How Microgrids and DERs Can Deliver Value to California Schools and Public Agencies with Local Energy

In an ideal world, a school with four to five buildings could cover its campus roofs with solar, add batteries to form microgrids and produce 10 to 20 times the amount of electricity it needs, then sell the electricity to neighbors, earning income, providing onsite education, advancing environmental justice and yielding resilience during outages.

This is also true of cities and other public entities such as irrigation districts, according to comments from five groups filed with the California Public Utilities Commission (CPUC) that support the local energy concept. The comments, from the Microgrid Resources Coalition, Climate Center, Center for Biological Diversity, Clean Coalition and Green Power Institute were part of an ongoing CPUC effort that aims to modernize the electric grid and incorporate high levels of distributed energy resources (DER).

Governor Gavin Newsom, who has a reputation for favoring the state’s utilities, in the fall vetoed SB 1374, which would have allowed aggregated net metering for multimeter properties, including schools and farms.

As a result, if a school has five buildings on its campus, each with its own electricity meter, and it installs solar and batteries on the roof of one building, the existing regulations require that whatever energy is not used by that one building must be sold into the grid at the low export price, and the other buildings must pay full retail rates for whatever kWh they consume. In other words, 

Groups seek local energy support from cities, policymakers and public entities

In submitting their comments in the DER case, the groups hope to reach a wider audience than the CPUC to gather support for the local energy concept from policymakers, schools and public entities, along with candidates seeking the position of California’s governor when Newsom’s term is up in two years. One of those candidates is former controller Betty Yee, who in October issued a statement on Facebook denouncing Newsom’s veto of SB 1374, saying the measure “offered a clear path forward for a clean energy economy.”

Lorenzo Kristov, a consultant to the Climate Center who specializes in electric system policy, structure and market design and who wrote the groups’ comments, said,  “I’m using the CPUC as a venue to talk about local energy. We want to work with a lot of different groups to raise awareness in cities and school boards so we get hundreds of cities and schools behind the idea.”

Deploying excess solar, storing it and sharing it

Here’s one way local energy would work:  A school with building rooftops covered with solar could produce excess electricity to serve the campus and its neighbors. Batteries that combine with solar to create a microgrid would capture the solar and use it in the late afternoon and overnight, said Kristov.  It would be possible to create a microgrid just to serve a school campus—with the ability to island during outages—or the school’s microgrid could provide power to nearby houses and businesses on a distribution circuit, said Kristov.

The schools or cities could own the resources and sell power to neighbors, reaping income.

One option is to create power purchase agreements allowing the owners of the resources to sell the power to a single buyer, Kristov explained. That buyer could be a community choice aggregation (CCA)--an entity that allows governmental organizations located in the service territory of an investor-owned utility to purchase or generate electricity for their residents and businesses.

The CCA could sign a power purchase agreement with a project developer, agreeing to take a percentage of the power, and the agreement could become part of the CCA’s supply portfolio. The CCA would serve the neighborhood using the utility wires. And that might require the creation of an open-access distribution system operator (DSO), which would pay for the use of the utility wires.

Creating resilience for a community with a microgrid

This model would also provide resilience to the community.

“If you separate the entire circuit, the solar-plus storage array can power the entire circuit during an outage as a community or multi-customer microgrid, serving the school and all the other customers on that circuit,” Kristov said.

The technology exists to implement local energy projects, but what’s needed is the statutory and regulatory framework. “It’s not politically simple,” he said. “There’s massive opposition from utilities.” The utilities prefer large, centralized assets because that’s how they make money–by building infrastructure and asking regulators to pass on the costs to ratepayers.

An open-access DSO--which does not yet exist in the U.S.-- would help move local energy forward, Kristov said. The DSO would have a relationship with an Independent System Operator, and the DSO could run an electricity system at the distribution level. Under this model, a municipal entity could build and own its own DERs, then sell the power.

Maine looked into DSOs

In 2023, Maine began exploring the option of creating a DSO to boost deployments of DERs. As conceived, the DSO would operate an open-access, multi-directional, real-time market for distributed energy and act as the only interface with ISO New England, the regional grid operator.

The goal of the Maine DSO was to oversee integrated system planning for all Maine electric grids and coordinate energy planning with state agencies. The DSO would operate all state grids to provide optimum operation, efficiency, equity, affordability, reliability and customer service, according to a description of the concept from the Governor’s Energy Office. It would also  provide an open and transparent market for DERs and help meet climate policies.

After its initial study of DSOs, the energy office decided not to proceed with a follow-up study and has not created a DSO, said Kristov.

Utilities are cautious about local energy

While numerous stakeholders support the idea of local energy, utilities have some hesitation. For example, in an April grid modernization report filed with the CPUC, Pacific Gas & Electric (PG&E) said that DERs may possibly create capacity constraints, power quality issues and adverse impacts on protection systems because of the bi-directional flow of electricity. In addition, the rules and regulations about DERs in the company’s service territory are evolving, PG&E said.

“The goal of PG&E’s grid modernization effort is to meet today’s challenges while also positioning the grid to meet the demands of a dynamic energy future with improved situational awareness, operational efficiency, cybersecurity and DER integration and orchestration capabilities,” the company said.

While PG&E focused on some of the implementation details, the Climate Center, in a vision paper, concentrated on the big-picture advantages of deploying DERs as local energy.

“The landscape in this new world is dotted with solar panels on every suitable rooftop, complemented by a resilient network of microgrids as well as mobile and stationary batteries that seamlessly balance energy supply and demand. Clean air is widespread as fossil fuel generation no longer pollutes,” the Climate Center said.