In California, energy resource planning favors centralized resources – as opposed to distributed energy resources (DER) such as microgrids – because it fails to take into account non-energy benefits such as local resilience, health and economic development.
That’s the view of a number of organizations that met with the California Energy Commission (CEC) Oct. 7 (Docket OIIP-03) in an effort to convince the CEC to incorporate energy resilience and other non-energy benefits into the state’s resource planning.
The organizations include the Center for Biological Diversity, the Central California Asthma Collaborative, The Climate Center and the Local Government Sustainable Energy Commission, among others. However, the Natural Resources Defense Council (NRDC) opposes this type of planning, arguing that it will increase costs to ratepayers.
Focusing on local resilience, health and economic benefits
Lorenzo Kristov, an adviser to The Climate Center who specializes in electric system policy, structure and market design, said the goal is for local resilience, health and economic benefits to be considered, issues that have traditionally been left out of resource planning. Incorporating these issues into planning efforts would favor deploying distributed and connected solar plus storage resources on large rooftops as alternatives to remote utility-scale solar and wind farms, he added. The DERs would serve as grid-forming resources that can power customers on a local distribution circuit when there’s a grid outage upstream, he said.
The groups say the Warren-Alquist Act, which created the CEC, allows for including these benefits in planning. The act calls for resource planning and investment to minimize the cost to society of natural gas and electricity, as well as to improve the environment and encourage energy resource diversity. The act also calls for the CEC to include a value for costs and benefits to the environment, said Richard McCann, energy, water and environmental policy and economics senior consultant at M.Cubed, in a presentation filed with the CEC.
Roger Lin, senior attorney for the Center for Biological Diversity, said he’s been working on this effort since 2017. When he was deputy director of the University of California Berkeley Environmental Law Clinic, he and some colleagues were looking to replace polluting wood and propane as energy sources for a number of rural communities. Installing solar in these communities would be expensive because of the way resource planning is conducted, they found.
To meet 100% carbon-neutral law, policies need to be changed, groups say
“Everything hinged on cost-effectiveness. That's when we realized we don't consider public health and environmental benefits or costs when we make our energy decisions,” he said. To meet the requirements of SB 100 – which calls for utilities to use zero-carbon resources and renewable energy to supply 100% of electric retail sales by 2045 – policy needs to change, he said.
Lin is especially concerned about state planning efforts aimed at meeting SB 100 with carbon capture and biofuels, which skew choices toward centralized utility plants.
“If you put carbon capture on top of a power plant, that counts for SB 100,” he said, explaining that these plants are considered zero-carbon resources under the law. “If you put biofuels in a power plant, that also counts for SB 100,” he said. Because the environmental and health benefits of resources aren’t considered in planning, the state’s focus will likely be skewed toward power plants with carbon capture and biofuels, Lin said.
The complexities of placing a value on energy resilience
The groups participating in the non-energy benefits inquiry are looking to place a value on energy resilience, which is especially important to the microgrid industry because microgrids can operate during outages. However, it’s not a simple exercise, said Patrick Murphy, senior scientist with PSE Healthy Energy, a consultant to the CEC in the proceeding,
Valuing energy resilience, or lack of resilience, has two components: identifying the cost of a power outage and determining how much of the cost can be avoided or prevented by resilience investments, Murphy said.
A key challenge in this effort is finding ways to provide resilience to people who struggle with the costs of outages and can’t afford to invest in microgrids and DERs.
The painful costs of power outages
“For people who don't have a lot of extra money at the end of the month, the cost of dealing with power outages can be painful,” Murphy said. “Households already burdened by high housing, food, health care and other costs will feel the sting of outage damages like lost food, lost wages and health impacts more than others.”
Focusing on equity in analyses of power outage impacts is an important first step in addressing these challenges, he added.
The current metrics used to evaluate the costs of power outages generally focus on the economic costs to customers, including lost wages, damaged food and lost production in commercial facilities, he said.
“These methods fail to account for equity impacts and also don't capture impacts that might be hard to convert to dollar values,” Murphy said. PSE Healthy Energy is looking at placing a value on resilience based on income.
For example, a household might lose a week’s worth of groceries to spoilage during an outage. In a straight economic evaluation, a higher income household will spend more money on food than a lower income household and this spending represents a smaller percentage of the household’s budget.
Medical costs, lost work and heat injuries during outages
“Replacing the lost food might be an inconvenience for a wealthy household, but for a lower income household it may be impossible,” he said. The health impacts of outages should also be considered. They could include medical costs and lost work. But heat injuries can also lower a person’s income and quality of life, he said.
“These impacts can be captured as ‘quality of life years’ and accounted for separately from economic impacts,” Murphy said.
Placing a value on resilience involves modeling scenarios with different options such as undergrounding power lines or installing DERs to back up all or part of an unmet load.
Historically, wealthier households or communities install solar and storage to provide resilience, while less wealthy households can’t afford these technologies.
“The equitable-resilience impacts measured relative to household income would support more resilience in poorer households and communities,” Murphy said. For communities where achieving household resilience is challenging – poorer communities and renters – community solutions like resilience hubs may be necessary, he said.
NRDC: Fund non-energy benefits through a non-energy source
The NRDC has a different view of the proceeding.
Focusing on issues such as resilience in resource planning could increase costs to ratepayers, said Mohit Chhabra, senior analyst, regulatory and economic policy, climate and energy for the NRDC.
“NRDC believes that payments for all distributed clean energy resources should be commensurate with the value they provide to the energy system, the grid and their value in achieving California’s clean energy goals, which will facilitate carbon and pollution reduction,” he said. Any additional non-energy value should be identified transparently and funded through a non-energy source such as the general budget, he added.
NRDC: High rates could lead to less interest in clean energy
High electricity prices will reduce California residents’ interest in switching from gasoline cars and gas appliances to clean alternatives, said Chhabra. The high prices will inevitably affect lower income residents and will reduce “the political will” to invest in clean electricity, he added.
“High electricity prices in California will reduce other states’ decarbonization ambition as well,” he said.
Including all non-energy benefits in resource planning would also apply to expensive utility projects such as Pacific Gas & Electric’s plans to underground infrastructure to reduce the risk of wildfires, Chhabra said.
“We don’t want that. Instead, we want them to reduce wildfire risk in the most cost-effective manner possible,” he said.
There’s more work to do on valuing resilience
Placing a value on non-energy benefits such as resilience, protecting low-income residents and meeting California’s decarbonization goals isn’t an easy task, as evidenced by the testimony at the CEC’s first workshop on the topic.
As PSE Healthy Energy’s Murphy said, “Bottom line: We’re still working on this.”
