California Microgrid, DER Communities Seeking Legislative Reversal of CPUC Net Metering Decision

California’s distributed energy resource (DER) and microgrid supporters have experienced many setbacks recently, but one bill that’s still in the state legislature, SB 1374, would help the industry by allowing for aggregated net metering on multimeter properties.

The bill, which is scheduled for a hearing July 1 in the California Assembly Utilities and Energy Committee, would overturn a November 2023 California Public Utilities Commission (CPUC) decision that eliminated aggregated net metering for multimeter properties, including schools and farms, said Kurt Johnson, community energy resilience director for The Climate Center. It would also help support California’s climate goals, which are now being undermined by recent CPUC and legislative decisions. 

Earlier CPUC decision didn’t support state’s climate and resilience goals

“That disastrous CPUC decision works directly against our climate and energy resilience goals,” Johnson said. California needs to very quickly increase its amount of installed renewable energy, including doubling distributed rooftop solar, in order to meet its climate goals, he added.

The CPUC decision made it difficult for community microgrids to be commercially viable, said Lorenzo Kristov, a consultant and former principal of market design for the California Independent System Operator.

It also made it difficult for tenants of multifamily buildings – who are overwhelmingly low income or members of communities of color – to realize the economic and environmental benefits they were beginning to experience before the rule changes, said Allie Detrio, chief strategist for Reimagine Power and senior adviser to the Microgrid Resources Coalition.

Making microgrids commercially viable

If policies and regulations don’t allow microgrids to be commercially viable, the only community microgrids that will be developed in California will be those subsidized by large grants – such as the Redwood Coast Airport Microgrid, Kristov added.

SB 1374, if passed, would enhance the commercial viability of shared generation and storage resources that could serve as grid-forming resources for microgrids, he said.

Right now, as a result of the November 2023 CPUC decision, 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.

Electricity flows to the closest source of demand

This regulation ignores the physics of how electricity flows, said Kristov.

Locally generated energy flows through the distribution wires to serve the nearest loads, he said. “But the regulations perpetuate a fiction that the energy flows into the entire statewide power system, which then sends power produced elsewhere to serve these loads. It’s an absurd construct which adds unfair costs onto local resources, which is how it undermines commercial viability of DERs.”

Because the rates for exported energy are very low, an investment in on-site solar and battery systems may not pencil out. That means, in the case of a school district, that the on-site DERs don’t provide much energy cost relief. The district, which likely spends 10% to 15% of its annual budget on energy, could benefit from supplying its campus with the on-site energy resources.

What’s more, existing regulations prohibit creating a microgrid using solar and battery as grid-forming to provide resilience during a grid outage, Kristov said.

Allowing on-site energy resources to meet on-site demand

SB 1374 would allow the school district to utilize the on-site resources to serve its entire campus, he said. It would also allow multifamily housing units and farms to utilize on-site resources to meet their needs.

The bill is the beginning of what could become “meaningful legislative pushback” against CPUC decisions that undermine the state’s climate resilience and energy justice objectives, he said.

The bill is one of the only remaining bills on DERs still moving forward in the legislature and it would improve the value proposition for microgrids under virtual net metering tariffs, said Detrio.

Bill recognizes the value of self-generation

“The bill will help all multimeter DER projects, including but not limited to microgrids, by ensuring the integrity of self-generation value remains intact,” Detrio said.

If property owners can’t recognize the value of self-generation, they won’t invest in on-site clean energy at all, she said in testimony submitted in the case.

“We have a very wide and diverse coalition supporting SB 1374,” said Detrio. “This bill won’t cost the state money and benefits all ratepayers. Given that nothing else is moving on customer clean energy, it’s my hope this is the one that makes it through.”

Frustration over California’s efforts to commercialize microgrids

Microgrid supporters are especially upset about efforts to establish a tariff that will commercialize microgrids.

When the California Legislature passed SB 1339 in 2018, the goal was to create a microgrid tariff that would help commercialize microgrids, allowing for third-party microgrid development and ensuring microgrids’ potential benefits would serve those who receive microgrid power, the grid and ratepayers.

But nonutility stakeholders say they haven’t seen movement toward that goal during the proceeding (Rulemaking 19-09-009). They’re not happy with the CPUC’s request for utilities to propose tariffs based on Pacific Gas & Electric’s Community Microgrid Enablement Program. That program hasn’t yielded any community microgrids that aren’t heavily subsidized, they argue.

California’s new budget slashes climate spending

Meanwhile, on June 13, the California Legislature passed AB 107, the Budget Act of 2024, which includes billions of dollars in cuts and deferrals in climate spending, according to a press release from The Climate Center. The cuts affect wildfire resilience and distributed clean energy, among other issues.

In January, The Climate Center and more than 70 other environmental organizations sent a letter urging Gov. Newsom to eliminate all state fossil fuel subsidies. The Climate Center is also urging Newsom to put a bond on the November ballot to fund climate programs.

For now, microgrid supporters have their fingers crossed that SB 1374 will be passed by the California Assembly. It will partially reverse a worrying trend, said Detrio.

“No projects are getting developed at multimeter properties,” she said. “The economics don’t work.”