California Town Tests New Model for Microgrids, With Statewide Implications

In California’s Salinas Valley, the town of Gonzales is
planning a $70 million microgrid to provide a business park with
round-the-clock reliable power at cheaper than utility rates, and
overcome a grid upgrade bottleneck that would otherwise stifle its
economic development plans.�

If it works, the unusual combination of a newly formed municipal
utility, large electricity customers as anchor tenants, and a
microgrid developer to fund and manage the solar, battery
and natural gas-powered system could provide a new statewide model
for towns and cities looking for reliable, clean energy
options. 

That’s how Brian Curtis, CEO of Concentric Power, views the
Gonzalez Agricultural and Industrial Microgrid project. The
“multi-customer municipal utility energy services agreementâ€
announced this week could solve many of the more complex barriers
to microgrid development in California, he said. 

“It leapfrogs some of the barriers and challenges that have
been experienced in the market, not the least of which is
interconnection and utility-side upgrades,†he said. “We think
we’ve found a pretty elegant way to design with those constraints
in mind.†

Gonzales, a town of about 8,500 in the country’s most
productive fruit and vegetable growing region, has a business park
with two major agricultural processing facilities owned by Taylor
Farms and Del Monte Foods. Plans to expand those facilities or add
new ones have been stymied by insufficient capacity at the Pacific
Gas & Electric substation serving the town, Gonzales city
manager Rene Mendez said.

Expanding that substation could take anywhere from three to five
years, given PG&E’s backlog of grid projects and the
convoluted process for approving upgrades, Mendez said. It would
also impose significant costs to customers seeking the additional
substation capacity. 

Beyond that bottleneck, poor grid power quality has been
threatening refrigeration and processing equipment at facilities
that process about $5 million in perishables at any given time. And
that’s not mentioning PG&E’s fire-prevention
blackouts
, which left the city without power for about 40 hours
last year, and could be an economic disaster if they continue,
Mendez said. 

In that light, “energy has turned out to be a critical need,
and a critical tool†for economic development. But with capital
budget of about $20 million per year, Gonzales “can’t throw
money at the problem.† 

The town can enlist
private development
, however, by forming a municipal utility
and electric authority. That route helps Gonzales
overcome regulations that bar utility customers from sharing power
across utility grids. Such regulations made multi-customer
microgrids a nearly impossible proposition across the country. 

“We’re flexing the power of a municipal utility to act as a
load-serving entity,†explained Dustin Jolley, founder and
principle of OurEnergy, a technical advisory firm and project
developer that’s advised the city on designing the plan and the
2019 RFP that selected Concentric. 

A municipal utility to work around microgrid barriers 

California regulators are working on tariff
structures for microgrid
 developers and multiple customers can
share their costs and benefits with utilities. But that’s a

complicated regulatory task
, involving issues about who pays
for grid services or reduced electricity sales that can pit
utilities’ interests against those of microgrid customers. 

The California Energy Commission has provided grants to a number
of
microgrid demonstration projects
 across the state, but most are
operated by utilities or extend only to properties controlled by a
single owner. One exception is the Redwood Coast Airport microgrid
in Humboldt County, which over years of careful negotiations has
developed a proposed tariff structure that could allow its
microgrid to serve customers across PG&E power lines. 

Gonzales’ plan is meant to circumvent those barriers.
Concentric will fund the majority of the project and earn back
revenues through its 30-year energy services agreement. The
Gonzales Electric Authority (GEA) will contribute several million
dollars and own the distribution grid assets needed for the
project, and sell the wholesale power to the municipal utility,
which will set the retail energy agreements with its business park
customers.  

Concentric has already installed a 2-megawatt natural
gas-powered cogeneration system at Taylor Farms’ processing
facility that provide heat and electricity, and can also ramp up
and down to manage grid power needs. But the microgrid complex now
being planned is much more ambitious —14.5 MW of solar, 27.5
megawatt-hours of batteries, and about 10 MW of natural gas
reciprocating engines. 

“That combination in our analysis gives the right mix of
highest possible renewables, but also the reliability they need,â€
Curtis said. It can also help balance intermittency of two wind
turbines that provide 3 MW of nameplate capacity to Taylor Farms
and Del Monte via power purchase agreements. 

(An aerial view of the microgrid site (credit: Concentric Power)

The microgrid’s power will cost about 11.75 cents per
kilowatt, higher than typical California wholesale electricity
rates. But the retail service agreements being crafted for business
park customers will offer flat rates below utility rates, and
without the demand charges that add cost and complexity to
commercial-industrial customer bills. 

With a mix of roughly 80 percent renewable energy and 20 percent
natural gas, the power will be cleaner than what PG&E supplies
at present. That lines up with the city’s climate
action plan
 calling for sustainable energy development and
reducing carbon emissions to meet its economic and social goals.
Gonzales is planning a wastewater treatment plant methane capture
facility that could supply
its natural gas units
 with carbon-neutral fuel in future years,
Mendez said.  

A model for distributed clean energy-grid integration? 

If all goes to plan, the project will break ground in mid-2021
and be put into service by mid-2022. The next step will be
interconnecting with the transmission system run by state grid
operator CAISO to sell excess capacity via energy markets, or to
the local community choice aggregator Central Coast Community
Energy, Curtis said. 

“Microgrid clusters are going to be very much a part of the
energy landscape in California, and across the country,†he said.
“What’s required is the right mix of assets, and also the right
controls.†

As for utilities like PG&E, the costs of losing customer
electricity sales and the rate-of-return on capital investments to
supply them may be counterbalanced by benefits of being able to
rely on a stable energy resource in an area suffering from lack of
grid investment, Jolley suggested. 

“Having resilient generation projects that have the capability
and sophistication to interact with the broader grid, I think they
would view that as an asset.†

Source: FS – GreenTech Media
California Town Tests New Model for Microgrids, With
Statewide Implications