California’s electricity system is failing.

Earlier this month, in order to prevent wildfires, some 2 million people had their power cut by the state’s biggest utility provider, PG&E. It was the biggest deliberate blackout in history.

That record is likely to be broken this week, as the utility contemplates blackouts that could affect up to 3 million people.

Meanwhile, it turns out the Kincade Fire, which currently has 180,000 people evacuating Sonoma County and is only 5 percent contained, may have been started by one of PG&E’s transmission lines. That’s one of the lines it didn’t preemptively shut down, in part thanks to intense pressure from Gov. Gavin Newsom to minimize blackouts.

This, it seems, is what many California electricity customers can expect from now on: blackouts or fires. That is failure.

The first post in this series dug into the causes of that failure, which have been gathering for years now: climate change has made the forests hotter and dryer; forest mismanagement has left them tightly packed and flammable; land-use mismanagement has put more Californians in high-risk areas; decades of delayed and underfunded maintenance has left PG&E’s 100,000 miles of overhead power lines in a sorry state; and to top things off, PG&E is a felon, burdened with almost $30 billion in debt, thanks to the fires it previously started, and in bankruptcy.

It is an omnishambles.

After the Kincade Fire.

Photo by JOSH EDELSON/AFP via Getty Images

The second post considered three key ways to, if not “solve,” at least ameliorate the conditions making California’s electricity system so vulnerable to wildfires: grid hardening and fire safety; land-use reform, including changes in zoning and building codes; and, of course, repairing and restructuring PG&E, which is very complicated.

This post is about a way to make California’s electricity system cleaner, more reliable, and more resilient. It is, I believe, the only way to truly vouchsafe the promise of safe, reliable electricity in a warming century.

In a nutshell, it is accelerating the evolution from a centralized, top-down, long-distance, one-way energy system to a more decentralized, bottom-up, local, networked system. In the energy world, this is summed up as a more distributed energy system. It puts more power, both electrical and political, in local hands.

Though it is still in early days, and only hints of what’s to come are yet visible, the evolution to a more distributed system is inevitable. It can be done inefficiently and inequitably, or the state can make sure it’s done expeditiously and fairly, but it is going to happen one way or another.

We’re going to look at the benefits distributed energy produces and the reasons it is inevitable, but let’s begin with a simpler question: What is it?

What is “distributed energy”?

Since it first started growing in earnest in the early 20th century, the grid has worked according to the same basic model. Power is generated at large power plants and fed into high-voltage transmission lines, which can carry it over long distances. At various points along the way, power is dumped from the transmission system into local distribution areas (LDAs) via substations, where transformers lower the voltage. Local distribution grids then carry the electricity to customers.

The “ TD interface ” is the point where the transmission and distribution systems meet.

Javier Zarracina

Distributed energy is different from the conventional model in that its origin lies within an LDA. That’s where it is generated, stored, and managed; no transmission lines are involved.

At the edge of a local distribution grid, the utility hands power off to customers through a meter, which tracks consumption. (Meters are mostly analog, but these days digital “smart meters” are becoming more common.) Once power is “behind the meter,” it is in the customer’s hands. The utility has no visibility into or control over it.

Some distributed energy is located in front of the meter, within the distribution grid itself. Think, for instance, of a community solar park or a small local wind farm. We will return to front-of-the-meter distributed energy later.

But for now, when most people talk about distributed energy, they are referring to the kind located behind the meter, like solar panels on roofs and batteries in garages.

Some behind-the-meter distributed energy, some front-of-the-meter distributed energy. Thanks, stock image!

The power from the panels is stored by the batteries or used by the customer directly. Utilities are not involved. They only have access to aggregate consumption data from meters. If a customer’s solar panels generate so much power that it turns their aggregate consumption negative — they produce more power than they consume — utilities will, at least in California, buy that power from the customer, a policy known as “net metering.”

(It’s important to note that the most common form of behind-the-meter distributed energy, in California and across the world, is the old-fashioned diesel generator, which is unfortunate for a wide variety of reasons — more on that in a moment.)

A customer with the right kind of equipment (a smart inverter) can “island” off from the grid in the case of power failure, effectively becoming a freestanding electricity system. Unfortunately, the vast majority of people who have installed rooftop solar panels in California do not have a smart inverter and thus can’t island. Many have recently discovered that to their chagrin. To get resilience benefits, solar panels must be coupled with storage and a smart inverter.

There’s also a wave of electric vehicles (EVs) coming to California. That will happen alongside a rapid scale-up of “vehicle-to-grid” (V2G) technology, which makes EVs into bidirectional energy-storage and demand-shifting resources that can serve the microgrid (or the larger grid). EVs will further increase the reliability and capabilities of behind-the-meter systems.

In theory, a customer could install enough solar panels and batteries to become self-sufficient and cut off its connection to the grid entirely, but true “grid defection” requires a lot of panels and batteries, along with a suite of other measures, more than most people can afford or manage.

However, especially with California’s rising power rates and declining power reliability, it’s becoming more and more economical to become at least somewhat independent of the grid. A recent McKinsey research report on the effects of energy storage on the power system found that “partial grid defection” — which it defines as generating 80 to 90 percent of your own energy — could become economical for most customers within a decade.

The graphic below is based on Arizona retail electricity rates, which are around 11 cents per kWh; California’s are around 16 cents per kWh, the seventh highest in the nation, and are expected to rise:

Partial grid defection is already economical in many places in California, and those areas will spread. For now, solar+storage systems are still a niche product. On average, about 1 in 10 customers that install solar panels install batteries along with them. But that’s a national average; demand is already beginning to spike in California.

A typical residential battery will cover a typical home for about a half a day in a blackout, depending on the size and consumption of the household. That’s not much, but in some circumstances, it can make a crucial difference. And performance will improve as batteries continue to get cheaper and more powerful.

The cool thing about distributed energy is that it scales smoothly to any size, as more and more distributed energy resources (DERS) are networked together. Which brings us to microgrids.

What is a “microgrid”?

I wrote an in-depth explainer on microgrids if you want to dive in, but here’s the capsule version: any system that can island off from the grid is a microgrid, a miniature, semi-independent grid of its own. Technically, a single building, even a single room could be a microgrid, but more often, when people refer to microgrids they are talking about groups of buildings and facilities — a campus, a neighborhood, or even a whole community.

With the right equipment and software, a microgrid can coordinate DERs within the group, maximizing local resources while ensuring that enough power is drawn from the larger grid to keep supply and demand matched. (It is possible to have microgrids nested within larger microgrids; a microgrid could even be entirely composed of smaller microgrids, like Russian nesting dolls.)

While there are freestanding microgrids in developing countries, microgrids are typically embedded in larger distribution grids in the US. Most of the time, they remain connected to the grid; they island only in the case of blackouts. From the utility’s point of view, a microgrid is just another customer, just another meter. What goes on behind the meter, whether it’s one building or 100, doesn’t make much practical difference, except in the size of the account.

You can think of behind-the-meter distributed energy as “anything that can help a microgrid work,” including energy generation (solar panels, mini wind turbines, biomass boilers), storage (EVs, batteries, and fuel cells), and management (smart meters, inverters, and appliances, home energy management software, microgrid control systems). All of these are DERs.

From my microgrid explainer. You had to be there.

Alvin Chang

So that’s distributed energy: customers generating, storing, and managing their own power, either individually or in networked groups of any size.

Distributed energy is a way of building an energy system from the ground up, focusing on local resilience. It brings all sorts of benefits.

Distributed energy can make the grid more stable and resilient, even when there’s no blackout

One of the things that has complicated that task of getting more DERs on the grid is that it’s devilishly hard to quantify all their benefits.

On a sheer cost-per-kWh basis, which is how utilities typically make their decisions, central-station power, whether fossil fuel or renewables, is generally cheaper. But such comparisons leave out many of the benefits of distributed energy.

The most relevant to Californians at the moment, of course, is emergency backup power. Lots of people in California are buying diesel generators for this purpose because they’re fairly cheap and utilities are pushing them via their “resilience zone” plans, but they are dreadful for the task. They create intense local air and noise pollution, they need regular maintenance, and — irony of ironies — fuel stations run on electricity, so in a blackout, people have only what diesel fuel they’ve stored.

Solar+storage+smart inverter systems work better and more seamlessly during a blackout. What’s more, when they are connected together into a microgrid, their collective generation and consumption can be balanced out, maximizing backup power.

Clean Coalition, a nonprofit leading the charge for DERs in California, has set a goal of seeing every community in the state generate 25 percent of its electricity from local resources. Communities that hit that goal can provide substantial backup power during blackouts. Here’s what can be achieved with “a net zero level of solar to a community in California with energy storage capacity equating to two hours of the nameplate solar capacity (i.e., 2 kWh of energy storage for every 1 kW of solar).”

As you can see, with a balanced portfolio of DERs, including energy storage, the base 10 percent of “mission-critical and life-sustaining loads” can be powered indefinitely. Tier 2 “priority” loads can run 70 to 80 percent of the time, while discretionary loads will last 20 percent of the time and then begin phasing out.

These are approximate numbers, of course. Every community is unique and every microgrid will be as well. But still, it’s a big, big difference from a community going dark, with only diesel generators to rely on. It could mean the difference between life and death for vulnerable populations like the elderly and disabled.

(Clean Coalition has a page full of success stories about communities that have deployed DERs. Vote Solar has a similar list of solar microgrids in California that provided resiliency benefits, in some cases including life-saving care, during the recent blackouts.)

As Public Safety Power Shutoff (PSPS) events continue, emergency-backup benefits will be enough to kick-start a decent microgrid market. It’s already happening, especially around Tier 1 loads. And customers are herding to solar+storage systems, as Tesla and other companies eye big growth opportunities.

Cassina Tarsia of Oceanside, California, has a microgrid that powers her electric wheelchair and her EV. It will run the house in case of a blackout.

Photo by Don Bartletti/Los Angeles Times via Getty Images

The knock on microgrids has traditionally been that they’re expensive, but they are already reaching cost parity with California grid power in some places. And while it is true that, on an upfront-capital basis, they are more expensive than diesel generators, they are not more expensive on a lifetime basis because clean DERs, unlike diesel generators, can provide useful services even when there’s no blackout.

Solar microgrids don’t just provide their owners with backup power when the grid is off and clean energy when it’s on, they offer a number of benefits to the larger grids in which they are embedded.

First, remember that microgrids can island off from the larger grid. To the extent more areas have the capacity to island — to the extent the grid is more “modular” rather than one giant interdependent network — blackouts can be more carefully targeted. The communities in the path of wildfires can be shut down in an orderly fashion, without the need to black out giant swathes of territory around them.

Second, because they produce power close to consumers, DERs (both in front of and behind the meter) cut down on the need for long-distance grid infrastructure. They can help utilities avoid investments in costly new transmission towers, power poles, transformers, and power lines. At sufficient scale, they can avoid the need for new power plants, with savings running into the billions.

Third is “peak shaving,” a subset of avoiding infrastructure. The electricity systems in California and other states are wildly overbuilt; they have to be sized to meet the highest possible peak in demand. Because those peaks in demand are, by definition, exceptions, much of that capacity (especially a large fleet of natural gas “peaker plants”) sits idle much of the time. It is wasteful, again to the tune of billions.

Dynegy natural gas power plant, in Morro Bay.

Shutterstock

Smart microgrids can help smooth out the peaks and valleys in demand by storing solar energy when it’s plentiful and releasing it from batteries and EVs in times of high usage. They can also shift demand to match supply. The result presented to the utility at the meter is an unusually flat, stable “load curve.” As more customers clump together into microgrids, more load curves will be flattened and there will be fewer, lower peaks.

That means the bulk energy system of big power plants and long-distance power lines can be downsized, matched more closely to average rather than peak demand. The state could start shutting down natural gas plants.

It also means that some congestion pressure will be taken off existing power lines, which is a big deal, since overloaded lines tend to sag into vegetation and start fires. By relieving congestion, DERs could help make the existing grid less fire-prone.

Finally, DERs can provide important grid services like voltage regulation and phase balancing, to help the grid run more smoothly. (You don’t need to know the details.)

Here’s a McKinsey graphic that attempts to lay out all the benefits. It is focused on energy storage, but it all holds for microgrids as well:

If and when DERs are compensated properly for all those layered benefits, they can compete with the cost of grid power and vastly undercut diesel generators. They can bring jobs and economic development to local communities. And unlike big power plants and power lines, they can be installed quickly. They are both a short- and a long-term solution for California communities.

Unfortunately, there are very few places in the US that compensate DERs properly. Their benefits tend to be tallied on an ad hoc basis, with metrics and standards varying from state to state, and many benefits are neglected entirely. That’s as true in California as in most states.

The state needs to get its act together, though, because the evolution toward distributed energy is inevitable, and if it isn’t well-managed, it could be a humanitarian nightmare.

The inexorable logic of distributed energy in California

The core problem with California’s electricity system is that its millions of customers are overwhelmingly dependent on power generated by large, remote power plants and carried over long distances on overhead power lines, often through hilly, mountainous, and/or forested territory becoming dryer and more fire-prone by the year. If the state continues with the current model, a growing population will mean more power plants, more power lines, more vulnerability to wildfires, and more PSPS events. The system is too vast and sprawling to entirely prevent that, no matter how well trees are trimmed. Over half of wildfires aren’t even caused by electrical infrastructure, but 100 percent of wildfires can burn it.

As blackouts become a regular feature of life in California and their toll becomes more apparent, the cost debates around solar+storage systems are going to fall by the wayside. Those who can afford them are going to get them. Those who can’t afford them will get diesel generators and live with the pollution.

Here’s the dystopian scenario: As wealthier people begin generating and storing more of their own power, partially or wholly defecting from the grid, they will be less invested in the grid’s health, in two senses.

They will be less politically invested in keeping grid power reliable and cheap, which will take pressure off regulators and legislators. (Wealthier people have more political clout.)

And because they buy less grid power, they will be less financially invested in grid maintenance and other shared grid costs. Utilities can raise fees on solar homeowners to try to capture some of those costs back, as San Diego Gas and Electric is trying to do, but that will just increase the incentive for grid defection.

Increasingly, the costs of building and maintaining the grid will be borne by those without the resources to defect from it, namely lower-income homeowners. And even as fewer ratepayers shoulder them, rates will be rising, as PG&E scrambles to catch up on its giant maintenance backlog.

If the state doesn’t take proactive steps to avoid it, its utilities could end up in a doom spiral, with grid power becoming ever less reliable and more expensive for the underclass forced to rely on it.

Imagine the scenes on the nightly news a few years hence, during a PSPS like the one this week, showing wealthy Californians sitting at home sipping wine as poor Californians with disabilities huddle in civic centers and medical facilities powered by diesel generators. Or imagine a fire comes during a PSPS, as has already happened this week, and gated communities evacuate via a well-lit procession of fully charged Teslas as poor communities scramble in the dark.

Distributed energy is coming to those who can afford it. If California doesn’t get its shit together, it is at risk of stumbling into a safety and equity nightmare.

It needs to take charge of the shift to distributed energy, to make sure that it’s done fairly and equitably and that all Californians capture a share of the benefits.

Helping DERs succeed will require a bunch of small things and one big thing

It’s a perilous time for distributed energy. The federal solar investment tax credit (ITC), currently at 30 percent, is set to phase out over the next several years. Net metering is coming under attack from all sides; almost everyone agrees current programs aren’t sustainable, but no one can agree on what to replace them with.

Now would be a good time for California to make a serious plan.

There are microgrids operating in the state, with lots of fascinating and inspiring individual stories. I particularly recommend checking out the Stone Edge Farm Microgrid, which has multiple forms of energy generation and storage, and it is almost entirely self-sustaining. It stayed up and running for a few days even when its owners had to evacuate ahead of a fire! It offers guided tours, if you’re ever in Sonoma.

But the problem is that almost all of the state’s microgrids are one-offs and demonstration projects funded by state R&D grants. While individual solar+storage systems are getting more common and more competitive, it remains unduly difficult to finance and implement community microgrid systems.

And front-of-the-meter distributed energy, despite its enormous potential to reduce the need for grid infrastructure, also remains difficult to interconnect to the grid.

There are some positive steps happening; the California Energy Commission has invested over $100 million in microgrid projects and the CPUC is shifting $100 million in state money to prioritize energy storage in fire-prone areas. But it’s clear the state needs to do much more.

If you’re looking for policy recommendations on how California can encourage DERs, there are plenty. Clean Coalition has some here. The solar power provider Sunrun has some here, in comments it submitted to the CPUC on how DERs can be used to ameliorate PSPS events. The California Solar and Storage Association lays out some hyper-specific, wonky reforms.

Some common suggestions include simpler and more open-access grid-interconnection standards, more transparent common standards for estimating the value of DERs’ various benefits, more participation for DERs in utility solicitations, and better mechanisms for compensating DER owners for power, like feed-in tariffs

Also, everyone wants to boost funding for California’s Self-Generation Incentive Program (SGIP), which is currently authorized to spend $830 million on DERs over the next five years (75 percent of it on behind-the-meter storage). The funding will be targeted at the most vulnerable areas, but it is nowhere near commensurate with the scale of the crisis.

Finally, maybe utilities could start financing solar+storage systems rather than handing out diesel generators.

But all of these reforms, it seems to me, nibble around the edges. What California communities need is a partner in planning their distribution systems around their varying goals: resilience, clean energy, integration of EVs, smart land use, and so on. Right now, they have no such partner, because their power utilities are not structured to play that role.

Instead, utilities are still operating with a 20th-century hangover, a model that forces them to prefer big investments in big grid infrastructure. As long as utilities are operating under that model, they will use their influence to slow the transition to distributed energy.

What’s needed is root-and-branch reform of the way utilities like PG&E operate, a new model that makes them partners in the push for a bottom-up grid focused on local resilience. That is a level of ambition not yet seen in the restructuring plans before the bankruptcy court or in any of the plans being discussed by state lawmakers.

In my next post — my final in this series, I promise! — I will address that topic squarely: a new model for PG&E and other utilities that can better serve the social, environmental, and economic needs of California communities.