California Lawmakers Send Mixed Messages on Renewables and Microgrids

The big headline at the conclusion of California’s legislative session at the end of August was the passing of senate bill (SB) 100. The bill sets a goal of obtaining 100% of the state’s electricity from renewables by 2045. Yet, another bill—which is focused on microgrids and will be key to realizing this goal—was amended at the last minute to keep the door open to continued reliance on fossil fuels. 

California’s largest wildfire in history heightened awareness of the need for resiliency. Pacific Gas & Electric's proposal to disconnect customers from the grid during times of extreme fire danger may also have pushed through legislation (SB 1339) specifically supporting microgrids. The bill is notable for several aspects, especially if compared to other states’ microgrid initiatives, a topic of a new Guidehouse Insights report to be published this September. 

What Makes California Different?

California faces different threats to grid reliability compared to New York, Maryland, and Massachusetts. The ever-present threat of wildfires and earthquakes which, unlike hurricanes, cannot be forecast, translates into a need to limit the reliance upon natural gas. Why? Earthquakes may interrupt natural gas supplies due to pipeline ruptures. While Connecticut saw natural gas as a way to enhance resiliency in light of diesel fuel shortages during extended outages, California tried to look the other way. California’s mandate to reduce carbon emissions per AB 32 is another reason for it to limit fossil fuels.

The prime thrust of the SB 1339 is to provide streamlined interconnection processes for third-party microgrids. Not only does this reduce costs by codifying requirements for integrating with the incumbent grid, but it also reduces barriers to implementation that do not shift costs to ratepayers not included in microgrids. 

The most controversial aspect of legislation, however, was the prohibition of any state funding in the form of newly proposed tariffs to compensate a customer for the use of fossil fuels including diesel backup. Earlier versions of the bill prohibited support for natural gas, but this was amended during the last days of the legislative session. The California Energy Commission did not allow any state funds to pay for fossil fuel technologies incorporated into microgrids in its most recent microgrid solicitation. Fuel cell advocates and those who see the efficiency benefits of combined heat and power in microgrids both questioned such a strict prohibition—and won out. 

What Role Will DC Play?

Perhaps the most novel twist to SB 1339 is its explicit support for direct current (DC) microgrids. The advantages of DC include modularity and lack of need to synchronize with the larger alternating current utility grid. A number of DC microgrids are in California, including the Honda facility developed by Bosch. 

A new Guidehouse Insights report on DC distribution networks, which includes microgrid-like applications ranging from off-grid cell towers to EV DC fast charging and data centers, shows a remarkably robust market. Today, the market for distribution-level DC networking applications (which include nanogrids, microgrids, and virtual power plants) stands at approximately $11 billion. By 2027, that implementation spending total reaches almost $50 billion a year. 

What California does on microgrids in regards to DC innovation and renewables may have a large influence on the overall global market. While Alaska may be the microgrid capital of North America, anyone focused on grid-tied applications is advised to look west at what’s happening in the Golden State, often a harbinger of things to come.