Climate-related wildfires have caused significant power outages in California, including planned outages called Public Safety Power Shutoffs. Consequently, concerns about grid reliability have increased public and private demands for backup generators, including diesel-fueled ones, but diesel generators bear high environmental costs, emitting greenhouse gases and air pollutants. Meanwhile, California aims to transition the economy to phase out the use of fossil fuels, including its target for 100% clean electricity by 2045. This research quantifies the economic value and environmental benefit of replacing diesel backup generators with PV-plus-storage microgrids in California public buildings. Using an energy integration and optimization model, REopt, and empirical data, this study demonstrates that replacing diesel backup generators in just one building would save almost $3M of public expenditures and reduce over 10,000 tons of CO2 emissions over a 20-year period. The resulting implication is that public buildings and critical facilities in the state’s 22 air districts could save $31-385M annually by the same application. Despite these huge economic benefits of the diesel backup generator replacement, it would be challenging for decision-makers to finance or invest in PV and storage installations due to high capital costs. However, this research provides policymakers with a framework to dive into the economic value of resilience when determining distributed energy systems by quantifying future estimated benefits so that new financing models can be developed to reduce the upfront cost burden of PV and storage. Also, this research develops a marginal resilience curve for the cost and environmental impact of extended outages, which demonstrates that increasing energy storage capacity greatly outweighs increasing PV or generator capacity to enhance resilience, while reducing costs and emissions. This research highlights that phasing out diesel generators may be a critical opportunity for the transition to net zero-emission energy systems in California and around the world.