Water utilities provide a service that is absolutely essential to life, which makes energy resilience for these facilities equally essential. While diesel generators have traditionally been a mostly-adequate source of backup power, they also rely on a costly and polluting fuel source. Today, advancements in solar, battery storage, and controller technologies, as well as the emergence of $0 down financing options, have turned microgrids into an opportunity to provide an enhanced level of resilience while simultaneously saving on costs as well as emissions.
The growing adoption of microgrids by California’s water utilities is a terrific example of how these on-site energy systems can provide a smart, resilient foundation for one of our most essential services – even in a part of the country where water supplies as well as electricity supplies are being threatened by climate change.
California’s Energy-Water-Climate Nexus
Water and energy are inextricably linked, in what is often referred to as the “energy-water nexus.” Energy supplies depend on water in a variety of ways, and water utilities require significant amounts of energy – mostly in the form of electricity – for pumping, treatment, and distribution of water, as well as for the collection, treatment, and discharge of wastewater.
Energy is thus a major cost for water utilities, accounting for as much as 40% of their operating budgets according to the EPA. The EPA also estimates that population growth and increasingly stringent health and environmental standards for water supplies will increase electricity demand by approximately 20% for these facilities nationwide. At the same time, the cost of electricity has skyrocketed, far outpacing inflation (and in fact helping to drive inflation) with average nationwide increases in commercial and industrial rates of 25% since 2020.
The energy problem for California’s utilities is especially acute. California has always had the most variable precipitation in the U.S., with multi-year wet periods alternating with multi-year dry periods, and the additional challenges posed by climate change have led researchers to begin referring to the state’s “energy-water-climate nexus.” For example, increasing temperatures reduce the snowpack that provides a third of California’s water, droughts are becoming more frequent, and rising sea levels can contaminate coastal aquifers and the state’s water system.
More energy will be required to address all of these issues – for example, for increased groundwater pumping – and California’s water utilities have seen a 50% increase in electricity rates since 2020, far outpacing the national average. These rate increases have been driven primarily by massive electricity utility investments in wildfire prevention measures such as undergrounding power lines, which have become an urgent necessity with climate change driving a doubling of wildfires in the western U.S. in recent decades.
These increasingly-frequent, climate change-driven wildfires have also caused dramatic, multi-day power outages in recent years, including both outages caused directly by wildfires as well as precautionary, multi-day Public Safety Power Shutoffs (PSPS) called by electricity utilities to prevent power lines from igniting wildfires. During these extended outages, water utilities have typically had to rely on diesel generators for backup power, resulting in significant fuel costs and harmful emissions, including smog-forming and particulate pollution as well as carbon dioxide – which, of course, is responsible for driving climate change in the first place.
Scaling Up Water Utility Microgrids
For all of the above reasons, water utilities everywhere – and especially in California – have long sought to manage electricity costs, with many implementing energy efficiency upgrades or even installing solar panels to help reduce their electricity bills. Of course, given the essential service that water utilities provide, maintaining operational reliability with resilient electricity supplies has always been their first energy priority.
That’s why, in the face of climate-stressed water supplies as well as fast-rising cost and resilience challenges for California’s electricity system, some of the state’s water providers are embracing a more robust solution to address all of their energy challenges: microgrids. Microgrids are integrated, on-site energy systems that use advanced controls to optimize multiple resources like solar, batteries, and dispatchable generators, enabling them to deliver diverse benefits:
Cost Savings: The cost savings of microgrids often begin with on-site solar installations, which can provide a portion of a site’s electricity needs at a significantly lower (and fixed) cost compared to escalating utility rates. However, the key to microgrid economics lies in battery storage. The addition of battery storage with advanced controls unlocks even greater cost savings through dynamic energy management strategies, which allow for the use of stored energy from solar or from the grid to be optimized based on utility rates as well as site load.
For example, microgrids can find the optimal balance between minimizing peak grid use to avoid excess demand charges and shifting the use of solar to cheaper hours of the day in areas with time-of-use (TOU) rates, including California. Microgrids also allow companies to take advantage of emerging opportunities for additional revenues from demand response and virtual power plant (VPP) programs.
Resilience: Battery storage can also provide 4 or more hours of reliable backup power for critical operations, which may be enough to ride through most normal outages – provided the installation has islanding capability, as is typical for microgrids. However, securing resilience against the extended outages characteristic of California’s wildfires and PSPS events requires a source of dispatchable, fuel-based, on-site generation. Water utilities typically have backup diesel generators in case of such an emergency, but these generators simply add costs (and emissions) instead of saving money.
By contrast, microgrids generate everyday cost savings when they aren’t being used for backup power, and incorporating existing generators into a microgrid allows them to be remotely operated, monitored, and optimized in tandem with solar-charged battery storage. This means the backup generation can switch back and forth with the battery system as needed, enabling it to run with maximum efficiency and the least possible amount of fuel consumption – which translates into greater resilience with lower costs and emissions.
Sustainability: Sustainability has always been a priority for water utilities, and as they increasingly see how climate change is impacting their operations many utilities are aiming to lead the way in advancing solutions. Microgrids with solar power can significantly reduce a site’s carbon footprint, and the use of batteries to shift the use of grid energy to the least-polluting (and lowest-cost) hours of the day reduces overall emissions on the grid. And during outages, the ability to draw on battery storage for a significant portion of a site’s backup needs reduces local pollution impacts as well as carbon emissions.
Microgrids can also play a key role in enabling an important sustainability solution for water utilities in California in particular: the adoption of electric vehicles (EVs), which will be required for most water utilities under the state’s Advanced Clean Fleets (ACF) rule. Electric vehicle chargers can dramatically increase a facility’s power demand, potentially leading to multi-year delays and additional costs if utility service upgrades are required. Microgrids solve this issue by augmenting a facility’s capacity with on-site energy resources, enabling water utilities to get their chargers powered sooner as well as more cheaply, sustainably, and reliably.
Why California Water Utilities Are Partnering With Scale
With all of their diverse benefits, microgrids are necessarily more complex than a simple solar installation. However, third-party microgrid providers – like Scale – can give water utilities a partner to design, build, operate, and continually optimize these systems to meet their evolving needs (and take advantage of emerging opportunities) over time. Scale also offers $0 down financing under its microgrid services agreement (MSA), further simplifying the process of adopting a microgrid by turning a potentially significant capital expense into an operating expense that results in net savings.
Given the complex energy cost and resilience challenges that California’s water utilities face, this combination of robust, customized microgrid solutions and a simple, third-party service agreement model can be tremendously appealing. Scale has already partnered with several of the state’s water utilities including the Goleta Water District and the Santa Margarita Water District, providing a blueprint for future water utility microgrid projects across the state – and potentially across the country.