A modern Cinderella story: California’s record on wholesale distributed generation leaves much room for improvement

California, long a progressive leader on renewable energy and climate change mitigation, has neglected a key market segment for renewable energy: the “community-scale,” or “wholesale distributed generation” (DG), market. This market segment is defined as projects below 20 megawatts that connect to the distribution grid and export power to the grid for sale.

This market segment is important because it allows for development of renewable energy at a scale large enough to make a difference to the state’s ambitious climate change and renewable energy mandates, but also with low costs and much lower environmental impacts than for larger projects, which have been the default in California for meeting state renewable energy goals.

On the one hand, a five-megawatt solar project occupies about 30 acres of land and can be located closer to load in urban pockets, on already-disturbed land, or on large buildings and parking lots. Whereas, on the other hand, the largest-scale solar projects have much greater impacts: the 550-megawatt Topaz Solar Farm in San Luis Obispo County occupies over seven square miles of land and is located far from the load centers where power is consumed. 

There is an increasing pushback on large-scale solar and wind power, due to their large impacts. For example, San Bernardino County, California’s largest county and the focus of much solar power development, has passed new rules that would severely restrict large-scale solar developments on private land, but would allow “community-oriented renewable energy.” Similar restrictions are increasingly being applied in other counties and for federal lands in California, such as the Desert Renewable Energy Conservation Plan completed in 2016, which has had the effect of stifling new large-scale solar and wind power projects in favor of conservation of natural habitats. 

In short, community-scale renewables enjoy the cost advantages of much larger projects without much of the environmental impacts or need for new transmission lines and associated costs.  The community-scale market segment combines the benefits of the small-scale and utility-scale market segments, without the downsides. 

Unfortunately, most of California’s programs targeting this key market segment have struggled or failed. Since the 1990s this market segment has been a kind of modern Cinderella waiting for its prince. 

This disparity has come about because California’s energy policy is dumbbell-shaped, with strong support for small-scale and utility-scale renewables.  In contrast, the community-scale market segment has been plagued by ongoing policy neglect, and otherwise poor policy choices. 

For example, California’s first community solar bill, SB 43, created a 600-megawatt program for community-scale solar projects in 2013. Yet as of early 2019, just 27 megawatts of this 600-megawatt program have been contracted, and none have been built. This program has now already ended (the Public Utilities Commission created the sunset date for early 2019 when it enacted the program) and will be seen to have been a significant failure. There are many similar results with respect to other wholesale DG programs, as detailed in the GPI report and summarized in the table below. 

Wood Mackenzie’s senior analyst Austin Perea stated in late 2018 with respect to California’s latest failed effort to promote community-scale renewables (SB 43): “For a market that is leading the country in utility-scale, commercial and residential solar, California’s community solar market is abysmal.”

California’s renewable energy success story is mostly a story about utility-scale renewables, with at least 57 percent of the development over the last decade coming from these large projects. California’s residential and commercial market segment has also done well, with about 33 percent of the market coming from this segment. Only 10 percent or less has been community-scale renewables. This is a massive missed opportunity. 

California’s policymakers are aware of the potential for wholesale DG and distributed renewables more generally, as there are a number of policy efforts underway, such as the Distribution Resources Plan proceeding at the Public Utilities Commission (DRP), the state’s Distributed Energy Resources Action Plan that is designed to coordinate various state efforts in this area, and ongoing efforts by the Public Utilities Commission to streamline interconnection procedures for distributed generation. 

The problem is that so few of the efforts to develop and assist the community-scale market segment have been successful. And many stakeholders have repeatedly warned policymakers of problems with these programs, with these warnings too often falling on deaf ears. 

The Green Power Institute (GPI), part of the nonprofit Pacific Institute, has produced a new report, A Modern Cinderella Story: Assessing the stat of California’s “community-scale” renewable energy market. The report does a deep dive into the last decade of experience in California’s programs focused on wholesale distributed generation (“community-scale renewables”).  GPI’s hope in producing this new report is that policymakers and advocates will finally heed the lessons of past programs and incorporate these lessons into new – effective – programs. 

The following table summarizes seven key wholesale DG procurement programs from the last decade and shows that most have largely failed, for various reasons: 

It is not too late for this neglected market segment to find its prince. Will policymakers heed the track record of demonstrated failure and finally create new programs that address previous problems? 

GPI’s report presents a number of procurement and interconnection recommendations that will, if implemented, do much to correct the neglect and poor policy choices relating to the wholesale DG market in the last couple of decades.

Tam Hunt is a renewable energy lawyer and policy expert based in Hawaii and California, owner and founder of Community Renewable Solutions LLC, and author of the book, Solar: Why Our Energy Future Is So Bright

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Tam Hunt is managing member of Community Renewable Solutions LLC, a renewable consulting and project development company focused on community-scale wind and solar. He is also a lecturer at UC Santa Barbara’s Bren School of Environmental Science & Management.

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