Sacramento Inno

In a pilot program in Sacramento, homeowners can get paid incentives to send electricity back to the grid, part of an experiment in distributed power.

The Sacramento Municipal Utility District is offering residential electric customers with solar panels and battery storage incentives of up to $2,500 to sell power back to the grid.

"We want to see if this can provide a benefit to the utility," said Patrick McCoy, strategic business planner with SMUD.

One of the benefits for the utility of distributed power is it can tap a large group of small customers as a power source, which is one way California utilities hope to meet the state's zero-carbon rules in the future. SMUD's zero-carbon goal is 2030.

SMUD is testing the program not just to pick up a few kilowatts here and there on hot summer days. It wants to be able to draw multiple megawatts of power, McCoy said. A megawatt is enough to power more than 750 homes. It could be possible for SMUD to get 27 megawatts through distributed power.

Historically, utilities have taken power from big generators like hydroelectric dams or utility-scale solar arrays, and then sent electricity out to customers through the grid. In distributed power, customers all along the grid can combine to be the generator. A group of customers together can form a microgrid. If those customers are large enough, or there are many of them, those customers on the grid become a virtual power plant.

That's easy to say, but it quickly gets complicated and expensive to implement on the ground, McCoy said. That's why SMUD is starting with a pilot program this summer to test the concept with just residential customers.

The utility wants to learn the costs, the reliability of power and the customer response to the concept of selling their power back to the grid. It also wants to test the timing of how fast a virtual power plant can respond to grid management.

To get customers interested, SMUD is subsidizing battery cost, and offering other incentives to participate, ranging from a couple hundred dollars up to $2,500 a year. Customers need to have a Tesla Powerwall.

The pilot program will also measure what kind of incentive is needed to get people to enroll.

Santa Monica-based Swell Energy is acting as the aggregator for SMUD's program, which is called My Energy Optimizer Partner+.

Eventually, SMUD and other utilities could tap business, commercial and industrial customers to be part of a virtual power plant.

Utilities across the country are currently pioneering microgrids, but it's a little tougher in California because the state depends so much on renewable power, and renewables can't be controlled on demand like gas or coal, McCoy said.

The interest in the microgrid idea started with a disaster. Superstorm Sandy's flood surge in New York in 2012 caused a blackout in Lower Manhattan. Nighttime aerial photos showed vast expanses of urban darkness, and some very few islands of light. The lights were on at hospitals, because they have backup power, battery power and power-generation capabilities. They are essentially microgrids.

In 2018, Senate Bill 1339 was approved. It directed the California Public Utilities Commission, in consultation with the California Energy Commission and the California Independent System Operator, to develop policies for microgrids.

The CPUC currently has $200 million in grant money to support development of pilot programs for investor-owned utilities, like Pacific Gas & Electric Co., whose allocation of that money is $79.2 million.

That's not a lot of money for a state as large as California or for a utility as large as PG&E (NYSE: PCG), especially when you consider that the California Energy Commission is allocating $7.3 billion to update the transmission grid in the state.

The California Energy Commission also has about $700 million for microgrid grants, and "that's not nearly enough," said Allie Detrio, chief strategist with Reimagine Power Inc., a clean energy advocacy group in San Francisco.