- Energy-as-a-service or microgrid-as-a-service, the approach allows customers to secure the benefits of microgrids — reliable local power, cost management and clean energy — without taking on the risk. Typically, the host pays only a fee for electric service while a third party develops, builds and operates the microgrid. “Energy as a service is the story of energy smartly procured, locally produced, and efficiently consumed.
- Key ways government can support microgrids and principles that should drive policy.
- Interconnecting microgrids to get the greatest public benefit.
- Eliminating the transmission charges (3 cents/kWh) for locally produced renewables would lower the cost of renewable energy and microgrids, paving the way for more of both. Clean Coalition’s overarching goal is to establish a network of community microgrids, as opposed to single, behind-the-meter microgrids. A network of community microgrids would be incorporated into the existing grid infrastructure. “In its most comprehensive form, the community microgrid covers the grid area served by a single substation and the handful of feeders that come out of that substation. The organization is working to address a number of policy, regulatory and pricing issues that make it difficult to meet this goal.
- Also see regulatory and incumbent obstacles to multi-user microgrids, which provide multiple energy consumers the ability to self-supply electricity during grid outages.
Microgrid Policy: What Really Needs to be Done? April 19, 2019 By Microgrid Knowledge
Five principles that should drive government programs globally to make microgrids a mainstream reality:
- Shift from grants to market-based incentives
- Target funds toward new clean and smart technologies
- Choose projects that foster new financing business models
- Allow for flexibility and midcourse corrections
- Create metrics that capture the value of resiliency – the National Renewable Energy Laboratory has done some groundbreaking work in this area. Nonetheless, such conceptual frameworks often find the translation into actual policy and regulations to be difficult. Though the value of resiliency will vary by end-use community.
Below Navigant’s Peter Asmus provides an overview of US microgrid policy and identifies what’s most needed to drive microgrid adoption.
In 2011, Connecticut was the first state to pass a law authorizing microgrids to serve community resilience. A microgrid funding program was proposed in July 2012 as a response to Hurricane Irene and gained momentum after Hurricane Sandy hit in late October 2012.
Since 2012, several other states have followed Connecticut’s lead and developed specific programs to support microgrids. These states include California, Hawaii, Maryland, Massachusetts, New Jersey, New York, and Rhode Island. Washington, DC has also developed programs. Perhaps the most notable effort is not in a US state, but rather in the territory of Puerto Rico, which may redesign its entire distribution grid network around large, interconnected microgrids.
Different forms of government support
Government support can take many forms. For example, incentives such as tax credits, low interest loans, or other forms of financial assistance for enabling technologies—such as solar PV systems—help facilitate microgrid developments. These incentivesare ubiquitous, however. They are not specifically focused on the integration of these assets into microgrids. The following are among the most common program support elements that are specifically driving microgrid adoption in the US today:
- Direct government grants for microgrid deployments
- Government authorized solicitations for microgrids (often meeting specific state policy criteria)
- Mandates and targets for distributed energy resources, renewables, or carbon reduction
- Specific financing vehicles that steer public or private dollars (or both) toward microgrids
- Utility regulatory reforms addressing existing barriers to microgrid deployments
- Technology commercialization roadmaps
- Approval of utility rate-basing of microgrids
Government spending on microgrids in US states and territories
In terms of sheer government spending on microgrids, New Jersey comes out on top by a wide margin, largely a result of past hurricanes on the state’s economy. The state has $611.8 million earmarked for microgrids, which easily dwarfs all other state-level investments. With its $71.9 million investment, California would rank second if the focus remained on state-level microgrid funding budgets. To date, California has funded the full development of 17 microgrid projects.
Notably, what other industry has been able to grow at double-digit growth rates in a market that doesn’t even recognize its most important value?
New York is also worth noting, since it planted more seeds for more future microgrid projects than any other state with 83 sites receiving $100,000 for feasibility studies. Only 11 of these sites, however, were awarded follow-on $1 million grants for actual project development, and then subsequent additional grants. Perhaps the most disappointing aspect of the programs analyzed was that most funding still flowed to fossil fuel capacity; only a quarter of state funding went to renewables and energy storage.
A recent Navigant Research report will be the basis of my presentation at the Microgrid Knowledge conference in San Diego, California on May 13, 2019. Within this report are five principles that should drive government programs globally to make microgrids a mainstream reality:
1. Shift from grants to market-based incentives
2. Target funds toward new clean and smart technologies
3. Choose projects that foster new financing business models
4. Allow for flexibility and midcourse corrections
5. Create metrics that capture the value of resiliency
Of these five principles to guide government support for microgrids, I would argue the most critical is the last. As noted in a previous blog, the National Renewable Energy Laboratory has done some groundbreaking work in this area. Nonetheless, such conceptual frameworks often find the translation into actual policy and regulations to be difficult. Though the value of resiliency will vary by end-use market segment and region, the microgrid industry should coalesce around a framework that could be applied to calculate resiliency. Notably, what other industry has been able to grow at double-digit growth rates in a market that doesn’t even recognize its most important value?
Peter Asmus is associate director of utilities & energy companies at Navigant.
Electricity use is on the rise. Despite massive infusions of energy efficiency, demand for power grew 4% last year, its fastest pace since 2010 when it received a jolt as the global economy recovered from the financial crisis.
And that’s just the start, given long-term growth expected as the world increasingly uses electricity to run cars and heat and cool buildings. A federal study sees potential in the US for an “unprecedented” rise in electricity use from 2016–2050 — 80 TWh/year compared with 50–55 TWh/year over the prior 34 years.
For the oil and gas industries, this mean loss of market share to the power sector. Electricity already eclipsed those fuels globally in 2017 in terms of new infrastructure investment, drawing $750 billion compared to the oil and gas sector’s $715 billion.
How to get the electricity to the charging stations?
As demand for electricity grows, so does the need for new infrastructure to deliver it — more wires, poles and substations to serve the electric vehicle charging stations that will replace gas stations. Will utilities — which invest via slow-moving regulatory oversight — be able to build infrastructure quickly enough to serve electric vehicle demand? Not alone, Feasel said. That’s where independently built microgrids come into play.
“I do expect regulated utilities to serve the electric vehicle segment in a major, major way,” Feasel said. “But the segment’s going to be so big — and some of it is starting to emerge so fast — the microgrid is going to have to be the answer.”
Aware of accelerating demand for electricity, oil majors are beginning to diversify into power. Shell, for example, has made recent acquisitions into microgrid and distributed energy companies, among them GI Energy and Sonnen. Microgrids are particularly well-suited for electric vehicle charging stations far away from population centers, in what Feasel called “last mile places.” As these charging stations replace gasoline stations, vast areas on the US highway will need an infusion of electricity. Utilities could build new transmission lines to deliver the power, but the projects will be expensive. Regulators might find the rate of return questionable, Feasel said.
Ports and airports
But it’s not just cars and trucks that are electrifying; so are planes and ships. And their ports are seeking more reliable energy from cleaner fuels. Schneider Electric, for example, won a $5.2 million contract to provide a microgrid for the nation’s second busiest port, the Port of Long Beach in the city of Long Beach, California. In addition, Schneider’s recently announced joint venture with The Carlyle Group, AlphaStruxure, is developing multiple microgrids as part of the modernization of JFK Airport in New York.
Feasel noted that the infrastructure in many US airports is showing signs of aging. Few airport microgrids exist, although more are being installed to avert a repeat of the 11-hour power outage that crippled the Atlanta Hartsfield-Jackson International Airport in December 2017.
Microgrids require team work
Electrification is clearly expanding the need for microgrids, but producing them to scale hasn’t been easy. This is because microgrids are complex — in terms of technology, financing and regulation, Feasel said.
Microgrids are often tailored to customers energy needs and local regulation. They may contain a variety of energy technologies — solar, wind, energy storage, fuel cells, cogeneration, backup generators — that must operate correctly together.
Layer on top of that the complexities of project financing: Capitalization, tax incentives, renewable energy credits, rebates, demand response and other financial considerations. Any of these may be specific to each form of generation within the microgrid.
As a result detailed engineering, operational, and financial decisions must be made to get the best microgrid built at the best cost. It’s too much for most hosts to handle on their own. “The incredible complexity is a lot to ask of any energy consumer that isn’t in the business of energy,” Feasel said.
Even those in the energy business often seek the expertise of partners to develop microgrid projects. “I think you could argue that it’s extremely difficult, if not impossible, for any single technology player, even folks in the energy business like Schneider, to make all those decisions on their own — which is why so often you see us go in the market with a consortium around best in class technology providers.”
How energy-as-a-service changes the game
The industry has discovered what some call an ‘easy button’ to make development more seamless for the customer. Known as energy-as-a-service or microgrid-as-a-service, the approach allows customers to secure the benefits of microgrids — reliable local power, cost management and clean energy — without taking on the risk. Typically, the host pays only a fee for electric service while a third party develops, builds and operates the microgrid.
“Energy as a service is the story of energy smartly procured, locally produced, and efficiently consumed” — Mark Feasel, Schneider
Schneider was early out of the gate with the approach, but it is now being used by many other companies that work in the microgrid space, among them Ameresco, Centrica, ENGIE, Siemens and Veolia,
“Energy as a service is the story of energy smartly procured, locally produced, and efficiently consumed,” Feasel said. “When you can deliver those three things and address the complexity associated with technology, finance and regulation, you really have delivered a solution that the market can adopt.”
What strategies and tools can help microgrids reap benefits, including societal, financial and environmental gain?
Microgrid Knowledge recently sought perspective from some of the panelists who will be featured at Microgrid 2019: Shaping the New Electric Grid, May 14-16 in San Diego.
Patrick Lee, founder of PXiSE Energy Solutions, a subsidiary of Sempra Energy, says that to deliver the biggest benefits, industry stakeholders need to move away from the focus on single microgrids and concentrate on interconnected microgrids that would yield benefits to society, the grid and customers.
The well-connected microgrid
“The overall benefits of interconnected microgrids can be viewed as the sum of benefits of individual microgrids. The focus of designing and delivering a maximum total benefit as a system would yield the most cost-effective solution for the society,” said Lee, who will speak Wednesday, May 15 on a panel: “Beyond Islanding: The Well-Connected Microgrid.”
Moderated by Ameresco’s Jacqueline DeRosa, the panel also includes Siemens’ Sacha Fontaine and NRG Energy’s Doug Sansom. Discussion will focus on the value of leveraging a microgrid’s connection — not only to each other but to the utility grid, which allows microgrids to sell energy, capacity and services back to the grid, arbitrage prices, manage renewable attributes, participate in demand response and engage in other revenue positive activities.
An interconnected microgrid can improve reliability, reduce energy costs and manage price volatility, Lee says. Additional advantages include optimizing the power delivery system, providing different levels of service quality and value to customers, and managing the intermittency of renewables. A network of microgrids would also help promote the deployment and integration of energy efficient and environmentally friendly technologies, Lee says.
Clean Coalition, another conference participant, also says networks of microgrids will deliver the biggest benefits, but sees numerous challenges.
While Lee focuses on microgrid networks, Kati Sidwall, simulation specialist at RTDS Technologies, another featured panelist for the upcoming Microgrid 2019, concentrates on tools that help bring microgrid concepts to reality.
She says real-time simulation can provide important benefits to the microgrid industry and the grid. Sidwall will participate in a technology and engineering session on Tuesday, May 14, on the necessary steps to determine the feasibility of a microgrid. Moderated by ICF Consulting’s David Jones, the panel also includes Power Engineers’ Daniel Jones and Opal RT’s Syed Qaseem Ali.
“Our goal is to make people aware of real-time simulation as a tool that can support and even dramatically change the process for implementing grid modernization projects,” says Sidwall.
Originally created in the late 1980s, real-time simulation was initially used to test transmission-level protection and control. Traditionally, modeling tools have played a role in power systems analysis, equipment development and project implementation, she says.
“Traditionally, these programs run offline – they are software tools which run on the user’s PC to represent the behaviour of the grid. Events can be simulated in order to analyze system behaviours before (or after) they occur in the real world.”
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But as the grid has evolved, real-time simulation has been used more for distribution applications.
“As real-time simulation becomes more commonly used by engineers to support microgrid, smart grid and non-wires automation projects, it is important for not only technology leaders, but also for policy and thought leaders, to be aware of the role it can play in shaping tomorrow’s grid,” she says.
Today, real-time simulation provides new opportunities for power engineers. It’s run on a custom-designed computer, operating at speeds fast enough to allow users to connect external equipment to the simulation.
“This means that centralized microgrid control systems, supervisory control and data acquisition (SCADA) systems, protective relays and local distributed energy controllers can be connected to the simulated microgrid.” These elements can be thoroughly tested before they are installed, says Sidwall.
With real-time simulation, engineers reduce risks associated with deploying new schemes or strategies. The tool boosts interoperability of devices, and improves the reliability, safety and efficiency of projects for all stakeholders, says Sidwall.
“I would also like to learn about specific design or deployment strategies taken in response to various technical challenges, as well as results,” says Sidwall.
Why It’s Hard to Create a Network of Community Microgrids in California
Clean Coalition is on a mission to alter transmission access charges that the organization says unfairly boost the cost of local renewable energy and community microgrids in California.
Eliminating the charges for locally produced renewables would lower the cost of renewable energy and microgrids, paving the way for more of both, says Craig Lewis, executive director.
Clean Coalition’s overarching goal is to establish a network of community microgrids, as opposed to single, behind-the-meter microgrids. A network of community microgrids would be incorporated into the existing grid infrastructure.
“In its most comprehensive form, the community microgrid covers the grid area served by a single substation and the handful of feeders that come out of that substation,” he explains.
The organization is working to address a number of policy, regulatory and pricing issues that make it difficult to meet this goal.
Local energy doesn’t use the transmission system
One of Clean Coalition’s top priorities is changing the transmission access charges, which it says are unfair because locally produced solar, wind and other renewables don’t use the transmission system.
“The transmission access charges are worth an average of 3 cents/kWh. This is a massive highjacking or stealing from distributed energy resources and is causing a market distortion,” he says.
The charges are assessed and metered at the customer’s meter, where it’s impossible to determine whether a kWh came from 1,000 miles away or next door — and didn’t use the transmission system at all, he says. “You shouldn’t pay them if you don’t use the transmission system.”
The California Independent System Operator (CAISO) assesses the charges and bills them to the utilities, which then bill customers, explains Rosana Francescato, communications director, Clean Coalition.
“For distributed energy resources to become cost-effective, we need to make sure they’re not getting value stolen away from them.” — Craig Lewis
The charges are assessed in different ways depending on whether a utility is a participating transmission owner — like the investor-owned utilities. However, most of the municipal utilities in California are not participating transmission owners. CAISO properly assesses the charges to municipalities, she says.
For municipal utilities, the charges are metered and assessed at the transmission-to-distribution grid interface, at the transmission substation. Using this system, it’s possible to determine whether energy is coming from afar or from local sources. And that’s how the charges should also be assessed in the investor owned utility territories, Lewis says.
A spokesman for Southern California Edison said that the company took part in a recent CAISO stakeholder process regarding transmission charges.
The company “strongly believes that all customers on the distribution system receive benefits from the transmission grid and should therefore pay for the transmission grid,” the spokesman said.
California ISO proposal
CAISO in September developed a proposal which, if approved by the CAISO board, would be filed with FERC. Moving the point of measurement, for the purpose of determining transmission charges, would shift the embedded costs of the transmission grid to areas that don’t have distributed generation to serve a “comparable” portion of their load, according to CAISO.
CAISO said it’s willing to revisit the issue for the purpose of allocating the costs of future transmission facilities — if state policymakers and regulators support retail rate changes that provide a transmission cost credit. The credits would go to load-serving entities that have distributed energy resources on their systems
“Such retail rate design changes are outside of the purview of the ISO and this stakeholder initiative,” CAISO said.
Clean Coalition supports CAISO’s call to the state regulators, especially the California Public Utilities Commission, to review all cost allocation mechanisms, including the CAISO tariff, the investor owned utilities’ tariffs, and any retail rates or other mechanisms, says Francescato.
Without the transmission access charges, more renewable energy and storage would be developed, Lewis says. Additional demand response would be added, and less transmission would be needed.
In fact, Clean Coalition estimates that ratepayers would save $60 billion over the next 20 years from avoided investments in transmission infrastructure and associated operation and maintenance costs.
This figure is based on the assumption that 75% of planned transmission could be avoided.
Clean Coalition believes that California can move to 100% renewables, with 25% coming from local renewable energy and 75% coming from remote sources.
In its efforts to bring more renewable energy online, the organization is also developing three behind-the-meter, renewables-based community microgrids through its Montecito Community Microgrid Initiative.
Community microgrid ready
One goal is to create community microgrids that are “community microgrid ready,” which means that when the utility is ready to partner in the project, it will be possible to use the utility grid. At this point, the organization has not convinced Southern California Edison to participate in the project, says Lewis.
“Those three sites will have behind the meter microgrids for now; that’s the only thing we can do due to existing rules,” says Lewis. “Community microgrid ready” means the microgrids can communicate with the utility via the utility’s standards.
“We’re going to make our best guess, but will also have hardware in place that’s flexible. If we need another standard, the hardware can manage that,” he says.
Meanwhile, the organization is also working to establish resilience values for microgrids.
Changing transmission access charges would allow the economics of community microgrids to improve significantly, Lewis says.
“They are driven by local renewables,” he says. “In order for distributed energy resources to become cost-effective, we need to make sure they’re not getting value stolen away from them.”
Why Aren’t There More Multi-User Microgrids?
When most people consider a microgrid, they think of on site generation serving a single business or an enclosed campus. But another concept is emerging called multi-user microgrids, which allows neighbors to share distributed energy resources to receive reliable electricity.
Only a few such multi-user microgrids exist. But some electricity experts say that conditions could evolve and benefits mount for more of them.
Richard Stuebi, president of Future Energy Advisors, sees improving microgrid economics and increasing customer need for resilience as a growing catalyst.
“Even today, certain sets of customers find the benefits offered by multi-user microgrids to outweigh the additional costs,” writes Stuebi in a recent study on the subject.
That study was authored by a research team from the Institute of Sustainable Energy at Boston University.
Expounding on what a multi-user microgrid is, Stuebi says that it provides multiple energy consumers the ability to self-supply electricity during grid outages. During normal periods, they they leverage the existing power grid. For this movement to become a trend, the economics would have to improve, including that of solar-plus-storage, which bottles electrons when the sun is out to discharge them for later use.
Some examples of multi-user microgrids include Commonwealth Edison’s Bronzeville microgrid, which is under development; the Philadelphia Navy Yard and Burrstone Energy Center (Utica, NY), both in operation; and National Grid’s Potsdam Community Microgrid, a New York project in planning.
The Institute of Sustainable Energy studied the northeastern United States to discover the barriers to development of multi-user microgrids. It found:
- Inability to monetize resilience (and other value streams)
- Conflicts with pre-existing rights associated with electricity delivery
- Preferential rights for utilities to cross public rights-of-way
- Ambiguity about viable multi-user microgrid ownership models
- Utility assertion of rights via legal action
- Lack of suitable risk-mitigation structure
- Insufficient leadership to coalesce solutions
And at least some of those obstacles can be overcome by tailoring business models to meet situation-specific cases, phasing in development to minimize cost and strengthening regulations to improve the odds of multi-user microgrids.
“If the barriers that prevent the development of multi-user microgrids can be reduced or eliminated, a wide range of stakeholders (private individuals, utilities, businesses, etc.) stand to benefit from the internalization of various social surpluses that multi-user microgrids can produce,” says Stuebi.
The report also noted that more advocacy could help the microgrid industry overcome barriers.
“Although a growing number of conferences are being convened on the topic of microgrids, with the annual Microgrid Knowledge conference arguably being the best and most well-attended, the microgrid community generally lacks a focal point – such as a trade association – that is well-positioned to serve in convening, educational, research and advocacy capacities,” says the report. “No doubt, this reflects the fact that the microgrid market is still immature and consequently small, but there is a risk that the microgrid market will remain underdeveloped unless and until stakeholders organize for impact and provide necessary leadership for market participants.”
Why Microgrids? May 2019 Joe Sullivan – The traditional large central power generators with one way distribution systems are being challenged by the development of distributed generation that is closer to the end users and can support integration of various renewable and energy efficient generation. If we believe the science behind global warming, we need large near-term reductions in emissions with progressive shifts to long term low or no-carbon power sources. These goals can and are being delivered by microgrids and distributed renewables, which can also increase the resilience of our electric power system and enable increased penetration of renewable energy. Long term, we still need to develop and use renewable energy resources — which do not have any direct emissions. However, short-term utilizing the cleanest burning fuel at the highest efficiency possible makes both economic and environmental sense, as resiliency and base load power microgrids often utilize natural gas.
In a microgrid, natural gas is frequently used for combined heat and power (CHP), when fuel can be utilized at 80% efficiency far better than the best grid scale merchant electric-only generation. Using a low carbon fuel at the highest efficiency is a way to maximize resilience and reduce carbon. The most efficient grid scale merchant power plants are combined cycle combustion turbines, which are typically 55% or in some cases less efficient. Much worse in terms of efficient use of resources are grid scale boiler steam turbine plants, which are typically 32-34%c efficient. And if they utilize coal, the carbon/unit of useful heat is extremely high as compared to natural gas. When we develop microgrids, which include natural gas CHP, the fossil fuel component would be only one of multiple energy resources that can be integrated into a microgrid. Microgrids can effectively and simultaneously integrate conventional generation with renewable energy such as PV and storage.
We are now seeing multiple states adopt goals to make electric power 50% to 100% zero carbon and to simultaneously electrify transportation and phase out nuclear power. The renewable goal is laudable and potentially achievable, but the intended reduction in carbon emissions is not achievable unless we adopt a different paradigm for the generation and distribution of electricity.
As development of distributed alternatives — such as microgrids — occurs, we need to be mindful that utilities still have a critical and essential role. The lowest cost renewable energy is grid scale PV and wind. This trend will likely continue adding offshore wind and energy storage to the grid scale resources. Increased urbanization means that many space or geographically limited resources including wind and solar will need to be developed outside of urban core relying on an electric transmission system. These changes must be accompanied by evolution of the regulations under which utilities currently operate. The electric power industry in our region is regulated at the state level and over a large multi-state region electric transmission and distribution is managed by the PJM. PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, serving 61 million people. This is a large complex and historically reliable system. For distributed generation and microgrids to contribute to the energy supply and distribution system we will need to see significant changes in both regional RTO/ISO regulations and in the Intra State regulated electric utilities.
We are at a unique crossroad in the energy industry where in fundamental terms American households are paying less for natural gas for heating their homes, less for electricity and much less for gasoline at the pump. This is an opportunity to develop new paradigms like distributed generation and microgrids which offer an opportunity to contain costs. Reliable cost competitive energy drives our economy, and the continued development of flexible ways like microgrids to meet our needs can make a significant contribution.
Joe Sullivan is vice president energy policy and development at Concord Engineering Group.