California Approves Microgrid Tariffs as Grassroots Groups Push for More Local Control of Energy

Jan. 15, 2021
In a decision likely to be eyed closely by other states, California regulators yesterday approved microgrid tariffs and rules to hasten the deployment and commercialization of the technology.

In a decision likely to be eyed closely by other states, California regulators yesterday approved microgrid tariffs and rules to hasten the deployment and commercialization of the technology.

Approval of the tariffs, as well as accompanying microgrid incentives, followed a year-long effort by the California Public Utilities Commission (CPUC) to enact a state law (SB 1339) that requires regulatory changes to support microgrid development.

California is one of the forerunners in the creation of microgrid tariffs — an approach meant to create a revenue stream for microgrids. Its work is expected to be used as a springboard for other states looking to do the same. 

The commission’s deep dive into microgrids over the last year drew a wide range of participants and nearly 700 filings (Rulemaking 19-09-009). The proceeding took place within the backdrop of power outages related to wildfires and grid issues.

Genevieve Shiroma, the CPUC commissioner who headed the effort, described the final decision as a balancing act “to reduce barriers for the commercialization of microgrids while keeping an eye to ratepayer equity and supporting vulnerable and low-income communities.”

Advocates push for greater local control

But before the vote was taken, the commission’s approach was criticized by several speakers from environmental and community-based organizations, among them the Reclaim Our Power campaign and the youth-led Sunrise Movement, which said the decision favored utility control over local control of microgrids.

“Californians desperately need more choices to protect themselves from power outages and outrageously high electricity bills. Microgrid power by local solar and storage are a key solution, but the solution only works if we empower communities to establish microgrids in a way that they see fit and do not allow the utilities to use their monopoly power to undercut community-based microgrids,” said Lee Miller of the Solar Rights Alliance.

Californians for Energy Choice’s Eric Brooks said the decision fails to consider that the “bread and butter” for utilities is construction of transmission lines and other large capital projects, “which makes it ridiculous, quite frankly, to put them in charge of microgrids.”

Microgrids, he said, “are designed to take communities away from those long-range transmission lines to make them safer and more resilient from power shut offs and to promote local community-based clean energy adoption.”

“…the solution only works if we empower communities to establish microgrids in a way that they see fit” — Lee Miller

Known as the Track 2 decision, yesterday’s ruling had been circulated by the commission weeks earlier in draft form. During that time, the draft also drew criticism from some independent microgrid developers, including Google, as skewed against third-party development of microgrids in favor of utility projects. Microgrid developers are particularly concerned about California’s “over-the-fence” rules, which prohibit them from building microgrids that serve commercial buildings on adjacent properties — something utilities can do.

The decision loosens the restriction but in a limited fashion. It allows local government microgrids to service critical customers on adjacent parcels.

Serves the vulnerable

Others praised the decision, particularly its focus on ensuring that low-income and disadvantaged communities reap the benefits of microgrids. 

“Vote Solar appreciates the public utility commission’s leadership on supporting microgrid development in disadvantaged communities with a $200 million incentive program. There is still much work ahead to implement this groundbreaking initiative,” said Ed Smeloff, senior director, grid integration at Vote Solar.

The $200 million microgrid incentive program will be jointly developed by the state’s three investor-owned utilities, Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. The money will fund clean energy microgrids for vulnerable communities that face grid outages. It also will be used to test new technologies or regulatory approaches. 

Lightning pace

Marybel Batjer, CPUC president, said that the commission worked at a “lightning pace.” It produced two major decisions on microgrids over the last 12 months. 

“Often it takes us 18 months (per decision). This has been nothing short of a whole lot of work done very quickly,” Batjer said.

 The Track 1 decision, approved on June 11, 2020, created a suite of short-term solutions to accelerate deployment of microgrids and improve resiliency for the 2020 wildfire season.

Now having completed the second track, the commission moves into Track 3, which includes creating a Resiliency and Microgrids Working Group to take up additional approaches to speed microgrid development. Among other things, the third track will look at adjustments to the microgrid tariffs to reflect the value certain technologies provide, regardless of what fuel sources they use. Batjer noted fuel cells as an example.

Key actions on microgrid tariffs

The decision orders that the state’s three investor-owned utilities take the following actions:

  • Southern California Edison must revise its Rule 2 to permit installing added or special facilities microgrids.
  • All three utilities must:
    • Revise their rules to allow local government microgrids to service critical customers on adjacent parcels.
    • Create a renewable microgrid tariff that prevents cost shifting for their territories.
    • Jointly develop a statewide Microgrid Incentive Program with a $200 million budget to fund clean energy microgrids to support the critical needs of vulnerable communities impacted by grid outages and test new technologies or regulatory approaches to inform future action.
    • Develop pathways for the evaluation and approval of low-cost, reliable electrical isolation methods to evaluate safety and reliability.
    • Consult with local air quality agencies to ensure temporary generation complies with applicable air regulations with a goal to achieve a 90% reduction in criteria pollutants.

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

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