The following is a contributed article by Craig Lewis, Executive Director of the Clean Coalition
Hurricane Ida, the California wildfires and the Texas winter storm are just a few recent examples in the growing list of disasters around the United States that highlight both the dangers of climate change and the increasing need for resilience. To fight climate change, we need to deploy much more clean energy. To enhance resilience, we need to ensure that a significant portion of the clean energy is generated locally. And to deliver an unparalleled trifecta of economic, environmental and resilience benefits, we need to unleash renewables-driven community microgrids.
But how do we finance community microgrids and properly value their significant resilience benefits? First, we must overcome three basic challenges:
- Establishing initial community microgrids to provide resilience to Critical Community Facilities (CCFs).
- Enhancing community microgrids to offer resilience opportunities within the initial community microgrid footprint.
- Expanding community microgrids to larger footprints that can guarantee resilience to a wider list of facilities and include additional communities.
The Clean Coalition, a California nonprofit, has developed the Resilient Energy Subscription (RES) market mechanism to finance community microgrids and address these challenges in a straightforward manner. The RES has two fundamental features:
- Facilities located within the footprint of a community microgrid can procure resilience through a monthly $/kWh RES fee that is separate from any existing rate tariffs. The RES guarantees a facility a specific allotment of daily delivered energy during grid outages. Each facility can decide what percentage of its total electric load to include in its RES and then perform appropriate behind-the-meter (BTM) load management to stay within its guaranteed daily RES load budget during outages.
- Through RES fees, community microgrid owner-operators will recover the cost-of-service (COS) required to meet the contracted RES obligations. As is standard in the utility industry, the COS is determined by the capex associated with community microgrid assets, opex associated with operations and maintenance, and an appropriate rate of return (in California, about 8% for the return on equity allowed for distribution grid infrastructure, and nationally, about 12% for transmission grid infrastructure).
Under normal grid conditions, facilities will operate with all their loads served. During grid outages, community microgrids will generally deliver far more energy to facilities than their RES allocations — because community microgrids are sized to deliver resilience during grid outages of any duration, including during worst-case conditions like numerous consecutive days of low solar production. When there is a shortage of available energy during grid outages, a community microgrid will be obligated to deliver only to RES limits, and any customer reaching its RES limit can be turned off at its meter. RES subscriptions will be offered on a first-come, first-served basis, limited only by community microgrid subscription capacity, which can expand to meet market demand for RES allocations.
Value-of-resilience methodology as the basis for RES
While COS is appropriate for pricing the RES fee, RES subscribers might want an easy way to assess the value-of-resilience (VOR) they are getting from the community microgrid. To calculate VOR for any facility, and even for an entire community microgrid, the Clean Coalition has developed a straightforward methodology — known as VOR123 because it tiers electric loads into three tiers, regardless of facility type or location:
- Tier 1, usually about 10% of a facility’s total load: Critical loads that are life-sustaining and/or mission-critical and therefore should be configured for 100% resilience.
- Tier 2, usually about 25% of a facility’s load: Priority loads that should be maintained as long as doing so does not threaten the ability to maintain Tier 1 loads.
- Tier 3, usually about 75% of a facility’s load: Discretionary loads that should be maintained only when doing so does not threaten the ability to maintain Tier 1 and Tier 2 loads.
With this load tiering, and Solar Microgrid sizing for facilities in California based on deploying enough solar to achieve net-zero at a site and incorporating 200 kWh of energy storage for each 100 kW of solar, the following levels of resilience are provisioned to each load tier:
- Tier 1 loads: Online 100% of the time.
- Tier 2 loads: Online at least 80% of the time.
- Tier 3 loads: Online at least 25% of the time.
Each facility can identify its critical and priority loads, and then determine which are worthy of paying RES fees to cover with guaranteed daily energy delivery during grid outages.
Facilities within a grid area can be tiered in much the same way that the loads are tiered at an individual facility, with Tier 1 facilities being the most critical to a community.
Typical load tier percentages for a community microgrid will generally mirror those for individual facilities: 10% for Tier 1 loads, 15% for Tier 2, and 75% for Tier 3. The top emphasis will be to provision 100% resilience for Tier 1 loads at Tier 1 facilities (the darker green square in the chart above), followed by Tier 1 loads at Tier 2 facilities and Tier 2 loads at Tier 1 facilities (the lighter green squares).
Tier 1 facilities include Critical Community Facilities such as fire stations and emergency shelters; they might also include grocery stores, banks, data centers, pharmacies, gas stations, EV charging stations and apartment complexes that can provide efficient sheltering-in-place during grid outages.
Ratebasing for Tier 1 loads at Tier 1 facilities
Due to the critical role that Tier 1 facilities play in keeping communities safe and functioning, the COS for serving all Tier 1 loads at Tier 1 facilities should be socialized via ratebasing, similar to how costs associated with the transmission and distribution grids are socialized. It is more than reasonable to ratebase the associated COS for community microgrids to a level that they can deliver RES allocations covering Tier 1 loads at Tier 1 facilities — and arguably Tier 2 loads at Tier 1 facilities as well as Tier 1 loads at Tier 2 facilities.
Once an initial community microgrid is established for serving Critical Community Facilities, the incremental COS for expanding the community microgrid via the market-based RES will be relatively low. In general, it is expected that each 1% of load that a facility secures via a RES will result in a 1% electricity bill increase for that facility:
The RES provides a revolutionary yet straightforward approach for financing community microgrids and delivering the resilience that our communities increasingly need in the face of the growing list of disasters. While this groundbreaking innovation has just been developed, the Clean Coalition is already working with a utility in the Pacific Northwest to implement the RES. This implementation will provide a model that can be followed as a standard for financing community microgrids around the country.