Nanogrid Building in San Francisco Grapples with Utility Incentives

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Developers of one-of-a-kind nanogrid building in San Francisco are grappling with challenges stemming from the incentives they’re receiving from the California Public Utilities Commission (CPUC), through Pacific Gas & Electric (PG&E).

The project, Sol-Lux Alpha, is a four-unit condo building  with a 42-kW photovoltaic array and 105 kWh of energy storage in the Mission Creek district.

“This is the first nanogrid building to go on the market to the public,” said John Sarter, CEO and founder of developer Off the Grid Design.

The project, which is grid-tied through PG&E and also supports electric vehicle charging, may move away from PG&E to a community choice aggregation at some point down the road if the energy exported is not valued fairly. In that case, the condo owners would likely receive higher payments for the solar energy exported.

“PG&E will pay about 3 cents/kWh; CCAs will pay up to 20 cents/kWh,” he said.

The challenges Sarter faces are related to project funding from PG&E through the CPUC’s Self Generation Incentive Program, Sarter said. When the company applied for the incentive, the incentive was $1.86 per watt for energy storage Initially, that amounted to $160,ooo and more than paid for the battery system–minus installation, R&D, and related equipment–but the funding was rolled back to $80,000 due to “two-hour average discharge” language in the rules that essentially halves the allowable incentive.

But that’s still a substantial amount, and almost funded the $118,000 battery system, he said.

However, PG&E and other investor-owned utilities interpret the wording of the incentive program in a way that reduces the percentage of available storage that can be coupled with PV.

“The wording is ambiguous,” said Sarter. “We should be able to couple the entire PV system with the entire battery system, but that’s not the way they are interpreting the rules.”

It’s up to the investor-owned utilities to interpret the rules, and the utility told Sarter that his company must limit the amount of storage coupled with the PV system. It’s based on a calculation involving the capacity of the PV system.

“If you have a 32-kW system, you can’t couple any more energy storage than the CEC-AC rating of the PV, which ends up being about 28 kW,” he said.“Let’s say you have six hours of PV production a day. If they limit it to one hour, we only have 18 percent of the capability.”

However, the system can use the storage for peak shaving, which provides savings, he noted. “We’re taking advantage of time-of-use rates to do peak shaving.”

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Right now, the PV energy generated will go to the utility and then back to the project (Net metering). However, if there’s an outage, the developers were allowed to have the right to power the batteries directly from the project’s PV, creating an islanded “Nanogrid”.

“Most of the time, the system will export to the grid and bring it back in from the grid as needed. That way I guess the utility has better oversight,” Sarter said.

He’s hoping the rules change so that the project’s batteries can be powered directly from PV all the time. “The whole point of the program is to encourage mass energy storage adoption, grid balancing, and resilience.” he added.

“The CPUC is considering changing the PV/ES coupling language later this year, but the wheels of government move slowly”, he said. “And we’re caught in this transition; it has however had the benefit of making us create an extremely adaptable system.”

Nanogrid building to be part of microgrid

Sarter says the  Mission Creek area could become one of the first 100% renewable energy microgrid-scale communities in California, if the City of San Francisco and others choose to develop adjacent properties in a similar manner.

One first step/incentive is forming a CCA that would pay a FiT.  San Francisco has chartered their own CCA, called SF CleanPower. Whether and/or how much of a feed-in tariff they may offer for local renewable energy generation remains to be seen, said Sarter. That could pave the way for the beginnings of microgrid community development, he added.

“With a CCA, the community can buy power from anywhere.” The CCAs often have a feed-in tariff that pays much higher rates than net metering programs do.

However, in order for the developers to obtain the full benefits of the PG&E incentive program, the project has to be grid-tied to PG&E for five years. The end owners (purchasers) of the Sol Lux Alpha Condominiums and Energy system may look into whether it makes more sense to leave PG&E for the local CCA down the road, if there is better incentive to do so.

In addition to the solar and storage, the nanogrid building provides a number of unique features–including planning for the future ability to transfer energy from EVs to buildings.

“We’re providing future proofing for vehicle-to-building transfer of energy. That’s on its way. That way you double or triple the storage capacity of your building and provide mobile energy source for the community in the event of a disaster,” said Sarter.

“We’re providing future proofing for vehicle-to-building transfer of energy. That’s on its way.

Live sustainably and luxuriously

The project is a Passive House condominium complex, which means that it meets the requirements of a science-based methodology that limits the amount of energy use per square meter and requires an airtight envelope.

“When you use this technology and methodology, it reduces the energy used for space heating and cooling by up to 90 percent,” said Sarter.

One of the important lessons of the project is that living sustainably does not require turning down the thermostat or giving up showers.

“What we’re trying to show people is you can live sustainability and luxuriously,” said Sarter.

Are you aware of other projects facing challenges in the California Self Generation Incentive Program? Share your information in the comments section below or by joining the Microgrid Knowledge LinkedIn Group.

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  1. David McCoard says:

    FYI, if “Mission Hill” is in San Francisco, the city has already launched its CCA. Customers are being automatically enrolled in phases (not all at once), but other PG&E customers in the city are able to proactively sign up now.

  2. Thanks for writing. Yes, as the story mentions, efforts to form the CCA are underway. But the developers haven’t finished the project yet. For now they’re still with the PG&E net metering program.

    • Jed Holtzman says:

      The comment above seems to misunderstand what a CCA is. CleanPowerSF launched on May 1st and is currently serving customers. The full load of San Francisco will be phased over to CleanPowerSF in phases, however any residential or business electricity customer may sign up anytime at to get into the next phase. (Currently, signing up by August 1st will get you switched over in November.)

      The NEM tariff is already out, and the FIT will be released this summer.

  3. Why this website don’t have other languages?