Rule 21: California’s Electric Grid Just Got Smarter

California’s Rule 21, which went into effect in September, is an interconnection source document that describes the interconnection, operating and metering requirements for certain generating and storage facilities seeking to connect to the electric distribution system. The tariff provides customers wishing to install generating or storage facilities on their premises with access to the electric grid, while protecting the safety and reliability of the distribution and transmission systems at the local and system levels.

DER and the Electric Grid

The electric grid can be viewed as individual sections, each with its own rules and regulations. Each section plays an important role and has defined operating requirements to ensure it is safe, stable and meets the energy needs of our country. In a simplistic view, the sections are illustrated in the figure below:

Rule 21: California's Electric Grid Just Got Smarter

1. Generation plants convert fuel into gigawatts of alternating current (AC) electricity, located far away from consumers. These are owned and controlled by utility companies.

2. Transmission lines carry the electricity long distances to where it is needed (megawatts).

3. The distribution network delivers the electricity to homes and businesses (kilowatts).

4. Low voltage includes homes and businesses where electricity is consumed.

This architecture was designed and intended for single direction flow from power plants to homes. Utility operators are responsible for ensuring that the consumers always have access to the electric grid, any time of day. Solar photovoltaics (PV) and battery energy storage systems (BESS) can create grid-quality AC on the site where it is consumed, and they are becoming a larger contributor to the modern electric grid. These resources can be connected at virtually any section on the grid, thus being considered distributed energy resources (DER). Now electricity can be produced, used and stored at home, where it is needed most, thus avoiding or reducing generation and transmission costs.

Since DER can be installed in all sections of the grid, the grid of the future will have architecture similar to the current grid, but power flow will be able to move in virtually any direction. For stability purposes, any electric grid has to create the energy to match the consumer’s loads. If this balance is not maintained, then overall stability is jeopardized (see the figure below, courtesy of CAISO).

Rule 21: California's Electric Grid Just Got SmarterUtilities understand that DER occasionally experience dynamic behavior because of weather and grid conditions. Due to weather-dependent performance, a utility must carefully predict all the energy needs for its territory and ensure that it can match production and loads. Weekday vs. weekend or holiday load profiles can be drastically differentand pose a real challenge to satisfy all conditions. For every DER installed, it is essentially removing a “consumer” from the grid, further altering the predicted power flow. Higher DER penetration on the grid is changing the conventional energy flow – homes now have the potential to send power backwards through the distribution and transmission system.

The existing grid has certain DER limits that can be connected to the grid, which is considered the distribution system’s “hosting capacity.” This hosting capacity is determined by existing equipment electrical ratings. For example, you cannot connect more PV than the wires were designed to handle; otherwise, they could melt. If this hosting capacity is not exceeded, DER can be installed on the distribution network without causing major grid disruption or incurring high-cost system upgrades (which eventually get passed on to consumers).

If the hosting capacity is reached or exceeded, abnormal grid conditions may develop due to this unforeseen bi-direction energy flow. Utilities can increase the quantity of DER, which the network can support, with upgrades to the network equipment (high upfront cost) or by introducing new DER operating rules.

Rule 21 Smart Inverter Requirements 

California’s new Rule 21 smart inverter requirements allow for greater hosting capacity, with minimal infrastructure upgrades (which can now be funded, in part, by the new DER additions). The goal is to allow the adoption of new technologies quickly and cost-effectively and to provide a stable path for DER growth while decreasing dependency on fossil fuels.

The first change will include DER to respond autonomously to changes in the grid measurements, such as voltage and frequency. Traditionally, inverters are required to have a unity power factor (no VARs) and only export active power (watts) to the grid. With advanced functions being required, the inverters are required to make reactive power first (VARs based on current grid voltage) to help keep the grid stable and then create active power (watts), which the customer uses at home or gets credit for while exporting back to the grid. Installers will be required to activate smart inverter functions when installing any new DER, including the following:

Anti-Islanding: Anti-islanding functions should be enabled so that DER operate in a consistent, predicable manner and disconnect when any potential “island” is formed.

Fault Ride Through (voltage and frequency): Abnormal voltage and frequency events have previously required DER to disconnect completely in a very short time (160 milliseconds). After DER disconnect from the grid, they are required to wait for five minutes of stable conditions before they are allowed to return to operation. Grid equipment and layout is designed to re-route power in case of any accidents (such as cars hitting power poles) to minimize grid downtime. If a significant quantity of DER all drop off the electric grid at the same time before the “re-routing” is finished, then traditional plants (called peaker plants) must be on standby to pick up the loads formerly covered by DER. Smart DER can now ride through short grid interruptions, thus decreasing the quantity of required, expensive peaker plants online (see the voltage ride-through figure below).

Rule 21: California's Electric Grid Just Got Smarter

Dynamic Voltage-VAR operation: Smart inverters can now provide reactive power (VAR) as well as traditional active power (kW). The theory and math behind reactive power is complex, but keeping the grid balanced is easy with the technology available today. Due to bidirectional energy flow, voltage regulations will be required by DER and are necessary for an evolving electric grid. PV inverters are able to inject or absorb reactive power to help keep the voltage stable.

Ramp rates for connection and reconnection: In the event of a large DER disconnection, PV must disconnect and wait for five minutes of stable operation before reconnection. After the event has been repaired and DER operation returns to normal, PV can ramp up to full power incredibly fast, whereas ramping down peaker plants, or other generators, requires longer periods of time. Too much generation on the grid is just as bad as not enough generation. The smooth transition between generation sources must be controlled in a stable, easy manner to prevent further cascading disruptions.

(Optional) Voltage-Watt: When hosting capacities are reached, reactive power control might not be enough to keep the local grid voltage stable. Smart inverters can reduce their output and reduce the impact based on the local grid conditions. This is a secondary approach to minimizing impact and allowing greater amounts of DER to stay connected (remember, it is the goal to prevent or delay upgrades to existing infrastructure). If more DER push the grid to conditions where normal operation is not permitted, massive amounts of existing DER may disconnect and can prove detrimental to overall stability.

(Optional) Frequency-Watt: The grid frequency is the same at all points on the grid. The frequency is primarily dependent upon the generation capacity and existing loads on the grid. If a generator has too many loads, it tends to slow down. Alternatively, with too few loads, it tends to speed up. Since the utility operator cannot always control the loads (consumers do), it has to carefully run the correct combination of generators capacity online to match the loads in real time. If the loads are being satisfied by onsite DER, this is essentially removing loads, thus changing the load profile and potentially increasing the grid frequency. Once significant portions of PV disconnect at the same time, the generators are faced with many more loads, slowing them down and potentially causing an under-frequency event. This runaway cascading scenario is avoidable and can be prevented with smart DER functions.

The Rule 21 smart grid functions will be required for all new DER interconnections located in Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric territories. Similar smart grid requirements are also being adopted from utilities in areas with high PV adoption, such as Hawaii, Arizona, North Carolina and the Northeast (including Pennsylvania, New Jersey and Massachusetts). Aging grid infrastructure and territories prone to natural disasters can benefit most when livelihood can depend on grid availability.

Phase I went into effect on Sept. 8 in California. From now on, every new PV system must use certified equipment and enable these smart functions. The California Energy Commission and GoSolarCalifornia websites host a list of certified and approved equipment. Phase II involves monitoring of the DER and will go into effect nine months after the release of a standard, uniform monitoring method. This will provide better planning and transparency for load and DER production. Phase III is the most integrated method, which includes both the remote monitoring of DER and allowance for more control. DER will change the way the entire grid operates, increasing DER capacity with minimal costs.

How Does Rule 21 Affect Solar Professionals?

The Rule 21 requirements will directly affect PV professionals located in California in different ways. This includes utilities, PV installers, sales, financiers and consumers.

1. Utilities now can feel confident connecting more DER while maintaining tight control over their networks.

2. PV installers will need to purchase certified equipment, which was tested to meet these new requirements. Some inverters sold in the U.S. for the past few years have had these functions available (but not activated). European standards have required them due to quicker and greater adoption rates, even exceeding the impressive U.S. growth of DER. Sizing of the PV equipment to meet the new requirements and meet customers’ needs requires little to no additional training on the inverters. Since not all states are requiring these advanced functions and simply rely on the UL 1741 standard, California installers will activate the functions during commissioning or remotely through the network after Phase III. Adjustments should be quick and easy, keeping installer costs low but providing significant value to the grid.

3. Sales teams can talk confidently about California’s efforts to make the electric grid better, faster and stronger. Conventional sales pitches will still hold true, but now with introduction and integration of BESS, value propositions are even more attractive. New regulations promote the opportunity for growth in previously saturated regions.

4. Financiers providing funding for DER projects can feel confident that they can maintain current business trends and continue with predictability and safeguards for current and future investments. With utilities adopting and enforcing these functions, they are acknowledging that DER will continue to be an integral part of the modern world.

5. Consumers will be affected the least, but their decision for electricity savings will contribute to a smarter and potentially better electric grid. They could also see potentially lower electricity costs as utilities avoid more costly upgrades.

Ultimately, our long-term goals should be to meet our society’s technological needs, while reducing the dependency on fossil fuel consumption. And while we cannot stop all usage of fossil fuels, we do have the opportunity to slow down how much we consume. The benefits are clear and abundant for using renewable energy to power our daily lives. Europe has embraced renewable energy generation and has already developed and adopted identical smart functions to maintain grid stability.

Increasing the hosting capacity with minimal costs makes for a more flexible grid, potentially keeping rates the same or eventually lowering them due to the market drivers. With distributed resources sharing responsibility, it is feasible to extend the useful life of installed infrastructure by years, saving upgrade costs and future upgrade costs. PV will likely never be the only solution for electricity generation, but when installed correctly and when working with other sources, it can be very cost-effective and provide great flexibility.

Chris Schwegler is senior applications engineer at solar inverter manufacturer SMA America.


  1. Good info. Surprised you didn’t mention UL1741 “SA” as the supplemental listing requirement for smart inverters. In California you’ll need an inverter tested/listed to UL1741 SA to connect under the new program, at least for PG&E.

    The CEC has an approved inverter list here:


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