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City of Palo Alto: A Look into the World of Municipal Utilities

July 26, 2019
Nora Hennessy
PhD, Energy Resources Engineering
Nora Hennessy headshot

Nora Hennessy, 2019 SEICW Intern, City of Palo Alto

Working at the City of Palo Alto Utilities (CPAU) has given me a unique opportunity to see what life is like inside a municipal utility. CPAU has many functions. They provide electricity and natural gas to homes, but also provide water, trash, and sewer services. While just providing these services requires constant work to maintain the quality of life Palo Alto residents are accustomed to, don’t be fooled — CPAU is not interested in simply maintaining the status quo when it comes to providing their utility services. Palo Alto has been a leader in sustainability for many years. CPAU has provided carbon neutral electricity since 2013, and as of 2017 began purchasing carbon offsets for emissions from their natural gas services, making them the first fully carbon neutral utility in the world. The majority of the city’s carbon free electricity comes from large hydropower and solar generation.

CPAU's electricity generation mix

In addition to providing carbon neutral energy, CPAU is hard at work developing and implementing programs to incentivize home electrification, energy efficiency, and the adoption of electric vehicles. As of 2017, Palo Alto has the highest rate of electric vehicle adoption in the country — one in three new vehicles purchased here is electric. CPAU is always looking for creative, innovative ways to become even more sustainable.

While CPAU is at the forefront of sustainability initiatives, they are not exempt from fulfilling regulatory requirements enforced by agencies such as the California Energy Commission. One such regulation requires public utilities to evaluate energy storage targets every three years. In the past, Palo Alto has not adopted an energy storage target. My main role this summer is to determine whether or not CPAU should reconsider adopting a target.

This project consists mainly of developing a model that determines the cost-effectiveness of storage both from the customer and utility perspective. While storage is cost effective in many regions of the country, its effectiveness is highly dependent on local utility rates and transmission and distribution infrastructure. Building out a model to determine cost-effectiveness requires a robust understanding of the ways storage can be used to provide value. While the majority of behind-the-meter residential energy storage units are used to provide backup power and increase the utilization of on-site solar PV, there are many other ways storage can benefit both customers and utilities, including providing resource adequacy for utilities, reducing transmission or distribution congestion, and providing ancillary services to the grid.

Understanding the value storage can provide with each service has required diving into the world of electricity markets. Learning about the details of the wholesale electricity market and thinking through the many ways that energy storage and flexible loads can interact with California’s markets to provide value to the customer and the utility has been a very interesting experience so far. I’m intrigued to see what the final results of the model will show.