Dive Brief:

• California regulators adopted on Thursday rates, tariffs and rules for how the three largest investor-owned utilities (IOUs) in the state will facilitate microgrid deployment in California to ensure grid resilience and backup power capabilities.
• The tariffs with Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E) have new rules in place to reduce barriers to microgrid development. The California Public Utilities Commission (CPUC) ordered the utilities last summer to submit reports and plans on new resiliency programs and their support of microgrid development.
• The latest CPUC decision is part of ongoing efforts by state regulators to prepare for the upcoming wildfire season. CPUC ordered the utilities to create a Microgrid Incentive Program, which would fund clean energy microgrids from a $200 million budget for vulnerable communities impacted by grid outages.

Dive Insight 

California regulators have focused on short-term solutions for the next wildfire season, using last week's decision to speed up the development of microgrids in the last year as an attempt to increase reliability and mitigate energy security concerns during Public Safety Power Shutoff (PSPS) events. Utilities have increasingly triggered widespread power shutoffs during conditions of high wind and high heat to reduce wildfire risk.

At the same time, regulators prioritized a pathway to ensure microgrids are contributing to the state's clean energy goals in the recent decision.

The interim approach to getting the backup generation needed for the next wildfire season and PSPS events, requires utilities to consult local air regulators to include lower emissions alternative fuels in their microgrids, like hydrotreated vegetable oil, in the next year, with a subsequent shift to clean generation. The Microgrid Incentive Program is also intended to be used for testing new technology to ensure grid reliability.

"[T]he Decision addresses resiliency to keep customers energized for the upcoming 2021 fire season, including a transition plan to clean back-up generation for 2022 and beyond," Commissioner Genevieve Shiroma said in a statement.

As battery storage capacity is added in California, battery storage developers are preparing to meet the summer peak demand through new projects, including microgrids.

"We've been in this 'just-in-time' procurement cycle" for energy storage in the state, Alex Morris, executive director at the California Energy Storage Alliance, said ahead of the CPUC decision.

CESA's developer members are able to deliver on the storage buildout ahead of the wildfire season, "they work really hard to bring that stuff online, but it's probably not the best strategy for California to do too much of that 'just-in-time,'" he said.

Longer-term procurement would lead to less of a rush, allowing for more projects to become eligible, leading to greater competition as well as lower costs, said Morris, who is also a vice president at Strategen Consulting.

Each IOU was ordered to create tariffs that prevent cost shifting of microgrid projects for their territories, and revise their rules to allow local government microgrids to service critical customers in the surrounding area.

Regulators focused on "streamlining and studying microgrid deployment," said CPUC President Marybel Batjer. "In addition to a new tariff, the newly approved incentive program and working groups will help us chart a path towards building a stronger, more resilient grid with insights into the costs and benefits of microgrids."