Electricity is the common denominator that helps us maintain, or regain, a sense of normalcy during crises. This has been abundantly clear during the current COVID-19 pandemic, or if you’ve weathered any kind of disaster scenario. When the power goes out, every critical system – from commerce, communications and healthcare to food, emergency services, transportation, water and more – is impacted.

Investments in resilient energy infrastructure have the power to stimulate the economy in the near-term and guard it against problems in the future. Laws, policies and incentive programs are being used to encourage more widespread deployment of clean energy alternatives that can complement and supplement the grid while reducing reliance on fossil fuels and optimizing energy use.

Experiences in California – including a recent push for battery backup for homes and businesses, and the creation of community and critical facility microgrids – offer important lessons on how clean energy and storage solutions are vital as a cornerstone for economic recovery at both the state and federal levels.

Powering through a crisis

Our entire society relies on electric power to function. In the throes of COVID-19, power is the common denominator that ensures vital businesses, such as grocery stores and healthcare facilities, can remain open, and ventilators continue to work for patients suffering from the virus. Power is also key to keeping the devices charged and servers running, which enables students to learn remotely, employees to work from home and commerce to continue, albeit in new, creative ways.

This is not nearly the first major crisis we’ve faced, nor will it be the last. Every year, natural and manmade disasters cause us to deviate from “normal” by adversely impacting where we work and live. Consider California, which has been hit by a trifecta of crises: COVID-19, wildfires and climate change. Over the past few years, the state has experienced significant droughts and suffered major wildfires causing billions of dollars in damages. As a precaution, electric utilities shut off power in the name of public safety, causing large swaths of homes and businesses to go without electricity for days when fire risk is high.

California’s quest for a resilient energy future

The challenges related to reliable power have left consumers and businesses in California searching for alternatives. Though many want to decrease reliance on fossil fuels, they’ve felt their only near-term option for back-up service is diesel generators – a market that is expected to hit $1.52 billion in the U.S. this year and continue growing in the foreseeable future.

To support a clean energy future while fostering greater resilience and reliability, California policymakers are encouraging the development of microgrids and deployment of battery back-up solutions.

For example, in September 2018, legislation introduced by State Sen. Henry Stern passed, requiring the California Public Utilities Commission (CPUC) to incent development of microgrids for resilience. At the same time, another law added hundreds of millions of dollars to California's Self-Generation Incentive Program (SGIP), earmarked for use to fund energy storage projects across the state. The CPUC then directed a majority of those funds to equity customers, which included homes, businesses and organizations located in and serving low-income and disadvantaged communities.

After the wildfires and public safety power shutoffs of 2019, the CPUC then directed almost all of that equity money towards so-called “Equity Resiliency” customers: homes and a select list of critical facilities, like fire stations, located in high fire-threat districts or who had their power shut off multiple times. In early 2020, the CPUC allocated $50 million to the broader “equity” incentive category and $600 million to the Equity Resiliency category.

However, these incentives and policies have not moved quickly enough, nor are they sufficiently flexible, to address issues Californians are dealing with as they come out of the COVID-19 crisis and prepare for the 2020 fire season.

A CPUC proceeding related to the microgrid legislation took more than a year to launch and was split into two tracks. The first track sought proposals from utilities about how to address public safety outages for wildfire mitigation in 2020. Expediting interconnection of microgrids to the grid would take more than a year, so utilities contended their only near-term option would be using semi-truck-sized diesel generators to support communities when transmission infrastructure was shut off. The second track, which is expected to start later this year, will focus on developing a long-term road map for deploying microgrids to improve reliability and resilience.

In the meantime, the program to disburse the equity funds opened in May 2020. The equity budget was almost immediately oversubscribed, with nearly $400 million worth of projects going into a lottery to vie for the $50 million pot. This left about $350 million worth of shovel-ready projects without funding.

Because the SGIP criteria were more tightly defined, it did not attract nearly as many projects. Only about $130 million of the $600 million total was claimed. The remaining $470 million was left unused.

Fixing the imbalance

Several of the $350 million of waitlisted projects under the Equity Incentive Program were interested in deploying solar plus storage, including back-up services. But they cannot apply for the resilience funds because of the program design.

As a result, many projects are ready to be deployed but will not proceed because they were shut out of funding, including:

• A hospital system in Southern California that has the only Level 1 trauma center in a 50-mile area, is the primary medical center for surrounding high-fire-threat districts and most of its patients come from disadvantaged communities. Six projects to install solar and battery storage at its facilities were waitlisted when the equity incentive ran out of funding.
   
• A correctional facility in Central California wanted to install battery back-up power, but cannot since it was on the losing end of the SGIP equity lottery.
   
• A grocery store serving a low-income community impacted by public safety shutoffs could not qualify for Equity Resilience funds since it was a bit bigger than the definition of a “small business.”
   

The multiplier effect of energy storage

Responding to the COVID-19 crisis, trillions of economic stimulus dollars are now on the table in Congress and the states. Everyone has their opinion on how these funds should be spent – whether it is to slow the economic risk, cushion the bottom or to boost recovery. Among options on the table, state and federal lawmakers should consider earmarking dollars to support the integration of stationary energy storage into the local electrical grid as one means of maximizing their ROI on public money.

So, why are grid-tied battery systems a better stimulus investment than small business loans, universal basic income, corporate bailouts, or even clean, renewable energy from solar panels? The answer is the economic multiplier effect these systems can produce, leading to a host of benefits after the initial monetary injection.

Let's take a closer look at this scenario. Most stimulus funds have little to no multiplier effect. A dollar given directly to people to buy food, while certainly important, provides only a dollar of economic stimulus. Low-interest or forgivable business loans work much the same way.

Funds to install energy storage provide this kind of boost, enabling shovel-ready projects to put people to work right away. And right now, jobs are needed, considering how the unemployment rate spiked from 3.5 percent at the end of 2019 to nearly 15 percent just four months later.

But a dollar invested in storage projects goes beyond short-term employment gains. Installing energy storage at commercial or industrial buildings enables businesses to save money on energy bills as soon as the battery turns on. One energy storage early adopter, a "big-box" retailer, observed that “every dollar the battery system saves me helps me hire another employee or keep one in the next downturn.” That investment dollar now saves and creates twice the jobs – first for the storage installer, and second for the business customer.

Compared to other energy technology investments, energy storage offers far superior multiplier effects. The same battery system that saves money for a home or business also helps local electrical grids be more reliable and efficient, saving money for everyone nearby. This happens through “aggregator” companies whose software turns a fleet of battery installations into a virtual power plant (VPP). When buildings don’t use the batteries, a VPP provides energy and services to the local utility company or the wholesale market, reducing energy prices and saving on expensive poles and wires. The same battery that saves customers money and helps the grid also can provide backup power when the grid goes down.

By allocating hundreds of millions of dollars in SGIP to support the deployment of storage solutions, California had the right idea about how to stimulate its economy – while also addressing climate change with clean energy alternatives and providing solutions for resilient, reliable power.

Let's put this multiplier effect into perspective, looking specifically at California. When a commercial or industrial storage project receives $1,000 in stimulus money, it can result in $2,000 in immediate economic activity. Then, over the next 10 years, this initial stimulus investment can result in benefits for the customer – including $4,000 in bill savings and $1,500 in resilience value – and $2,500 in other economic value for the broader electricity system.
 

Maximizing the impact

While the intention of distributing equity funds to spur economic investment in California was good, the execution has resulted in some stumbles that have left valuable dollars on the table, while millions of dollars of shovel-ready projects remain stalled.

This experience provides valuable lessons for the future. Programs like the CPUC’s equity funding initiatives should be flexible so that easy tweaks can be made to ensure valuable projects receive the funding they need promptly. This could immediately benefit the community and act as that needed multiplier during an economic downturn.

By adding flexibility to these programs, the allocated funding also could be more equitably distributed. This would ensure that projects can proceed and check every box for a variety of goals: stimulating the economy by employing workers, lowering utility costs and improving resilience in low-income communities, while creating that valuable multiplier effect for optimizing return on ratepayer dollars and spurring the development of clean energy alternatives.

The experience in California, combined with the resulting multiplier effect, is a clear signal to federal lawmakers that funding of clean energy storage and back-up solutions should be a cornerstone to economic recovery plans.