Commission hears update on reliability and resiliency studies; consultants present avoided‑cost, resilience valuation work

At a meeting of the Utilities Advisory Commission, staff and outside consultants updated commissioners on the Reliability and Resiliency Strategic Plan and the three studies that will feed a final set of program recommendations later this year.

The studies consist of (1) an avoided supply‑cost and resiliency valuation analysis led by BureauHapold with Alternative Energy Systems Consulting (AESC); (2) a distribution‑level benefits study (originally scoped with a different vendor and now under E3) to estimate whether customer‑side flexible technologies can reduce or defer distribution investments; and (3) an airport microgrid study that Burns & McDonnell is conducting for the City’s airport and that also provides neighborhood‑microgrid modeling. Staff said the supply and resiliency components are expected to be largely complete by late spring, with integration and a final report in the fall; the distribution and airport microgrid work will follow on a similar spring‑to‑summer schedule.

Why it matters: the studies aim to answer whether Palo Alto should move beyond barrier reduction and outreach and instead offer incentives, technical assistance or more staff‑intensive programs to promote technologies such as solar plus storage, EV managed charging, vehicle‑to‑home and vehicle‑to‑grid applications, and “smart” residential panels and circuit sharing. Staff framed this as both a supply‑cost question (how much energy and capacity value the technologies create) and a resiliency question (how much customer outage damage can be avoided when outages occur).

“We really believe that there’s some level of quantifiable and qualitative benefit to the utilities,” Jonathan Abenshein, assistant director for climate action, told commissioners, but he added the point of the current work is to determine whether the quantified benefits exceed program and administrative costs. BureauHapold and AESC presented an avoided‑supply‑cost model built on hourly price shapes derived from Palo Alto data and stressed that Palo Alto’s local avoided‑cost curve can look very different from the statewide avoided‑cost curve used in other California analyses.

Consultants’ early finding: BureauHapold and AESC showed a notable divergence between a statewide avoided‑cost curve and Palo Alto’s local avoided‑cost profile. Consultants told commissioners that statewide models often place large shares of transmission and new generation capacity costs into a few summer peak hours, which makes distributed resources look very valuable statewide. By contrast, many of the utility’s transmission and capacity charges are embedded in hourly charges the city pays, and Palo Alto’s diurnal load profile and supply mix reduce the size of those peak hour values in a local avoided‑cost model. Consultants said that difference means Palo Alto might capture less of the statewide, social value of distributed resources unless programs or regional arrangements change.

Valuing resiliency: BureauHapold described a resilience valuation approach that uses the Interruption Cost Estimator (ICE) methodology developed by the National Renewable Energy Laboratory to derive customer damage functions (dollar cost per event or per kilowatt‑hour avoided). Nathaniel Gunderson of BureauHapold said the ICE results will be adjusted to Palo Alto’s demographics and outage history to produce dollar estimates of avoided outage costs for residential, small commercial and larger commercial/industrial customers. The consultants emphasized that their study is focused on short‑ to medium‑duration outages (hours to a few days) and that estimating broader, multi‑week economic impacts would require different, more complex econometric approaches and fall outside the current contract.

Program research and next steps: consultants reported a sweep of California resilience and battery programs and will use that catalog to propose program designs. Staff said they expect to present a first round of proposed program approaches to the commission in April or May and to return with integrated findings and final program recommendations in the fall.

What commissioners asked: commissioners pressed consultants on the difference between statewide and local avoided‑cost values, the treatment of capacity and transmission costs, and how demand response, time‑of‑use rates and managed EV charging affect resiliency. Consultants and staff clarified that the current resiliency analysis emphasizes customer outage damages for shorter events and that demand response can improve system reliability but is not being modeled as a primary short‑duration resiliency device in the same way as local battery backup.

Where this goes from here: staff will refine inputs and scenarios requested by the commission and finish the supply/resiliency analysis and the distribution benefit work over the next several months. The commission will be asked for feedback on program priorities before staff brings recommendations to council later in the year.