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Microgrids & Regulation With Chris Villarreal — Episode 30 Of Local Energy Rules Podcast

Originally published on

In 2014, Chris Villarreal helped write the white paper, Microgrids: A Regulatory Perspective. As a regulatory analyst with the California Public Utilities Commission, he outlined the regulatory questions of microgrid development at a time when the state was mulling over how to allow more distributed, renewable energy to come onto the grid.

The questions weren’t small or easy to answer. Microgrids naturally straddle the definitions of utility and customer, of supply and demand, of community and utility ownership. Their existence and emergence point to a not-so-distant future when utilities simply manage different communities of distributed power generators, a departure from the historical monopolistic ownership style.

Now Villarreal is a neighbor to the Institute for Local Self-Reliance in Minnesota, working as the Director of Policy for the Minnesota Public Utilities Commission. He recently chatted with John Farrell about microgrids, their many uses, and what policies help or hinder their growth.

With the release of ILSR’s report, “Mighty Microgrids,” we released two podcasts with the developers and regulators of microgrids in the United States. This is the second podcast.

Defining Moment

A microgrid is a subset of the grid that has decided to band together to use its own power sources, says Villarreal. It’s an entity that can island, or separate, from the larger grid in case of a larger outage. For a supermarket that wants to keep the power on at all times, or a factory that wants optimum power quality through its operation cycles, a microgrid is simply the most efficient power option.

Villarreal points to military bases as a usual customer of microgrids, driven partly by federal requirements for lowering greenhouse gas emissions and a need for constant power, even when under attack. The Los Angeles Air Force Base stands out as an example, utilizing 40 electric vehicles to help it bid their power into wholesale markets. Other hospitals such as South Oaks on Long Island, police stations, and even the New Jersey transit system are all considering or building microgrids.


Microgrids can be flexible, utilizing storage, solar, electric vehicles, combined heat-and-power in a symphony of electric self-supply. They can absorb excess power from the utility, or supply it when it’s needed on short order. However, their use is complicated when dealing with incumbent utilities and a regulatory system that usually only supports one electric company selling and distributing electricity.

CPUC microgrid diagram

Above: a possible configuration of an advanced microgrid.         Photo credit: California Public Utilities Commission

There are still technological challenges with microgrids. There’s no universal microgrid controller that can plug into any system. Smart inverters are now starting to come along to ease power quality issues. Beyond these issues, there is also the interconnection process with the utility, which because of safety concerns, historically has feared any power source it can’t control or see on the grid. Current engineering standards are being updated to include new codes for microgrids, and state standards will follow suit in the next few years.

On the economic side, it’s still a difficult question as to how states will define who can own the microgrid, if it will be regulated as other electric utilities, how it will access the wholesale energy market, and how benefits accrue to the utility, the microgrid owner, and the customers. While Villarreal’s 2014 white paper immerses itself in these questions, it ends with four recommendations for regulators to consider:

  1. The role of the electric utility will change. An option … is to consider the utility as a distribution system operator, akin to an independent system operator on the transmission side.
  2. There is a need to develop appropriate standards and requirements to ensure that microgrids interconnect and interact with the distribution grid in a reliable and safe manner.
  3. In order to determine optimal locations for microgrid development, the [Public Utilities] Commission should undertake an effort to map the distribution grid in order to best identify these locations.
  4. There is a national interest in successful development of microgrids; the Commission should be involved in these efforts to better understand the technical challenges with microgrids, and learn from these efforts to help support appropriate policies.

Advancing Microgrids

While a microgrid from a utility’s perspective might represent departing sales, Villarreal emphasizes it doesn’t have to be that way.

“A microgrid could be a good partner with the utility to provide all the localized needs of microgrid customers as well as utility customers,” he says.

Nationally, utilities are building microgrids and adding them to their rate bases, what all electric customers pay for through their electric bills. Exelon’s regulated utilities, especially, are proposing public purpose microgrids in Maryland, Pennsylvania, and Illinois. But utilities owning microgrids might undermine competition and grid neutrality, as the District of Columbia Public Service Commission recently said in its alternative settlement to Exelon’s takeover of the DC-based utility Pepco. The DC PSC ordered Exelon, if it can salvage the increasingly doomed merger, to be a facilitator of microgrids, instead of developer.

Elsewhere, in places such as New York, developers are working with communities and utilities to promote other ownership arrangements of microgrids, including those that incorporate community and third-party owners. This is part of the Reforming the Energy Vision, a regulatory proceeding in New York that will eventually make utilities into distribution grid operators.

Villarreal adds that in states like Hawai’i and California, microgrids could mollify concerns about the high penetration rates of rooftop solar. More advanced microgrids can incorporate these multiple points of intermittent generation with ease.

He cites the Santa Rita Jail in California is one of the best examples of an advanced microgrid. The jail’s solar, storage, fuel cell, and diesel-powered resources can automatically balance themselves. Its peer-to-peer controls provide an early glance of what might be available for neighborhood-based microgrids in the future.

With current rules, the microgrid today is limited to behind-the-meter power, for use on single buildings or campuses with single owners. But it will move toward supporting whole communities, if the rules of the grid and market will allow it.

“If the economics are put in place, and the grid is constructed in such a way to allow these things to operate in a safe and reliable,” says Villarreal, “the building of microgrids becomes not a matter of if, but a matter of when.”

This is the 30th edition of Local Energy Rules, an ILSR podcast with Director of Democratic Energy John Farrell that shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion. Other than his immediate family, the audience is primarily researchers, grassroots organizers, and grasstops policy wonks who want vivid examples of how local renewable energy can power local economies.

It is published intermittently on, but you can Click to subscribe to the podcast: iTunes or RSS/XML

For timely updates, follow John Farrell on Twitter or get the Energy Democracy weekly update.

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Written By

John directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (, and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at


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