Big ideas evoke big responses and such is the case with Sunnova Energy’s proposal to let new communities in California create microgrid-driven microutilities.
It’s the kind of idea that can seriously expand community access to microgrids and seriously threaten conventional electricity business models.
Not surprisingly, those who stand to lose and those who stand to gain had a lot to say about the idea in comments recently filed before the California Public Utilities Commission (CPUC).
So what is the big deal about the Sunnova model?
It’s been difficult to build community microgrids, not only in California but throughout the US. The microgrid industry argues that utility regulations made for a bygone era stand in the way. Sunnova offers a workaround.
Sunnova’s proposal comes as California regulators work to enact a pro-microgrid law (SB 1339) and as the public grows increasingly irritated by grid-related power outages.
Other workarounds
The residential solar developer isn’t alone in seeking alternatives to the conventional utility model to make it easier to develop microgrids.
In Ohio, Cuyahoga County has set up a county utility with the intent of developing multiple microgrids and reinvigorating its economic base. In population-dense New England and the Mid-Atlantic, OhmGrid is taking residential customers off grid. Various businesses have decided to go off grid as well, most recently a major food producer in California, Taylor Farms.
California is often a bellwether regarding energy innovation, so the Sunnova approach is capturing a lot of attention.
Idea for our times
The Microgrid Resources Coalition (MRC), an advocacy organization, describes Sunnova’s idea as one for our times:
Maintaining reliable and resilient power is paramount in today’s post-pandemic economy and managing the new reality of remote work and schooling for many families and businesses. Vulnerable populations and those with access and functional needs are especially impacted by power outages, even if they are brief in duration, and it is unjust and inequitable to allow these populations to disproportionately suffer these impacts when solutions like DERs and microgrids exist and could be deployed to help mitigate the harm of power outages. Community microgrids are an ideal energy resiliency solution that can be tailored for all California communities, and they can be deployed expeditiously at scale if the pathway for microutilities to build them is cleared. — MRC
But not everyone agrees. Investor-owned utilities, and labor and ratepayer interests opposed the Sunnova plan in comments before the CPUC. Environmental, clean energy and social equity advocates supported Sunnova.
Here are highlights of what commenters said, or you can read their filings on the CPUC website.
Utilities: Against
Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E) and Southern California Edison (SoCalEd) filed protests against the plan.
PG&E said that Sunnova’s application is “legally deficient and should be dismissed.” The CPUC needs to develop rules and regulations governing microutilities before the Sunnova proposal can be considered, the utility said.
The utility also said that the microutility concept, as discussed earlier by the commission, doesn’t apply to what Sunnova is doing and that the company could end up with a constellation of microutilites that exceed the 2,000 customer cap for microutilities discussed in earlier state proceedings.
PG&E raised several questions about the influence of microutilities, such as whether they might create utility stranded investments.
SDG&E called the application “deeply flawed and directly contrary to the public interest” and said that Sunnova has not demonstrated it is qualified to provide bundled retail service as a public utility. The utility also raised concerns about cost-shifting from microutilty customers to utility customers.
The commission is likely to receive other proposals for new types of “lightly regulated” utility services, SDG&E said, and should not allow the proposals to hollow out “the protections established under existing public utility regulation.”
SoCalGas said that Sunnova’s application raises broader issues about microgrids that are already being addressed in the commission’s ongoing proceeding to commercialize microgrids (R.19-09-009). A framework to develop microgrids — which the utility said it wants to do with third parties — is being worked on in that forum and should be where Sunnova’s proposal is taken up, the utility said.
Like the other utilities, SoCalGas also challenged the legality of the application and its effect on investor-owned utilities and their customers. The utility questions whether the microutility structure “is an appropriate or necessary means for the development of microgrids in California” and said it will duplicate SoCalGas service “with little or no additional benefit for customers or the state.”
Environmental, renewable and social justice advocates: In favor
The Climate Center, the Center for Biological Diversity, the World Business Academy, the Local Government Sustainable Energy Coalition and the Zero Net Energy Alliance called the Sunnova petition “groundbreaking” and urged the commission to consider it.
Community microgrids can reduce reliance on large fossil fuel plants in disadvantaged communities, lower carbon output and improve energy resilience, which is “top of mind” in a state that “has experienced thousands of planned and unplanned power outages in all regions over the past several years,” the groups said in a joint petition. They added that community microgrids can provide cost benefits and customer empowerment.
The groups urged the commission to “showcase its policy leadership in clean energy innovation and customer empowerment by creating a pathway for the development of microutilities.”
“The community microgrid and dedicated substation will be entirely financed by Sunnova, to avoid using the existing utility distribution system or causing a cost-shift to other ratepayers. Moreover, because the housing communities will be newly constructed, there is no existing load being transferred away from the distribution grid that could be construed as a loss of sales,” the organizations said.
In an additional filing, the World Business Academy, a think tank that seeks solutions for social and environmental challenges, cited housing and transportation benefits.
Noting that California has committed to building affordable housing for 1 million households, the academy said that the microutility plan “offers a blank canvas” to deploy on-site capacity for the homes. Failing to incorporate local energy resources during initial construction “is a bell that cannot be unrung.”
For transportation, microutilities “could incorporate bi-directional charging capacity capable of storing daytime excess energy and discharging during peak grid conditions, significantly increasing the resilience capabilities of the community microgrid,” the academy said.
Separately, Clean Coalition said that Sunnova’s proposal would accelerate community microgrids in ways that the ongoing SB 1339 proceeding has not. “To date, the only community microgrids that have been deployed in the state are the result of grant-funded collaborations between multiple organizations.”
In urging the commission to approve the application, Clean Coalition said it takes care of problems raised in the past about community microgrids by giving the commission regulatory jurisdiction over microgrids.
The Sunnova proposal does not create ratepayer cost-shifting or loss of load by utilities, nor does it affect the rest of the grid because it will only island up to the dedicated substation, the nonprofit organization said.
The California Energy Storage Association, an advocacy organization, said that microutilities could “provide a new regulatory pathway for other communities to build microgrids that serve multiple customers or facilities.”
In a joint filing, the Solar Energy Industries Association, a trade group, and Vote Solar, an advocacy organization, said the plan offers environmental and social justice advantages, and the commission should let the application proceed and conduct a hearing so that the details can be fleshed out.
350 Bay Area, a climate group, said the Sunnova proposal will help develop “our power system from the bottom up, building from renewable resources at or near where energy is used in order to reduce the financial, environmental and reliability costs associated with remote generation and transmission and their large-scale land use impacts.”
Labor and ratepayer interests: Against
The Coalition of Utility Employees, representing 43,000 utility workers, echoed utility opposition, saying the Sunnova concept did not qualify as a microutility for various reasons, including the fact that the communities would be connected to the California grid.
The California public advocate’s office opposed Sunnova’s plan on several grounds and said many of the issues it raises are already being taken up in the SB 1339 proceeding.
The Utility Reform Network, a nonprofit legal advocate for ratepayers, raised a similar argument and said that Sunnova appeared to be seeking exemption from any future review of specific projects it intends to develop.
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