Reviews Mixed on Regulatory Proposal to Advance Microgrids in California

California regulators are getting an  ‘A’ for effort as they pursue pioneering rule changes to support microgrids, but beyond that, industry stakeholders diverge in their views as the proceeding nears a significant milestone (19-09-009).

At issue, is a proposed decision recently issued by an administrative law judge for Track 2 of the proceeding, instituted by the California Public Utilities Commission (CPUC) to help commercialize microgrids. The complex proposal would launch a range of changes, from creating microgrid tariffs to altering restrictive boundary rules. Track 2 awaits a commission vote that may occur as soon as January.

Allan Shurr, chief commercial officer at Enchanted Rock, described the proposed decision as a “mixed bag.”

He noted that while it advances multi-party microgrids, it also defers numerous key issues to a working group or Track 3 of the proceeding. Among issues deferred are standby charges, use of non-renewable resources in microgrids, microgrid definitions, and identification of microgrid policy issues not adequately addressed by existing state agencies.

Schurr praised its recommendation for a $200 million incentive program to support microgrids in disadvantaged communities and its recognition of “commercially available cleaner alternatives to expensive diesel and the proposed support for up to $350 million in near and medium term substation microgrids.” The recommendation would lead to lower emissions and eliminate public safety power shut offs at ‘safe to energize’ areas —  a positive development, especially for those affected communities, he said.

What about customer microgrids?

Meanwhile, Samantha Reifer, director of special projects at Scale Microgrid Solutions, called the proposed decision “disappointing.” Reifer was particularly critical of its emphasis on utility and substation microgrids, as opposed to customer microgrids that are typically built for businesses, institutions or households.

“If the commission were to create incentives and clear rules for behind-the-meter single customer microgrids (first and foremostly a robust microgrid tariff), private capital could build more resilience in the state more cost-effectively and rapidly than the solutions being prioritized,” Reifer said.   

Reifer is among microgrid stakeholders pushing for a microgrid tariff that would act as a  formal mechanism to pay microgrids for their services. Microgrids owners in California say they find themselves assisting the grid during disasters on their own dime. OhmConnect’s CEO Cisco DeVries recently pointed out that his company’s lost $100,000 to $200,000 after helping the state overcome a grid crisis in September. 

“Distributed microgrids provide essential services to the grid on a day to day basis, as shown by their and other DER participation in the PJM market, or in emergency situations, as proven by California’s reliance on microgrids during the August rolling blackouts. The difference is that in the latter scenario, these resources were not compensated for that service and there is not a formalized program or market signal in place to call on those resources reliably in a future emergency,” said Reifer.

The proposed decision does order utilities to create microgrid tariffs, but only by bundling incentives already available to microgrids, not through new compensation for reliability services.

“Many parties in the proceeding pushed and continue to push for a robust microgrid tariff in order to provide that market signal necessary to unlock the value of microgrids for customers and the grid. It is unclear as to how the ordered microgrid tariffs are different from the current net metering tariffs and thus how it encourages microgrid development,” Reifer said.

Cross-over policy touchpoints

While the tariff recommendation may come up short to many, other aspects of the proposal are getting positive reviews, among them a move to lift restrictions on community microgrids crossing utility rights of way. 

Jacqueline DeRosa, vice president of battery energy storage systems at Ameresco, also praised the proposed decision for acknowledging  “that microgrid commercialization involves many cross-over policy touchpoints  — including the Integrated Resource Planning and Resource Adequacy processes.”

“We are hopeful that there will be a quick implementation of many components listed in this decision, including a new microgrid tariff, which will help catalyze the rapid deployment of microgrids,” she said. “We commend the CPUC for their efforts to review the multi-faceted regulations. Their efforts will bring necessary awareness and break down barriers for microgrid development in California.”

New ground

California pursues the changes under a dual disadvantage: In many cases it is plowing new ground yet to be trekked by other states. And, it is doing so while under pressure to create immediate solutions because of the onslaught of power outages related to wildfires over the last year.

“California is tackling some of the very complicated issues surrounding microgrids and, as they have in the past, will no doubt set the path for other commissions around the country to follow. Only a few states have been compelled to consider anything like the microgrid tariff that the CPUC has outlined in this decision,” said Cameron Brooks, president of E9 Insight, a regulatory advisory firm that focuses on the activities of the state public utility commissions across the country.

He noted that regulators and energy officials from about 20 states are collaborating through a NARUC-NASEO working group, supported by DOE, to support microgrid development and ownership structures.

Brooks added that the proposed decision shows that the barriers to microgrids “are not in the technology, but in the myriad unresolved policy questions on topics like interconnection and connecting multiple customers to the same system.”

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