With outages, fire risks, California eyes ‘local’ electricity

Is small beautiful when it comes to power companies and their ability to prevent destructive wildfires?

Pacific Gas and Electric, the behemoth that serves nearly two-thirds of California, caused an uproar last week when it cut power to 730,000 customers – a blunt tool against predicted bone-dry conditions and gusty winds that might damage its equipment and spark a catastrophic fire.

PG&E averted a fire disaster. But the vast outage lasted days for some customers, and endangered those with medical needs. At least one man hooked up to an oxygen system was killed. Schools and businesses closed. And the utility’s bankruptcy – prompted by the threat of massive payouts from fatal fires in the last two years – is raising questions of whether the utility is too big to nimbly deal with fire prevention and needs to be broken up or restructured.

(Southern California Edison also cut off power preemptively last week – but to fewer customers and, unfortunately, not to an area where a deadly fire actually started.)

At the same time, energy trends point to greater reliance on locally generated power – “microgrids” that provide clean energy and battery storage on a small scale, often just to essential facilities like firehouses and hospitals. It allows them to keep running when the power shuts off. Also, starting next year, all new homes in California are required to have solar panels.

Small-scale power appears to be gaining momentum. 

“I believe that California will emerge as the national leader [in microgrids] because of these preventative grid shutoffs,” says Peter Asmus, research director at Navigant Research, a market research firm studying energy markets. 

David vs. Goliath? Not quite.

But it’s not so simple as small and local versus big and centralized, says Michael Wara, director of Stanford University’s climate and energy policy program. “There are some advantages to being small, and some to being big.”

Small utilities are more focused, have much less system to manage, and really know their systems. Energy experts and officials point to San Diego Gas & Electric, investor-owned like PG&E but much smaller, as a model. While PG&E is falling far short of goals to work on its grid, clear vegetation, and trim trees, the smaller utility is hardening against fire and modernizing more quickly, burying some power lines and insulating others. It has also “sectionalized” its grid to such an extent that it can surgically target a specific neighborhood for a preventive power cutoff.

On the other hand, a fire can devastate a smaller utility’s finances. In Northern California, the Trinity Public Utilities District faces multiple lawsuits over a 2017 fire caused when a branch fell on its electrical lines and burned 72 homes.

The lesson from the 20th century is that electricity costs fell as utilities got bigger, Mr. Wara points out. San Francisco has offered to buy infrastructure from PG&E, but splitting off cities would be a real problem for rural areas in terms of fire risk and costs – the state would have to take over, he says. A breakup would also be a huge distraction for management, just as bankruptcy is now.

“Size is good because of economies of scale,” agrees Greg Conlon, former president of the California Public Utilities Commission, which regulates utilities. Administrative functions and computing can be done more efficiently serving 1 million customers than 100,000.

PG&E’s special challenges

Both men point to problems more serious than size. Mr. Conlon believes PG&E’s main challenge is geography – vast forested areas – and state legal norms that hold a utility liable for damage caused by its equipment, even if the utility was not negligent.

Mr. Wara singles out mismanagement at PG&E. What really makes San Diego Gas & Electric a model is its culture, he says. “It has a management culture built around safety.” PG&E has to-do lists. San Diego has an ethos. If it’s met a goal, it wants to improve it, he says, even by half a percent.

Still, more locally generated power – whether home-based systems powered by solar panels or community microgrids – looks to be picking up steam nationally and internationally.

Mr. Asmus says that right now Alaska leads the nation in microgrids because of the difficulty of transporting energy to the state’s remote villages. It has more than 200 microgrids operating in small communities. In 2012, Connecticut passed the first microgrid law in the United States. “Now, most of the states from Washington, D.C., north along the Eastern Seaboard all have some sort of microgrid program in place with state funding,” he adds, pushed to act in part because of the costs and unreliability associated with hurricanes and storms on the East Coast.

In Japan, outages caused the country to deploy microgrids, he adds. And as developing nations build their power grids, he sees the use of localized power growing. Within the next decade, the global market for microgrids will increase from $8.1 billion to $40 billion, he estimates.

Legal barriers for microgrids

Microgrids pose their own challenges, however. “Microgrids also come with a lot of regulatory issues, which may be more difficult to comply with than people expect, as the laws are struggling to catch up to the technology,” says Jayashri Ravishankar, a senior lecturer in energy systems at the University of New South Wales in Sydney, Australia, in an email.

In California, the obvious advantage is immunity from fire-prevention power outages. “You can keep the lights on,” says James Kirtley Jr., a professor of electrical engineering at the Massachusetts Institute of Technology. The principal advantage of microgrids, he explains, is not having to transport electric power as far as energy that comes from a central station.

That’s exactly the idea behind a project to develop a clean-energy community microgrid on the California coast at Santa Barbara. [Editor's note: This sentence was trimmed to avoid the misimpression the installation would cover a 70-mile area.] The area is served by only one set of transmission lines, making it vulnerable to an outage – just like Napoleon’s long supply line that doomed him in Russia, says Craig Lewis, a Santa Barbara resident and director of the nonprofit Clean Coalition. “Our supply line is 40 miles long, a sitting duck.”

California has set ambitious goals to reduce greenhouse gases. Last year it passed a law designed to boost microgrid development. Solar costs keep dropping. The puzzle pieces are coming together for local systems that eventually could make up 25% of the total power pie, Mr. Lewis estimates.

What’s changed most recently is that utilities themselves are deploying microgrids, says Mr. Asmus. “They see the writing on the wall.”