Can California Shape Microgrid Development? Because it’s Coming Anyway

May 27, 2016
Promote them or not, microgrids are coming to California. How can policymakers map microgrid development to make the most of it?

Promote them or not, microgrids are coming to California. So how can policymakers shape microgrid development to get the most out of it for consumers and the grid?

That’s how Gabe Petlin, supervisor of grid planning and reliability at the California Public Utility Commission (CPUC), framed California’s upcoming quest to create a microgrid road map.

Or as put by Michael Gravely, deputy division chief at the California Energy Commission (CEC), “It’s not a question of are we going to do microgrids in the future. But where is the best place to use microgrids in the future? And what is the most cost efficient way to use microgrids?”

Petlin and Gravely were among officials from the CPUC, CEC and the California Independent System Operator (ISO) who gathered Tuesday for the first in a series of meetings to kick off the microgrid road map.

Similar to road maps prepared by the state for energy storage and vehicle-to-grid, the microgrid effort is meant to help policymakers set priorities. California wants to help the industry standardize and commercialize microgrids to drive down costs for consumers.

The road map sprang out of discussions with the military, which has been building microgrids for energy security and reliability in the state. California also has funded several demonstration microgrid projects.

Now California wants to get beyond microgrid research and development. “We could fund science projects for the next 10 years, but what is the purpose of it?” Gravely said.

So what will come out of the road map effort? Don’t expect large amounts of funding or any preferences given to microgrids in policy, he said. Instead, the road map will focus on developing useful business cases for microgrids.

The process will not be simple or quick. The state plans to hold four in-depth workshops over the course of nearly a year, interspersed by working group meetings. The goal is to have a draft road map by March or April 2017.

Microgrid development isn’t easy in California

Microgrid development faces many of the same issues in California as in other states, according to the speakers.

For example, in California microgrids become electric utilities if they sell to multiple customers and cross a right-of-way or property boundary. This means a level of regulation crushing to entities the size of microgrids.

High economic barriers exist too. These include potential standby charges and distribution upgrade costs. Further, microgrids may face substantial interconnection study costs because many are unlikely to qualify for California’s fast-track process,  according J. David Erickson, a lead analyst at the CPUC.

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California’s hybrid approach to restructuring also creates barriers — as well as opportunities.

Microgrids are likely to find it difficult to compete on price against unbundled generation rates. Generation charges, which are based on what a utility pays to procure power, range from 2-3 cents/kWh up to about 12 cents. Meanwhile, microgrids need to charge upwards of 12 cents/kWh to recover costs, according to Erickson.

“What sets your level of profit or loss probably can’t compete with the generation charge in the state of California today,” Erickson said.

Although, he noted, microgrid costs are expected to drop.

But there are opportunities for microgrids

Microgrids have been able to compete, however, with California’s bundled rates, which are about 17 cents/kWh for residential customers. (Bundled rates include generation, transmission and distribution charges.)

Given this economic back drop, the possibility exists for microgrids to compete on price under solar-type lease arrangements, as well as through California’s community choice aggregation program, according to Erickson. Under CCAs, local governments aggregate load and procure power independent of investor-owned utilities.

“It’s sort of like a mass deregulation on a community scale,” he said. “I personally think that CCAs are a great opportunity to develop microgrids.”

Under the CCA model, aggregated microgrids could form an electric micro utility, an entity allowed in California if it serves fewer than 2,000 customers. In such circumstances, microgrids might also find opportunities to provide heating and cooling, and serve water and waste water facilities, he said.

Revenue opportunities also exist for microgrids in the wholesale market. The ISO is looking at ways microgrids can serve the grid, after the microgrid has fulfilled the needs of its customers, said Peter Klauer, the ISO’s smart grid solutions manager.

Three proceedings are under way before the California ISO that might impact microgrids:

Energy Storage and Distributed Energy Resources

Expanding Metering and Telemetry Options

Frequency Response

What’s up next for California’s microgrid mapping effort? Defining the term ‘microgrid,’ an issue perplexing the industry well beyond the state.

“If you ask 10 engineers the definition of a microgrid, you get 15 at least,” said Robert Weisenmiller, CEC chairman. “It’s pretty hard to standardize in that environment.”

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of EnergyChangemakers.com. She is co-founder and former editor of Microgrid Knowledge.

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