Multi-Customer Microgrids: Rare, Difficult and the Future

Sept. 11, 2020
When the switch is flipped on the Redwood Coast Airport Renewable Energy Microgrid, it will become the first multi-customer microgrid in Northern California and one of only a handful active in the US. Why are they so rare?

When the switch is flipped on the Redwood Coast Airport Renewable Energy Microgrid, it will become the first multi-customer microgrid in Northern California and one of only a handful active in the US. 

The Redwood Coast Airport Renewable Energy Microgrid is located in remote Humboldt County, California. By Vladimir Sviracevic/Shutterstock.com

This inventive project aims to be a model for creating resilient communities, but should it be successful some of its more innovative features, as well as numerous roadblocks and archaic regulations, may make replicating this microgrid in the future unnecessarily difficult.

Traditional microgrids — typically a single building or contained campus — are becoming more commonplace. But the gradual rise of multi-customer microgrid projects further blurs the line of where electricity customers end and the utility begins, challenging traditional roles and regulatory responsibilities.

More than the sum

Implemented as a technology demonstration project, the ratepayer-funded microgrid in Humboldt County is part of California’s EPIC program to “accelerate the transformation of the electricity sector to meet the state’s energy and climate goals.”

The Redwood Coast renewable microgrid stretches over seven acres, connects multiple non-adjacent customers, and has both utility-side and behind-the-meter components, making it a unique endeavor even among microgrids. The anchor tenants are the regional airport and a US Coast Guard air station. A handful of surrounding commercial customers are also connected into the system.

The microgrid includes a solar farm with 2 MW of grid-tied capacity that can participate in competitive markets and 250 kW of net-metered capacity that will power the airport. Redwood Coast Energy Authority (RCEA) will own and operate the solar facility and maintain a 2 MW/8 MWh battery energy storage system and dynamic EV charging infrastructure that can participate in demand response programs.

The local utility, Pacific Gas & Electric (PG&E), will own and operate the microgrid circuitry and equipment, and oversee operations of the microgrid in island mode when the regional grid is inoperable or the utility implements a public safety power shutoff. This is one of a few EPIC-funded microgrids by PG&E and the state’s other investor-owned utilities that will come online in the coming months.

Unlike other microgrid systems, the front-of-the-meter design enables the output from the grid-tied solar capacity to be redirected to the microgrid in island mode, meaning that along with backup batteries the airport and coast guard facilities can effectively operate indefinitely as critical lifelines for the community.

Interfacing on the utility side of the meter enables the multi-faceted solar system to bid into the wholesale market, net-meter the airport, and supply the microgrid and batteries in times of need. This means that RCEA will generate new revenue, reduce operational costs for a major customer, and ensure resilience in wildfire and mudslide prone California, all from one solar farm.

One of the most important elements of the system’s design is the shared ownership model with the utility, without which this microgrid would be impossible.

This capability — to be directly grid-tied and still behind the microgrid meter — is possible because of PG&E’s participation. But that’s also what may make this project difficult to replicate in the future without the same conditions and partners in place.

Multi-customer microgrid projects can provide a number of communal benefits and help apportion the cost burden of resilient infrastructure investments, but the ability to build them is constrained by the rules and regulations that govern the electric grid.

Good for the goose

One of the most important elements of the system’s design is the shared ownership model with the utility, without which this microgrid would be impossible.

By splitting ownership with PG&E, the system adheres to a notable roadblock to wider adoption of multi-customer microgrids — utility franchise rights, known in California as the ‘over-the-fence’ rule.

California’s over-the-fence rule prevents non-utility entities from owning infrastructure that crosses public rights of way, like a public road. It also restricts customers from, in turn, serving as an electricity supplier to other customers. In effect, the rule is designed to ban anyone from stringing up their own wires and running their own shadow utility, which could endanger public safety and generally wreak havoc.

In practice, though, the rule can be limiting and circumspect in certain scenarios, preventing a multi-customer microgrid like Redwood Coast Airport from being built any other way. Without utility involvement as the owner and operator of the circuitry and equipment (particularly where it crosses public streets), the resilience and cost-savings benefits could not be shared by these otherwise independent customers.

Communal ownership of the microgrid assets between the utility, the public and customers prevents running afoul of the over-the-fence rule, but it also helps address the challenge of monetizing certain system capabilities.

As just one example, a storage-enabled microgrid could also support the distribution grid, and allow the utility to defer the cost of upgrading an area substation (augmenting the grid so that upgrade investments can be put off). This will save the utility money, making funds available for other infrastructure improvements.

There is no market mechanism or payment to compensate an independent microgrid developer or the microgrid customer for providing this cost deferral. When a utility participates in a multi-customer microgrid system design, implementation and operation, then these otherwise inaccessible value streams can be captured and factored into project planning.

Rendering of Peña Station NEXT. Credit: SevenG

At the Peña Station NEXT microgrid, there is a collaboration between local utility Xcel, project integrator Younicos, and anchor customer (and battery manufacturer) Panasonic, where each shares a portion of the microgrid’s costs and benefits. Xcel plans to use the microgrid to aid in renewable integration, augment other distribution infrastructure, and provide cost-effective  reliability for customers in the area.

If Xcel was not involved in that project, those capabilities would be left on the table in the absence of new market structures; the microgrid would not even be allowed to be built due to utility franchise rights. With a utility as a project partner, these new revenue streams become accessible, further improving overall project viability and justifying their costs and engagement in part by reaping these additional systemic benefits.

Utility involvement is a regulatory requirement for almost all multi-customer microgrid projects, and utility involvement can make economics more favorable and enable additional capabilities.

Good for the gander

Having a utility partner for a microgrid project is great — but requiring one is inherently limiting. Without utility involvement and partial asset ownership, most plans for multi-customer microgrids will quickly unravel as technically infeasible and cost prohibitive.

As clarification, current rules dictate that a non-utility entity is allowed to distribute power to two adjacent customers, meaning that not all multi-customer microgrid designs are restricted. But if two buildings are across the street from each other, distributed in a neighborhood, or multiple non-adjacent buildings on a campus, regulations currently prevent a microgrid without the utility.

The city of Berkley learned this when they sought to create a fully-connected, multi-building, clean energy microgrid community with non-adjacent government buildings. The solar and storage microgrid project was ultimately abandoned due to regulatory restrictions, and they opted for a less cost-effective variation with independent solar and storage systems installed at some of the targeted buildings.

Franchise rights are foundational to monopoly regulation, so it would be counterproductive to open up a Wild West where anyone can be a utility.

Under California law, and in many other states, utilities also can levy a cost of ownership charge on customers, ostensibly to recover infrastructure costs related to a customer’s service. This presents another financial hurdle to a multi-customer microgrid that lacks a utility partner.

Additionally, the interests of the utility and the customer are not always aligned. The financial and systemic benefits necessary to justify utility involvement may not be present in a project that otherwise would pencil out through customer benefits alone, deterring utility engagement in an otherwise viable microgrid. 

For a project where monetizing resilience and reliability is difficult, sharing the costs and benefits through a multi-customer microgrid can greatly improve the economics.

Franchise rights are foundational to monopoly regulation, so it would be counterproductive to open up a Wild West where anyone can be a utility. But striking a balance between necessitating utility involvement and empowering customers to deploy innovative microgrid strategies could open new opportunities for multi-customer microgrid development in the future.

The future of the multi-customer microgrid

Utility partnerships make multi-customer microgrid projects possible today, but also may limit future deployment of these communal systems. 

Limited access to revenue streams and a very competitive marketplace for distributed energy solutions mean that microgrids often operate on thin margins, and multi-customer microgrids could help project viability and increase access to this novel resilient energy solution.

The Redwood Coast Airport Renewable Energy Microgrid will create a resilient rural community in a state plagued by natural disasters and blackouts. It is poised to demonstrate the multiple benefits of collaboration between a utility and its customers to implement creative solutions. 

But this unique project may remain one of a kind if other utilities don’t embrace this reimagining of the utility-customer relationship, or unless interconnection and ownership rules are modified to allow for more innovative system designs. 

In the meantime, utility partners are essential to developing effective multi-customer microgrid projects and reaping benefits that transcend the traditional boundaries of the utility meter.

Matt Roberts is director of strategic growth & government affairs at Microgrid Knowledge

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About the Author

Matt Roberts

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