February 13, 2020

Microgrids on the Rise as CPUC Seeks to Streamline Resiliency Projects

Holland & Knight Energy and Natural Resources Blog
Tara S. Kaushik | Kevin J. Ashe
Energy and Natural Resources Blog

The state of California is calling for more investments in microgrids1 for electric power resiliency. Spurred by a 2018 legislative effort that recognized the multitude of benefits microgrid technologies can offer (e.g., grid reliability, renewable integration), the reality of increasing California wildfires and power outages make microgrid deployment a necessary option.

This week, the California Public Utilities Commission (CPUC) received comments from stakeholders on a CPUC staff proposal and utility proposals filed in a proceeding to streamline and improve the commercialization of California microgrid projects. The proceeding will span three phases, where interested stakeholders may file comments to shape the terms by which utilities must procure from this resource in the near future. The proceeding signifies the state's goal to introduce microgrids at a greater scale in the state's energy platform.

The CPUC Microgrid Proceeding

Senate Bill 1339 (Sen. Henry Stern), which passed in September 2018, directs the CPUC to undertake activities to further develop policies related to microgrids. On Sept. 12, 2019, the CPUC initiated Rulemaking (R.) 19-09-009, which intends to craft a policy framework surrounding the commercialization of microgrids. The CPUC is not confined: it can consider programs, tariff rules and rates applicable to microgrids to advance broader policy goals of reducing greenhouse gas (GHG) emissions, adapting to changing climate and protecting California residents from catastrophic events such as wildfires.

The CPUC has since segmented the proceeding into three tracks. Track 1 will focus on deploying resiliency planning in areas that are prone to outage events and wildfires. This track is expected to conclude by spring or summer 2020 before the 2020 wildfire season. Track 2 seeks to accomplish the state's broader policy goals in the context of supporting microgrids and resiliency such as developing standards, guidelines, rates and tariffs to support and reduce barriers to microgrid deployment statewide. Track 3 will focus on future, long-term implementation of SB 1339 and resiliency planning.

Track 1: Short-Term Proposal

On Jan. 21, 2019, the CPUC's Energy Division released a proposal of short-term action items to accelerate the deployment of microgrids and resiliency solutions. The proposals include recommendations on:

(i) standardizing and streamlining the IOU interconnection processes for resiliency projects such as developing pre-approved designs and allowing projects in key locations to bypass the interconnection queue

(ii) modernizing tariff rules such as revising storage charging and capacity limits under net energy metering tariffs and

(iii) improving information sharing with local agencies such as holding meetings to discuss vulnerable infrastructure and develop a guide to navigate IOU interconnection processes.

If adopted, short-term actions could reduce barriers to deploying microgrids and other resiliency projects as early as fall 2020.

On the same day the proposal was released, California's three major investor-owned utilities (IOU) filed their proposals for "immediate implementation of resiliency strategies, including partnership and planning with local governments. The IOUs' proposals have already caught scrutiny from commenters. For example, one IOU's proposal for increased mobile and temporary generators has been criticized as being cost-ineffective and contrary to what prototypical microgrid solutions should resemble. Microgrid developers and trade associations also caution the CPUC to carefully examine IOU-provided behind-the-meter services, especially given the number of competitors that already exist in the microgrid market.

Now that opening and reply comments on the proposals above have been filed, parties currently await a CPUC decision, which will adopt the proposals as regulatory requirements. The CPUC will then proceed to initiate the second phase, which will allow parties to submit additional comments on standards and regulations for utilities to procure microgrids in the future.

Key Considerations for California's 2020 Wildfire Season

Significant wildfires are most likely to occur under high-risk conditions of high winds and low humidity – chiefly, in the late summer and fall in northern and southern California. During extremely high-risk conditions, CPUC regulations require IOUs to de-energize certain distribution and/or transmission infrastructure to reduce the likelihood of equipment failure that may ignite surrounding vegetation, commonly referred to as a Public Safety Power Shutoff (PSPS).

On Oct. 6, 2019, PSPS impacted more than 728,000 customers across 35 different counties in northern California. At an Oct. 18, 2019, CPUC hearing, an IOU's president forecasted that PSPS events could continue for 10 years until the utility's infrastructure is sufficiently hardened to prevent wildfires. Unsurprisingly, 2020 wildfire mitigation plans filed on Feb. 7 by California's three largest IOUs predicted continued PSPS events during upcoming fire seasons.

The risk of future PSPS events presents an opportunity for microgrid technologies. Microgrids' ability to remain powered in an otherwise de-energized service area mitigate power loss risks for those requiring critical infrastructure (hospitals, police and fire departments) and help prevent economic losses from power outages.

The CPUC will have to strike the right balance with its Track 1 measures, given the somewhat competing positions of energy division staff, IOUs and microgrid developers. We can expect that the regulations governing the deployment of microgrids will evolve over time. However, one thing is certain ­– California is committed to micogrid deployment now more than ever.

Notes

1 Microgrids are interconnected systems of loads and energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid's ability to connect and disconnect from the grid allows them to operate both in tandem and in insolation from the larger utility network ­­– or what some industry experts refer to as the "island mode."

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