California state budget goes all in to fund energy resilience; expected to lower microgrid costs

Oct. 21, 2022
A range of programs approved in the California state budget boost microgrid funding to increase energy resilience.

Based on funding in the California state budget, lawmakers are intent on improving energy resilience and boosting grid reliability — and in doing so, are expected to lower microgrid costs.

The 2022-23 budget was approved by the state legislature in late August and has been signed by Gov. Gavin Newsom.

In a summary of its energy-related budget programs, the California Energy Commission (CEC) pointed out that California is on the front line of climate change, experiencing increases in extreme heat, wildfires and drought that are changing demand and supply and affecting disadvantaged communities the most.

“California has experienced back-to-back years of energy reliability challenges, including a multi-day extreme heat event across the western United States that resulted in rotating outages in August 2020,” the CEC said. In 2021, heat waves in June led to warnings about grid instability. The Bootleg Fire in July and August 2021 caused the loss of three transmission lines in southern Oregon, reducing California’s import capability by 4,000 MW, the CEC said in the document.

Included in the state’s budget are two new programs that fund new technologies and demand-side grid support. And existing programs — related to food and industrial processing and low-income loans — received additional funding for meeting resilience, environmental and reliability goals. The state topped off those programs with a community resilience program.

Opportunities for microgrid developers

Together, the funding measures offer significant opportunities for microgrid developers.

“The suite of programs that have been authorized funding in California this year will help to reduce customer costs for building and deploying microgrid technologies and solutions. This will increase community resiliency and improve grid reliability in California,” said Allie Detrio, senior adviser at the Microgrid Resources Coalition.

For microgrid developers, the most important measure is the Distributed Electricity Backup Assets program. The state allocated $550 million to fund new zero- and low-emission technologies, and the CEC has indicated microgrids will qualify for this funding, said Detrio. This will lead to the development of more microgrids, she said.

The CEC scheduled a workshop from 1:30 p.m.-4 p.m. on Oct. 28 to discuss the resources that might support grid reliability and qualify for funding.

Microgrids as grid support

The second new initiative likely to lower microgrid costs is the Demand Side Grid Support Program, which makes more than $200 million available for load reduction and demand response.

Created as part of the state’s Strategic Reliability Reserve, the program provides incentives to lower customers’ energy loads and provide backup generation during extreme events, with an aim of reducing the risk of blackouts.

That program will focus more on public power utilities than investor-owned utilities (IOU), Detrio said.  The IOUs already utilize the emergency load reduction program created by the California Public Utilities Commission, which provides incentives for reducing load during emergencies.

Public power utilities, on the other hand, are regulated by the CEC. The Demand Side Grid Support Program will offer customers of public utilities ways to support the grid to reduce the risk of outages. “Public utilities can leverage customers’ microgrids for demand-side grid support and to help during emergencies,” said Detrio.

Microgrid developers and other providers should apply with the CEC to be demand-side grid support providers. They get paid for units of load reduction when there is an event.

Boost for food producers and carbon reducers

In addition to the two new programs, a handful of existing programs gained support in the budget. Two of them, the Food Production Investment Program and the Industrial Decarbonation and Grid Support Program, together were allocated $125 million for this fiscal year, said Detrio.

The Food Production Investment Program, which has funded several microgrid projects at food processing facilities in past years, helps this energy-intensive sector of California’s economy decarbonize, increase energy efficiency and boost the resilience of operations. In the past, microgrid systems have been responsible for approximately 14% of greenhouse gas emission reductions in the program, thanks to the renewable energy generated by solar photovoltaic systems in participating microgrids, according to an American Council for an Energy-Efficient Economy summary of the program.

“Microgrids for a lot of these facilities are a perfect fit for these programs,” said Detrio. “They often leverage electricity and thermal energy. Microgrids can help reduce demand, improve efficiency and replace conventional generation with cleaner generation.”

A similar effort, the Industrial Decarbonization and Grid Support Program, has funding for processing facilities in other industrial sectors.

Microgrid technologies are expected to be eligible for both programs, said Detrio.

Funding for community resilience centers
The state’s budget also includes $85 million for community resilience centers. The Strategic Growth Council wants to fund neighborhood-level centers that provide shelter and other resources during climate and other emergencies. The funding will go to stakeholders such as tribes, nonprofit organizations, community-based organizations, schools and local government agencies. It would make sense for microgrid developers to partner with these organizations, said Detrio. The funding will go to new construction and upgrades of existing facilities that will help build long-term resilience.

In addition, the Climate Catalyst Revolving Loan Fund was allocated $49 million in new funding. Microgrids are explicitly eligible for low-interest loans under the program, said Detrio.

To apply for these programs, microgrid developers should look at the program guidelines, which emphasize reducing greenhouse gas emissions and accelerating the advancement of clean energy technologies. Microgrid developers should focus their applications on how their projects can boost the number of jobs, improve public health and the environment, and help meet state climate goals, she said.

The programs funded through the new California budget are expected to encourage utility customers and communities alike to invest in local energy projects, including microgrids.

“We need to empower customers and communities to be a part of the clean energy transition in the state. The new funding allocated to these programs will help accelerate that transition in an inclusive manner,” said Detrio.

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About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

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