San Diego Approves Deal with Shell New Energies for 8 Microgrids

July 9, 2021
Shell New Energies US will own and operate eight San Diego microgrids under a 25-year agreement approved by the San Diego, California, city council.

Shell New Energies US will own and operate eight San Diego microgrids under a 25-year agreement approved by the San Diego, California city council.

The microgrids on city facilities are set to include a total of 930 kW of solar photovoltaic systems, 2 MWh of battery storage and electric vehicle (EV) charging stations, city staff said in a memo to the city council.

Approved June 29, the agreement is driven by a California Energy Commission (CEC) grant awarded to Gridscape Solutions. The grant supports projects that show the viability of getting energy savings from microgrids while increasing electrical infrastructure resiliency, reducing greenhouse gas emissions and improving energy performance using smart, connected, distributed energy systems at critical facilities, according to the memo.

Using the grant, Gridscape Solutions, a company that develops renewable microgrids and EV charging systems, is contributing $950,000 to the project. Shell New Energies expects to spend $4 million on the project, according to city staff.

Pricing starts at 18 cents/kWh

San Diego will pay Shell New Energies 18 cents per kWh for electricity from the microgrid facilities, with the cost going up by 2.5% a year. The city will pay $78,000 a year for electric demand capacity from the battery energy storage systems, with a 2.5% annual increase. The city expects to continue buying some electricity from San Diego Gas & Electric (SDG&E) for the microgrid facilities.

The first microgrid is expected to begin operating in March 2023. After eight years, San Diego has an option to buy the microgrids from Shell New Energies.

San Diego calculates that it will save $6 million from reduced electricity costs over 25 years, assuming SDG&E’s rates increase by 4% a year. Using electricity from the microgrids is expected to cut greenhouse gas emissions by 1,270 tons over the life of the contract.

During normal operations, San Diego foresees the batteries at the microgrids discharging during the day when utility electricity prices are high. The system would then shift to grid electricity when prices are low, staff said.

Staff touts value of resiliency

Besides direct cost and emissions reductions, city staff said the city council should consider the value of increased resiliency provided by the microgrids. 

“As microgrid systems proliferate, the clean energy industry is homing in on a dollar value for resiliency benefits equal to 25% of the system cost, implying that the clean energy proposed for purchase from Shell New Energies is worth 25% more than the city is agreeing to pay,” city staff said.

Future microgrid projects considered by San Diego will likely include a resiliency “adder” in the project costs of about 25% as the market coalesces around a standard value of resiliency, staff said. 

San Diego didn’t issue a solicitation for the microgrid projects because a competitive bid would have eliminated access to the CEC grant funds, according to staff. 

Microgrids meet city’s goals

Three recreation centers, two fire stations and three police stations will house the microgrids. The fire and police stations have backup diesel generators that will be used if needed. 

The eight San Diego microgrids will help the city meet its goal of reducing its electricity use by 25% below 2010 levels by 2035. The city also has a goal of increasing its energy resilience.

Gridscape, which has been awarded several CEC grants, had 10 operating microgrids in California as of November 2020, including at three fire stations in Fremont. The company expects to have about 50 microgrids operating in the state by next year.

Track news about development of the eight San Diego microgrids. Subscribe to the free Microgrid Knowledge Newsletter.

About the Author

Ethan Howland

Propane Is a Sustainable Choice for Growing Microgrid Need

July 2, 2024
Construction professionals rely on propane’s lower emissions and enhanced resiliency

Making Money with Microgrids

How Microgrids Make Money: A Tutorial on Ways Microgrids Earn Their Keep

This presentation provides a tutorial on ancillary services, demand response, transactive energy and other ways microgrids earn their keep.