How California Cities Are Driving Down Costs with Microgrids in Bulk

By Elisa Wood in Microgrid Knowledge

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East Bay Community Energy has figured out how to scale community microgrids, with 30 microgrids on the way and another 50 to 100 to follow.

At the rate community microgrids are being developed, it will be a long time before North America achieves adequate energy resilience at critical facilities like water treatment plants and fire stations.

But what if they were developed in bulk?

That’s the concept now being executed by East Bay Community Energy (EBCE), a community choice aggregator in the San Francisco Bay Area. EBCE has figured out how to scale microgrids by creating standardized documents and undertaking other predevelopment work that can be used for several microgrids at once.

The idea arose four years ago out of EBCE’s realization that local governments often lack the resources and technical know-how to pursue microgrids. And microgrid developers — who do have the expertise — often avoid small community projects because of high customer acquisition costs.

So the EBCE kicked off its microgrids in bulk endeavor — what it calls the Resilient Municipal Critical Facilities Program. The project recently took a big step when EBCE chose its developer and financier: Gridscape Solutions and Sunwealth. Together they will bring about 30 microgrids to fruition in San Leandro, Berkeley, Hayward and Fremont, California, with 3.1 MW of solar panels and 6.2 MWh of battery storage.

“From a business model perspective, this is a unique project. This lumps sites from multiple cities in one portfolio to achieve economies of scale on project financing, legal, procurement, construction, etc. Individually many of the sites are very small [as they are in most cities] so the only way to make a local power plant project viable for them is to bundle them into a larger project,” said Alok Singhania, a partner at California-based Gridscape Solutions.

How to create confidence

Early on EBCE worked with the engineering firm ARUP to study hundreds of critical facilities for their natural hazard exposure, service to the community, and solar and battery potential. They identified sites that could accommodate 10 MW of solar and 25 MWh of energy storage.

The predevelopment work — including creating a standard power purchase agreement (PPA) that attorneys in the four cities agreed to in advance — helped the EBCE reduce legal costs and get a good price from the market when it solicited microgrid developers. The community aggregator also won buy-in from the city councils in the form of resolutions saying they are committed to signing the standard PPA.

“All that work gives the developer more confidence that it is a viable portfolio,” said JP Ross, EBCE’s vice president of local development, electrification and innovation. “Developers would not have been bidding on one or two projects, but the whole portfolio attracted a lot of interest.” (Listen to JP Ross discuss the preparation work at Microgrid 2021.)

EBCE issued its phase one solicitation for a developer in August 2022, which attracted three bidders. The Gridscape Solutions/Sunwealth bid won because it met pricing, labor and installation quality requirements with minimal revisions to EBCE’s standard PPA.

Gridscape also stood out as an experienced and familiar developer. It had earlier installed a microgrid development at a fire station in Fremont, a city included in the first phase. Connecticut-based Sunwealth, a clean energy investment firm, was attractive because of its experience portfolio of more than 575 projects.

How the PPA works

EBCE acts as a pass-through entity, signing the PPA with both the cities and the selected counterparty in what’s called a sleeve structure. It allows EBCE to be the buyer of energy services from a developer and a seller to cities, while minimizing risk to EBCE, according to a memo from Ross to the EBCE board of directors.

“The benefit is that Sunwealth signs one PPA and EBCE connects it to 30 different projects. This helps the cities aggregate volume and further lowers the cost. Our promise to the cities was that it wouldn’t increase costs, at the city level, over a 20 year period,” Ross said.

The participating cities pay no upfront costs for the solar and storage microgrids, and EBCE handles all maintenance and billing.

Where the project stands

The project got a big boost in December 2022 with a $2 million grant from Congress to bring energy resilience to 13 critical service sites in Hayward and Fremont.

EBCE is now in the final stages of signing the PPA with Sunwealth; the agreement also must be approved by the city councils. Ross expects the process to be wrapped up in May. Once the PPA is signed, Gridscape Solutions has one year to begin construction.

Vipul Gore, president and CEO of Gridscape Solutions, said it’s likely to take about 18 months to complete the microgrids. “The barriers in completing the project in time are (1) permit approval delays, (2) utility interconnection delays and (3) supply chain delays, although this is improving and may not pose a delay to this project,” he said.

The unique “bulk” model aside, the project also stands out from a technology perspective, according to Gore.

“This is the first very large-scale network of renewable microgrids project in the country. The project will provide a centralized, aggregated dashboard to EBCE to monitor and control how these distributed energy resource assets are performing on a second-by-second basis, spanning across hundreds of miles of geographical area,” he said.

Gridscape’s distributed energy management platform allows aggregators like EBCE to not only maintain distribution grid stability and reliability but also manage peak demands and participate in various ancillary virtual power plant grid services, Gore said.

What’s next?

Next comes phase two, which calls for 50-100 microgrids for the California cities of Emeryville, Livermore, Oakland and Pleasanton.

“We are still looking at the portfolio and evaluating the cost effectiveness. We will build as many sites as we can that meet our cost neutrality threshold so there is no real limit to the size, but there is a limit to the number of viable facilities in the four Phase two cities,” Ross said.

Meanwhile, more funding is becoming available for microgrids through various federal programs, including the Inflation Reduction Act, which EBCE hopes to tap into.

EBCE is now applying for about $30 million in funds from the federal Grid Resilience and Innovation Partnerships to scale the bulk microgrid idea to all of the EBCE cities, other public agencies and to retrofit batteries for existing municipal solar systems.

“Our hope is that all CCAs adopt this methodology to proliferate microgrids [local power plants] on public sites. California itself needs tens and hundreds of thousands microgrids not hundreds,” said Gridscape’s Singhania.