Microgrids to the Rescue?

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP

With ever-increasing risks of wildfire across the state, it seems certain that California’s electric utilities will have to continue to rely on – and perhaps increase – their use of Public Safety Power Shutoffs (PSPS) to prevent future wildfires. During PSPS events in October and November 2019 alone, over 3 million Californians lost power and many were left in the dark for multiple days at a time.

Facing this new normal, "microgrids" have emerged as a potential tool to ensure that crucial facilities maintain power during the inevitable PSPS events in 2020 and beyond. This article examines the current state of California’s microgrid market and the current commercial and regulatory efforts to build more microgrids throughout the state.

What Is a Microgrid?

The definition of microgrid varies depending on who you ask and what purpose it serves. In general, a microgrid is a power system that is capable of operating independently of the utilities' larger electric grid. Microgrids can electrify remote or isolated communities that do not have access to the grid. They can also be built to connect with, and run parallel to or in lieu of, the utility grid.

Microgrid benefits include:

  • Flexibility for integrating multiple distributed energy resource technologies (DERs);
  • Resilience and reliability in the event of disconnection from, or power shutoff by, the main utility grid;
  • Ancillary grid services between the microgrid and main utility grid; and
  • Bill savings, especially through demand charge abatement.1

Recent natural disasters across the country have spurred efforts to develop "resilient" electric service. The islanding capability of microgrids (i.e., the ability to safely operate the microgrid even when the utility power grid is down) allow for the operation of critical facilities, such as fire stations, hospitals, cellphone towers, etc. during natural disasters and utility grid power shutoffs.

Energy Commission Pilot Projects

Since 2009, the California Energy Commission (CEC) has invested $90 million to build 39 microgrid projects in California, funded through the Electric Program Investment Charge (EPIC), a ratepayer-funded energy innovation research program.2 The projects included low carbon-based microgrids to protect critical facilities from service interruptions, as well as high penetration, renewable-based microgrids to provide facilities and communities with up to 100% renewable energy.3

Recent microgrid demonstration projects include:

  • A secure, reliable, low-carbon community microgrid at Blue Lake Rancheria;
  • A microgrid at the Laguna Wastewater Treatment Plant;
  • A renewable energy microgrid at a California healthcare facility;
  • A microgrid automation project at Las Positas College;
  • Solar-powered emergency microgrids for Fremont fire stations;
  • A direct current, building-scale microgrid platform for Bosch; and
  • California’s first renewable energy-based community grid at Borrego Springs.4

These projects have demonstrated various microgrid benefits, such as successfully supporting facilities during major storms and fires, offering four to eight hours of power during grid outages, reducing energy costs by 20–40 percent, and providing grid support through reduced congestion and voltage regulation.5 However, the CEC still identifies high up-front costs, no standardized designs, and relatively long implementation schedules (typically 18-36 months to full implementation) as a few of the key remaining challenges facing microgrid development.6

Surging Demand From the State's Utilities and CCAs

In response to increasing fire-risk and bankruptcy-inducing wildfire liabilities, California's Investor Owned Utilities (IOUs) have begun instituting PSPS to prevent wildfires. Demand for backup generators, portable power stations, battery technology, and more holistic microgrid solutions have surged as California businesses, communities, and institutions seek ways to ensure that they have power when utilities shut down their service.

In November 2019, several Northern California Community Choice Aggregators (CCAs) – East Bay Community Energy, Peninsula Clean Energy, and Silicon Valley Clean Energy – as well as a municipal utility – Silicon Valley Power – issued a joint solicitation seeking to procure over 30 megawatts (MW) of resource adequacy (RA) capacity.

The objective of the solicitation is twofold: to identify new and existing DER systems capable of providing capacity to satisfy RA requirements while also supporting the development of DERs to increase resilience in each service territory. 

The solicitation requires that a portion of the capacity be achieved by September 2020, with the remainder achieved in advance of the 2021 wildfire season. Proposals were due December 23rd, 2019.

Pacific Gas and Electric Company (PG&E) is similarly embracing microgrids as a means of both strengthening grid resiliency and meeting State-mandated RA procurement requirements. PG&E issued a request for offers in December 2019, seeking companies to install microgrids near 20 substations in advance of the next wildfire season.7 The deadline for participants to submit offers is January 17, 2020.

CPUC Moves Forward With Microgrid Rulemaking

In 2018, the California Legislature passed Senate Bill (SB) 1339, directing the California Public Utilities Commission (CPUC) to take specified actions to facilitate the commercialization of microgrids for distribution customers of large electric utilities.8

To implement SB 1339, the CPUC has initiated Rulemaking 19-09-009. The proceeding will be divided into three tracks.

Track 1 encompasses the CPUC’s objective of deploying resiliency planning in areas that are prone to outage events and wildfires, with the goal of putting some microgrids and other resiliency strategies in place by spring or summer 2020 (i.e., before the 2020 wildfire season begins). The specific issues to be addressed in Track 1 include:

  1. Prioritizing and streamlining interconnection applications to deliver resiliency services at key sites and locations;
  2. Modifying existing tariffs to maximize resiliency benefits;
  3. Facilitating local government access to utility infrastructure and planning data to support the development of resiliency projects; and
  4. IOU proposals for immediate implementation of resiliency strategies, including partnership and planning with local governments.

The CPUC will issue a Staff Proposal and the IOUs are ordered to file "proposals for immediate implementation of resiliency strategies" by January 21, 2020. Comments on both are due January 30th, with reply comments due February 6th, 2020.

In Track 2, the CPUC will develop standards, protocols, guidelines, methods, rates, and tariffs to support and reduce barriers to microgrid deployment statewide.

Track 3 will consider the ongoing implementation requirements of SB 1339 as well as any future resiliency planning.

Looking Forward

California is not the only state in need of energy resilience. The United States has seen an increase in the number of high-impact, high-cost natural disasters. Seven of the ten costliest storms in U.S. history have occurred in the last ten years.9 As utilities around the country grapple to keep the power on in the face of a changing climate, lessons learned in California may facilitate deployment of microgrid solutions throughout the United States.

The CPUC’s development of microgrid standards, protocols, guidelines, methods, rates, and tariffs will go a long way to reduce barriers to microgrid deployment statewide. If utilities and CCAs are able to identify ways to align microgrid projects with RA counting rules to meet CPUC-mandated RA procurement requirements, this will provide another critical revenue stream for microgrid projects.

From a technical perspective, the duration of a microgrid’s ability to "island" depends on generation capacity, storage capacity, and load. CEC’s demonstration projects have successfully islanded during several unplanned utility outages to weather and nearby wildfires.

However, these islanding events have had a duration of a few hours. During the 2019 wildfire season, utilities shut off power to some customers for days at a time. Microgrid projects built to address PSPS will be required to island for much longer durations. It is likely that longer-duration microgrid applications will be identified as part of the CCA and PG&E’s current procurement efforts.


1  Anthony Ng, "Increasing Reliability and Resiliency with Microgrids," California Energy Commission (March 27, 2018), Presentation Slides, p.8.
2  Mike Gravely, "Lessons Learned from Energy Commission Microgrid Research Activities," California Energy Commission (December 12, 2019), Presentation Slides, p. 4, available at: https://www.cpuc.ca.gov/General.aspx?id=6442463482.
3  Mike Gravely & Laura Vogel, "EPIC-Funded Microgrid Projects: Lessons Learned," California Energy Commission (April 26, 2019), Presentation Slides, p. 14.
4  Id. at pp. 15-23.
5  See Gravely, "Lessons Learned," supra note 2, at p. 3.
6  Id.
7  See "System Reliability RFO – Distributed Generation Microgrid Service Phase," PG&E.
8  The bill also requires the publicly owned electric utilities (POUs) to develop and make available a standardized process for the interconnection of a customer-supported microgrid, including separate electrical rates and tariffs.
9  Kate Anderson et. al., "Resilient Renewable Energy Microgrids," SCTE-ISBE and NCTA (2017), Presentation Slides, p. 3.

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