HomeMy WebLinkAboutStaff Report 2609-6800CITY OF PALO ALTO
Climate Action and Sustainability Committee
Friday, October 02, 2026
Agenda Item
1.Update on Electric System Long Duration Resiliency; CEQA Status – Not a Project Late
Packet Report Added, Staff Presentation
Climate Action and Sustainability Committee
Staff Report
Report Type: ACTION ITEMS
Lead Department: City Clerk
Meeting Date: October 2, 2026
Report #:2609-6800
TITLE
Update on Electric System Long Duration Resiliency; CEQA Status – Not a Project
This item will be a late packet publication on 9/24/26.
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Climate Action and Sustainability Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Utilities
Meeting Date: October 2, 2026
Report #:2609-6732
TITLE
Update on Electric System Long Duration Resiliency; CEQA Status – Not a Project
RECOMMENDATION
Staff recommends that the Climate Action and Sustainability Committee recommend
that the City Council:
1. Direct staff to continue monitoring and provide updated estimates for local utility scale
battery storage to the UAC with the 2028 Integrated Resource Plan
2. Direct staff to review and propose reasonable hazard mitigations with recommended
capital improvement projects
EXECUTIVE SUMMARY
On March 2, 2026, the City Council accepted a report on the cost of local energy resources and
improved reliability and resiliency1. The report found that local microgrids were not cost
effective at this time but recommended continued engagement with the Utility Advisory
Commission (UAC), Climate Action and Sustainability Committee (CASC), and the City Council
regarding micro-grids and long-term resiliency. On an ongoing basis, utility staff are reviewing
the market and publicly available information regarding the cost of local microgrids and battery
energy storage systems (BESS). Because current costs indicate that microgrids do not present
cost savings for customers, staff plan to continue to review pricing until market analysis
suggests better value. Another assessment will be included with the next update of the City’s
Integrated Resource Plan, which staff will begin updating in 2027 and planned to file in early
2028.
Simultaneously, staff are beginning a review of the Electric Department’s preparedness to
respond to large-scale events requiring a significant and sustained effort to restore electric
1 March 2, 2026 staff report to City Council;
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=822448ca-092b-465b-8859-
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service. In the event of a large-scale natural disaster (earthquake, flooding, windstorm, wildfire,
heat storm, etc.), local micro-grids could help isolated pockets of electric customers remain in
power, but City staff would immediately need to begin the repair and restoration process for all
other customers. The larger effort of restoring utility service citywide requires forethought,
planning, and some capital investment. The Palo Alto Annex of the Santa Clara County Multi-
Jurisdictional Hazard Mitigation Plan (MJHMP) identifies areas of the City’s electric system that
could be strengthened to lessen the impact of major events. Over the next several months,
staff will review utility projects identified in the MJHMP and existing Grid-Modernization (Grid-
Mod) projects and consider impacts of major weather events over the expected life of the
assets. This review will help to improve long-term resiliency under adverse conditions as well as
support one of Grid-Mod’s primary goals of improving overall system reliability.
BACKGROUND
ANALYSIS
3 identified a cost for utility scale battery storage of $482/kWh, and NLR’s
2025 update4 saw a lowering of those costs to $334/kWh. The 2023 update also forecasted
battery storage pricing ranging between $255/kWh and $403/kWh in 2030, with the 2025
update estimating storage costs at $147/kWh and $339/kWh by 2035. Both the 2023 and 2025
forecasts of future battery storage costs anticipate reductions in costs, but the expected
reductions may fall within a wide range.
3 NLR Cost Projections for Utility-Scale Battery Storage 2023 Update https://docs.nlr.gov/docs/fy23osti/85332.pdf
4 NLR Cost Projections for Utility-Scale Battery Storage 2025 Update https://docs.nlr.gov/docs/fy25osti/93281.pdf
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period. There are currently just under 27,000 residential customers connected to Palo Alto’s
electric system. The NLR‘s forecasted costs of battery storage do not include land purchases
and connected costs of solar or other local generation needed to replenish the battery storage
to form an independent micro-grid.
7 For the City’s Electric Department, the Annex specifically names earthquake,
heavy precipitation/atmospheric rivers, extreme heat/cold, high wind, wildfire, and sea level
rise as hazards. It also lists mitigation measures that could make the electric system more
resilient. Some of those mitigation measures have been completed, such as undergrounding
overhead electric lines in the Foothills, while others are still being studied, such as mitigation
measures addressing sea-level rise. The Annex presents a good starting point to identify
additional mitigation measures and to estimate costs in preparation of potential funding
through rate revenue and/or federal grant dollars.
7 Santa Clara County Multijurisdictional Hazard Mitigation Plan 2023 Update: City of Palo Alto Annex -
https://www.paloalto.gov/files/assets/public/v/1/oes/plans/final_vol-ii-santa-clara-mjhmp_city-of-palo-alto-
annex-1.pdf
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of coastal flooding and sea-level rise, designating space within reconstructed substations for
future battery storage, mitigating the impact of earthquakes through stronger and more
resilient foundations, and building additional system capacity to prepare for future heat storms
and increased demands on the electric system.
9. Should additional projects show a cost benefit, staff will bring the projects showing the
largest benefit to cost ratio back to the UAC for further review and discussion.
10 (IRP), staff will perform a
more detailed analysis of local, utility scale solar and battery storage. Staff’s updating of the IRP
will begin in early 2027 with staff expecting to present initial results to the UAC in mid to late
2027. If local utility scale solar and battery storage show economic value to the community,
they will be included in the IRP.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
9 The National Laboratory of the Rockies tool for estimating the cost of outages is publicly available;
https://icecalculator.com/
10 Palo Alto 2023 Electric Integrated Resource Plan;
https://www.paloalto.gov/files/assets/public/v/1/utilities/power-content-labels/2023-cpau-irp-report-final.pdf
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- Consider long-term resiliency from the perspective of multiple days of power outages.
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
October 2, 2026
LONG DURATION RESILIENCY
Terry Crowley
Utilities Chief Operating Officer
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Subtitle 32 font
•March 2, 2026 City Council included discussions on local energy resource
costs as they relate to long duration resiliency
•At that time staff presented information that local microgrids are currently
not cost-effective
•While currently not cost effective, Council directed staff to continue to
engage the Utility Advisory Commission, Climate Action & Sustainability
Committee, and City Council within 2026 regarding long duration resiliency
and microgrids
•An update was provided to the Utility Advisory Commission on September 2,
2026
•Anticipate a Council agenda item in November of December of this year
Background
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The cost of utility scale or community scale microgrids (solar and battery) has
remained high.
Staff is monitoring reports from the National Laboratory of the Rockies (formerly
National Renewable Energy Lab) on the cost of utility scale battery storage.
Future Costs Anticipated to be Significantly Lower
•In 2023, NLR estimated cost of battery storage at $482/kWh, and expected 2030 cost
to fall between $255/kWh and $403/kWh
•In 2025, NLR estimated cost of battery storage at $334/kWh, and expected 2035
costs to fall between $147/kWh and $339/kWh
•Costs for land and solar to charge the batteries is not included
Microgrid Cost Trends
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A 4MW 4-hour battery could serve roughly 300 single family homes
during a 24-hour outage.
•Rough cost of $5.4 million
•Cost anticipated to fall to $2.4million by 2035
•Could only support 1% of roughly 27,000 residential
customers
•Does not include solar costs to charge and recharge the
system (land, installation, operation, and decommissioning)
Staff will continue to monitor for improved value and plan to discuss
in the updated Integrated Resource Plan scheduled for 2027.
Storage Benchmark
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Subtitle 32 font
•Natural disasters or large system disturbances fracture the
electric distribution system, cutting off customers from power
sources
•Resiliency requires reconnecting customers through repairs or
redundant facilities
•Santa Clara County Multijurisdictional Hazard Mitigation Plan
includes specific hazards and possible mitigations for Palo Alto
•Staff have begun reviewing hazards and possible mitigations for
inclusion in the current and upcoming Capital Improvement
Program
•Some mitigation measures include the possible use of micro-
grids
Systemwide Resiliency
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•Use Office of Emergency Services (OES) to determine hazards and build
staff competencies with the evaluation hazards
•Consider long-term resiliency from the perspective of multiple days of
power outages vs shorter outages
•Educate customers on certainty of power outages and how they can
assess their own needs (e.g. medical) and prepare
•Develop detailed benefit to cost analysis for local hazard mitigation with
and without estimated reliability benefits
•Refine the goal and benefits of proposed mitigation measures
•Consider situations where local utility scale energy storage systems make
sense
UAC Feedback
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•Still value in educating about resiliency of customer owned solar and
battery storage
•Continue to lower barriers for customers seeking solar and storage
•EVs present an opportunity for in-home resiliency, City could educate on
how to leverage this resource
•Small portable battery packs coupled with community resiliency/
charging centers should be explored
•Continue work to monitor cost effectiveness of customer owned solar
and storage
•Develop a dollar value for a customer’s perceived value of reliability for
use when ranking alternative reliability expenditures
•Start small, gain knowledge, and prepare to scale when costs are
favorable
Climate Action Work Group Feedback
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Recommendations
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•Recommend the City Council direct staff to continue monitoring and provide
updated estimates for local utility scale battery storage to the UAC with the 2028
Integrated Resource Plan
•Recommend the City Council direct staff to review and propose reasonable
hazard mitigations with recommended capital improvement projects