California’s Microgrid Incentive Program is an Opportunity

With Changes, California’s Microgrid Incentive Program is an Opportunity to Improve Resilience for Communities

The California Public Utilities Commission is designing a first-in-the-nation program that will fund clean microgrids to help disadvantaged communities be resilient to blackouts. However, the CPUC’s Microgrid Incentive Program staff proposal needs some key changes to truly center equity with the $200 million available for the program. 

What Are Microgrids and Why Do They Matter?

A microgrid is an interconnected power system that can be locally controlled and can function either while connected to the larger grid, or completely on its own. A microgrid can serve one single building, like a hospital or home, or a group of buildings, such as a university campus, or an even bigger territory, like a city. Clean microgrids use technologies like solar and storage to supply generation within a microgrid, as opposed to diesel generators, which emit harmful pollutants. Clean microgrids can operate year-round and can also provide clean backup generation during outage events driven by wildfires or other weather impacts that are occurring more regularly in California due to climate change.

California has fewer than 100 microgrids as the US Department of Energy defines them, and even fewer of those are located in and serving frontline or disadvantaged communities. These communities have borne the worst impacts of pollution and the climate crisis, and they should be prioritized for clean energy solutions. 

CPUC’s Microgrid Proceeding and the Microgrid Equity Coalition

The California Public Utilities Commission launched a proceeding (R.19-09-009) in 2020 that created a $200 million Microgrid Incentive Program (MIP) to be implemented by the investor-owned utilities (SDG&E, PG&E and SCE) the first of its kind in the nation. The $200 million is expected to fund around 15 multiuser microgrid projects aimed specifically at keeping critical services powered up in disadvantaged communities. In 2020, several organizations formed the Microgrid Equity Coalition to advocate for environmental justice and equity in this proceeding. Members include Reclaim Our Power, California Environmental Justice Alliance, California Alliance for Community Energy, Vote Solar, the Sierra Club, The Climate Center, and Grid Alternatives. The coalition came together initially to support the statement of Principles for Microgrid Development written by Reclaim Our Power: Utility Justice Campaign in a January 11,2021 letter to the Commission. The MEC has advocated at the CPUC through comments, presentations, and workshops for a program that specifically enhances energy resilience in disadvantaged and vulnerable communities.  

The CPUC asked the three major investor-owned utilities to file a draft MIP implementation plan, made public in December 2021. The Coalition responded to the utility proposal via comments and reply comments in January of 2021, and in July 2022, the Commission issued a Staff Proposal for implementation of the MIP that was largely based on the utility proposal, offering only small adjustments and additions. Parties filed comments on the Staff Proposal this month, and the MEC was supported by over 26 community based and environmental justice organizations in a recent letter filed at the Commission. We are hopeful the CPUC will move quickly to issue a Proposed Decision that implements the program and incorporates the MEC’s recommendations very soon.   

CPUC’s Staff Proposal Needs Some Key Changes

The MEC wants to ensure that the MIP makes funds accessible to communities and provides benefits that best meet the needs of disadvantaged communities. The MEC provided recommendations to the Commission on outreach and community participation, eligibility requirements, application process, application scoring and evaluation, and availability of funds. While we support some aspects of the CPUC Staff Proposal, some key changes are needed to make the program truly accessible to the disadvantaged communities it aims to serve.

First, make technical assistance funds available upfront. The utility plan offers $25,000 technical assistance grants as a reimbursement to CBOs and communities who apply for the MIP, after the applicant has obtained technical assistance to put together a viable application. Many community-based organizations, especially those in disadvantaged communities, will need technical assistance to develop plans for a microgrid that are sufficiently detailed for an MIP application. We are concerned because such CBOs may not have sufficient funding to pay for this technical assistance on their own, and they are also unlikely to be in a financial position to gamble $25,000 on a grant application that may be ultimately unsuccessful. The practical result is that most CBOs will not be able to participate in the MIP, which would completely undermine the objective to develop microgrids in underserved communities. We recommend that the technical assistance grant money be given upfront to applicants who meet certain eligibility criteria in a pre-application process, such as basic project summary and evidence of project support, so that communities can get the technical support needed to develop their project proposals.

Second, adjust project scoring criteria.  MEC’s goal is to ensure that selected projects offer significant benefits to the most vulnerable disadvantaged communities, and the scoring criteria must provide a fair chance for under-resourced communities to access funding. Parts of the Staff Proposal and the utility plan do not align with our recommendations. The utility proposal includes point caps that limit flexibility and limits projects with benefits from receiving higher scores.

Additionally, the scoring criteria in the Staff Proposal undervalues the emissions profile of the power sources in the proposed microgrids. The Environmental Benefits score includes a small point increase for 100% clean energy, with gradual decreases for projects that use fossil fuels. The MEC advocates for a sizable point boost for zero-emissions projects, and no point boost for projects that include resources that emit greenhouse gasses or criteria pollutants. The program should prioritize projects that create clean microgrids, rather than incentivizing more fossil fuel powered generation.

Lastly, projects with less access to other funding upfront should not be penalized. We oppose CPUC staff’s proposal to award more points for projects with additional funding sources, which would reward projects that already have funds and would reduce the competitiveness of proposals from communities with less access to funding. While connecting applicants with other funding sources is a great idea, and one the MEC supports, awarding projects for having funds up front defeats the purpose of helping those communities who do not have enough access to clean energy solutions.

We urge the Commission to make these changes to the Staff Proposal when issuing a proposed decision on the Microgrid Incentive Program. The Commission must move forward with a final MIP Implementation Plan as soon as possible, as we are in peak fire season, and funding and building these microgrid projects will take years. The sooner an accessible and equitable program is approved, the sooner communities can build microgrids that will help their community members access clean energy that will be resilient to blackouts and provide additional clean energy benefits year round.

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