE) framework, a vision to align retail electricity prices more closely with marginal system costs and enable distributed energy resources to respond in real time.
Under CalFUSE, the long-term objective is clear: transparent, locationally sensitive, time-varying price signals that treat imports and exports symmetrically and reward flexibility when and where it is most valuable. Hourly Flex Pricing and other real-time EV pricing pilots are early expressions of that ambition. In theory, this architecture creates the foundation for EVs, including bidirectional vehicles, to monetize flexibility dynamically, without the need for constant program overlays.
This is a bold vision. If realized, it could normalize vehicle-grid interaction as an economic response rather than a specialized program.
But the path from theory to practice is complex.
Within PG&E’s V2X pilot, participation still requires navigating equipment eligibility lists, Rule 21 interconnection filings, aggregator enrollment, ELRP participation, and layered billing constructs. The pricing architecture may be elegant, but the customer journey is not. For early adopters and institutional fleets, this may be manageable. For mass market participation, it is a barrier.
Moreover, real-time marginal cost pricing introduces its own uncertainties. Customers and fleets need revenue predictability. Automakers need clear compensation pathways. Utilities need planning certainty. Pure price exposure, without capacity commitments or structured procurement, can make investment decisions more difficult, not less.
Dynamic pricing may be a necessary foundation for scalable V2G. But it is not, by itself, a market design. Without clear deployment targets, simplified participation pathways, and integration into long-term planning frameworks, CalFUSE risks becoming a technically sophisticated overlay rather than a catalyst for infrastructure-scale adoption.
California’s vision is ambitious. Realizing it will require more than price reform, it will require institutional commitment to making flexibility a core grid resource, not an experimental add-on.
From Pilot Leadership to Infrastructure Scale
California has built more of the foundation for vehicle-grid integration than any other state. It has defined VGI in statute, modernized interconnection rules, funded demonstrations, aligned dynamic pricing reforms under CalFUSE, and required utilities to treat EVs as grid-interactive assets rather than passive load. It mandates bidirectional capability for electric school buses under CARB funding rules. It invests heavily in EPIC research.
That architecture matters. Other states are borrowing directly from the frameworks California pioneered.
But what California still lacks is a clear long-term deployment objective for V2G itself.
The state has EV sales mandates. It has aggressive storage procurement targets. It has a 7,000-megawatt load shift goal by 2030. What it does not have is a defined V2G capacity target, no statewide megawatt objective for bidirectional export, no explicit integration of V2G into resource adequacy procurement, and no formal requirement that distribution planning evaluate EV export as a scalable deferral resource.
- Without a target, pilots remain exploratory.
- Without integration into planning frameworks, V2G remains optional.
- Without durable compensation structures, OEMs and fleet operators lack bankable revenue certainty.
If California intends to lead not just in EV adoption but in grid integration, it must move from pilot logic to program logic.
That shift does not require abandoning affordability principles. It requires clarity.
The state should articulate a measurable V2G deployment objective, whether defined in export capacity, participating fleets, or distribution-level flexibility targets. Clear goals drive utility planning, OEM engagement, and private investment.
V2G should be embedded into avoided cost methodologies and distribution planning processes, treated as a credible capacity and deferral resource rather than an experimental add-on. Rule 21 must continue evolving from temporary pilot accommodations toward permanent, streamlined interconnection pathways, particularly for V2G-AC systems. And participation must become simpler, with automation, OEM integration at the point of sale, and enrollment structures that normalize grid participation while preserving customer choice.
California understands bidirectional charging. It has spent a decade building the intellectual, regulatory, and technical foundation.
The question now is whether it will convert that foundation into durable scale.
If it pairs its technical leadership with clear deployment targets and long-term procurement pathways, California is uniquely positioned to move V2G from demonstration to infrastructure, and once again shape the national market, not just for electric vehicles, but for how those vehicles become part of the grid itself.
In the nation’s largest EV market, V2G should not remain a demonstration. It should be infrastructure.
Whether California makes that transition will determine whether it remains a VGI pioneer or misses out on tapping into GWs of latent energy storage capacity to support affordability when it’s needed most.
Note: The author thanks Zach Woogen, Executive Director of the Vehicle Grid Integration Council, and Grace Pratt, Associate at Caliber Strategies, for their review and helpful comments on an earlier draft. Any remaining errors or omissions are the sole responsibility of the author
