PG&E image of a community microgrid

How PG&E’s new community microgrid program falls short

Poorly conceived and executed rules are undermining California’s latest attempt to enlist utilities to help communities keep power through outages and wildfires; in short, PG&E’s new community microgrid program doesn’t appear to be serious about promoting microgrid adoption

California’s attempts over the past three years to lay the groundwork for third-party owned microgrids that can power communities through wildfire-prevention grid outages haven’t worked out so far — and there’s little reason to believe the latest effort by the state’s biggest utility, Pacific Gas & Electric (PG&E), will turn out much differently.

That’s what I and other experts have concluded about PG&E’s “community microgrid enablement program” (CMEP). PG&E developed this new tariff in hopes of breaking an impasse over how utilities, microgrid developers, and communities can coordinate investment and operations of self-sufficient islands of electric power.

This piece details my own views as an energy policy lawyer and the views of various other parties involved with PG&E’s new programs.

The Redwood Coast Airport Microgrid (RCAM), the showcase microgrid being developed in California and the basis for the CMEP design, has been underway for a number of years now, but is still not online. RCAM has worked closely with PG&E in this process, but it has not always been smooth.

Dana Boudreau, RCAM’s chief engineer, was politic in his statement about CMEP: “CMEP is an early demonstration of how to integrate microgrids into a utility model built up over many decades. …. It’s all part of transitioning toward a clean, resilient, modern electrical grid.”

Allie Detrio, representing the Microgrid Resources Coalition in policy forums, was far less favorable in her assessment: “PG&E’s CMEP proposal was meant to be a red herring while PG&E received approval for hundreds of megawatts of temporary diesel generation … all funded by utility ratepayers.”

Lorenzo Kristov, an energy policy consultant and formerly with the California Independent System Operator, summed up his feelings about the CMEP by suggesting that “the false premise behind the CMEP is that a community microgrid provides no benefits to the power system, and even imposes costs on other ratepayers, except during those times when grid service fails.”

He added: “In fact the opposite is true. Microgrids and other local energy resources are key to achieving our urgent goals for decarbonization, resilience and energy justice. The problem is that [third-party owned microgrids are] a threat to the monopoly utility revenue model and therefore their growth is being tightly constrained.”

Let’s dig into the details a bit.

What is a community microgrid?

A community microgrid is a portion of the distribution grid, serving at least a few buildings and some supply and storage resources, that can be “islanded” away from the main utility grid. Islanding means that it can be separated from the main grid and operate as its own local grid during times when the main grid is down.

Microgrids promise a number of benefits for communities. Islanding will, in theory, allow the microgrid to operate even if the utility grid is down, at least up to a certain length of time or possibly indefinitely, depending on the internal resources.

The utilities have in recent years taken to actively shutting down power lines as a fire mitigation tool. This happened after the catastrophic Camp Fire in 2018, which destroyed about 18,000 structures and caused 85 deaths — the deadliest fire in California history — and was determined to have been caused by PG&E transmission lines. After those events, the utilities and regulators recognized that power lines were becoming a major safety risk because of their potential for starting fires in the steadily more frequent “heat storms” California is suffering. These shutoffs are now called Public Safety Power Shutoffs (PSPS events) and PG&E was on record in 2020 stating that they may last a decade!

With the growing frequency of PSPS events and other kinds of brownouts or blackouts, having a local microgrid that can operate even during such events could be a major advantage to many communities.

Microgrids also offer the potential for cost savings over time because the community microgrid becomes, in effect, a local utility without the large overhead and expenses of the utility grid. Microgrids will still, however, in most cases be unable to avoid what are known as “nonbypassable charges,” at least for the first years of their operation.

So let’s look now at PG&E’s new community microgrid program and see how it fares under scrutiny.

PG&E’s Community Microgrid Enablement Program (CMEP)

PG&E developed its new community microgrid program in response to California Public Utilities Commission (CPUC) Decision D.21–01–018 in the proceeding to implement SB 1339, which requires the CPUC, and the utilities that it regulates, to develop tools for commercializing microgrids. PG&E’s program is known as the Community Microgrid Enablement Program (CMEP) and the associated tariff is known as the Community Microgrid Enablement Tariff (CMET). It went live early this year.

A tariff is simply a document that states the applicable program rules. In this case, CMET provides eligibility rules for the new program but the primary things it does are to set forth the conditions for an “islanding study” to be completed prior to interconnection of the microgrid, and also confirm the possibility of reimbursement for the costs of islanding equipment (described as “special facilities” in the tariff) if the applicant is deemed eligible.

PG&E’s “experimental tariff” is, unfortunately, an experiment that seems likely to fail. This is because the tariff is too limited in its scope, does not provide for any compensation, does not include a study schedule, and does not contain answers to important questions. And, most importantly, it is not proactive in terms of actively helping communities achieve resilience through microgrids — a service that PG&E has manifestly failed to achieve through its own efforts and its reliance on PSPS events. Let’s look a bit further at these issues.

Major issues with CMET

Public Safety Power Shutoffs (PSPS) events have become frequent in recent years due to wildfire concerns from energized power lines during high winds and “heat storms,” which are becoming more frequent. PSPS events are, however, an outsourcing of the costs of potential fire damage liability to ratepayers, rather than having these costs borne by shareholders or taxpayers more generally.

Microgrids have the potential to shift this equation significantly by providing communities the opportunity to take charge of their own resiliency and power needs. Unfortunately, PG&E’s CMEP/CMET do more to hinder this proactive approach by communities than to help it.

As mentioned, CMET’s potential cost coverage for Special Facilities to island eligible microgrids is the primary feature of CMET, but this feature is insufficiently specified and is likely not enough, by itself, to create a robust microgrid program in PG&E territory. Additional details about eligibility for cost coverage of Special Facilities are required before this may be considered a significant incentive for communities seeking to develop microgrids.

As is, the CMET simply states that microgrids “may” be eligible for cost reimbursement, up to a program total of $15 million. But no additional detail is provided as to what may lead to denial of reimbursement costs. And $15 million total for PG&E territory is a very small amount given the interest and need in microgrids. For example, average cost of interconnection to the distribution grid is about $250,000/MW (based on data gathered in the CPUC’s interconnection proceedings by various parties), so $15 million would result in only 60 MW of microgrids. But islanding equipment will surely cost significantly more than this, so it seems a rough estimate of MW for this program is somewhere between 30 and 60 MW would in theory be incentivized, at best, by this program.

A second serious concern is the requirement from PG&E that PG&E retain ownership and control of the distribution lines in the microgrid. What this means is that the same safety and financial/insurance concerns that lead PG&E to shut down parts of their grid in PSPS events may also result in the CMEP microgrid being shutdown if the microgrid is nearby the shutdown part of the grid. This would undermine the primary purpose of the microgrid to provide backup power in the event of grid outages from ongoing PSPS events.

Instead of requiring that PG&E own the microgrid distribution lines and control the microgrid, both types of microgrids should be eligible for CMET.

PG&E’s Memorandum of Understanding (MOU), which is the operating agreement between PG&E and the microgrid, also lacks the required detail, particularly with respect to PG&E’s sole discretion to include distribution lines that are part of a CMET microgrid in PSPS events, due to the same legal liability issues being present for any PG&E-owned lines, regardless of them being part of a CMET microgrid or not.

In sum, it is not clear what PG&E’s intentions are with respect to the new CMEP. It is not a proactive effort to incentivize a number of new microgrids to assist with PSPS and other emergency events — that’s clear. The most reasonable interpretation seems to be that PG&E is eager to make it seem like they are being proactive, while actually imposing unworkable hurdles to third-party microgrid development.

The fact that PG&E submitted a significant new application that proposes a framework for approval of its own microgrids investments, located at vulnerable substations, in late June (A21–06–022), as well as over $7.4 billion in grid investments to mitigate PSPS events in its General Rate Case in early July (with a large rate increase requested), seems to support this interpretation.