Interest Growing in Commercial and Community Microgrids

Aside from places where microgrids have a track record—educational, industrial, and commercial campuses—commercial and community microgrids are still the domain of early adopters, but the number of people wanting to travel the trail they are blazing is increasing.

A microgrid is any collection of interconnected loads and distributed energy resources within clearly defined electrical boundaries that can be controlled as a single entity and that can operate in both grid-connected or island mode. Microgrids can provide energy security, energy independence, choice of generation, energy cost control, and other benefits to its owners and users. However, as speakers noted at the 4th Military & Commercial Microgrids Summit in Washington, D.C., July 17 to 19, integrating multiple microgrid components, dealing with regulatory constraints, and making the business case pencil out all pose challenges.

Despite those challenges, the dropping cost of renewable generation and energy storage technologies plus a growing awareness of the limitations on grid reliability has led to increased interest in microgrids.

Data Centers: Early Adopters

Because of their need for extremely high reliability, data centers were some of the early adopters of microgrids. Whereas uninterruptible power supplies at data centers became stranded assets, microgrids offer ongoing advantages. According to Ali Amirali, senior vice president of Starwood Energy Group, a private equity firm involved in energy projects, data centers and microgrids are “a natural fit.” Amirali, who previously worked for a California utility, said data centers are looking for more reliability than “utility-grade power” can provide, as well as predictable costs over 10 to 15 years. Microgrids support both needs.

Several IT-intensive facilities are adopting microgrids and even looking at the next level of efficiency, including using DC power from generation to point of use.

Another potential development from data centers is one of scale. Craig Harrison, founder of the Niobrara Data Center Energy Park in Colorado, predicted that the first “utility-scale microgrid” would come from a data center.

A Commercial Case in Point

Kevin Lucas, division director of policy, planning, and analysis for the Maryland Energy Administration, talked about how his state is examining where it can remove policy barriers. Grid service, he said, isn’t 100% reliable, and even though today there is “no market price on reliable operation,” as more people start to experience disruptions, they will start to incorporate reliability into the cost accounting for microgrids.

In Laurel, Md., the Konterra Solar Microgrid couples a containerized battery and inverter with solar photovoltaic generation from parking lot canopies plus a couple of electric vehicle charging stations. Developed by Solar Grid Storage and Standard Solar for the headquarters of Konterra, described as a sustainable mixed-use real estate development, the project leverages both tangible and intangible features.

The financials for the Konterra project were “pretty neutral,” according to Richard McCoy, Konterra executive vice president, but the project had other benefits, including environmental and cutting-edge technology aspects that make the facility attractive to prospective tenants.

Dan Dobbs, CFO of Solar Grid Storage, talked about the added benefit of providing ancillary services (frequency regulation) to the independent system operator, PJM, which generates revenue for third-party investors. The financial importance of access to the ancillary services market was a loud refrain at the summit.

Growing Awareness of Grid Vulnerability

States that have experienced significant grid disruptions, such as those in the Northeast affected by Hurricane Sandy, are among those taking the lead in encouraging microgrid development by removing red tape and developing partnerships with those wishing to develop microgrids.

Eric R. Coffman, in the Office of Energy and Sustainability Department of General Services for Montgomery County, Maryland, noted that his county is a potential microgrid customer in light of four major reliability events experienced in the past few years. Its long-term goal is to be a generator with utilities to provide backup for more than 400 county facilities, including those serving emergency services.

Connecticut, too, has endured multiple severe weather events over the past four years that have prompted Governor Dannell Malloy, a long-time microgrid advocate, to look at ways to use microgrids as an infrastructure resiliency strategy. Alex Kragie, deputy chief of staff, Connecticut Department of Energy and Environmental Protection, explained that the state wants microgrids to operate 24/7, which means they won’t be diesel-based. Connecticut is focused on providing microgrid support for police, fire, hospital, and other emergency services but also for “quality of life” services including a grocery store, pharmacy, and bank. Nine different projects have received a total of $18 million in awards to date.

Among the Connecticut projects is a combined heat and power project at Wesleyan University, which will serve as a FEMA rallying point during disasters. Another project, in Hartford, is run in partnership with the utility and the city and includes a gas station, senior center, and grocery. Because the state can’t by law finance generation, its projects are leveraging existing generation sources.

Other microgrids have already proven their value to the communities around them when the main grid goes down. Among the presenters was Thomas Nyquist, director of engineering at Princeton University. Though New Jersey was particularly hard hit by Sandy, Princeton’s microgrid, based on a cogeneration system, ran disconnected from the grid for several days. The university had to shed some of its load, as the cogen system can’t supply 100% of normal demand, but being able to supply electricity to most facilities enabled it to provide food services and phone charging for community first responders. A nearby community college provided similar support during the disaster.

The value of an islanded “oasis” of power during emergencies caused by anything from fire to hurricane to human action is difficult to put a dollar value on, but the value becomes obvious as soon disaster hits.

Community Microgrids

To date, the notion of a “community microgrid” is more concept than construct. (During a Q and A session, Navigant’s Peter Asmus commented that community power seems to have gotten greater traction in other parts of the world, particularly in Japan and Europe.) Though there’s a demonstration project described as a community microgrid in Borrego Springs, Calif.—a pilot scale project being operated by San Diego Gas & Electric (SDG&E) that is partially funded by the U.S. Department of Energy and the California Energy Commission—there are multiple reasons that the dream of a community that can island and protect its grid is difficult to realize. One involves regulatory limitations on controlling grids that cross incumbent distribution utility rights of way, explained Michael Burr, founder and director of the Microgrid Institute.

But several communities are eager to strengthen their infrastructure resilience and see microgrids as a way to achieve that goal. One attendee from Rhode Island, for example, was looking for ways to partner with military installations to develop a community microgrid solution.

Some communities are venturing into this new world first by adding energy storage, typically to increase reliability, especially for remote locales. Others aren’t sure why they are interested in microgrids.

Leia Guccione, a manager at Rocky Mountain Institute (RMI), said nearly 30 communities, including San Francisco, have approached RMI for assistance in redeveloping part of their cities as microgrids. Yet, when you ask why they want one, they don’t have a clear answer, she said. From what RMI has looked at, combined heat and power presents the most efficient entrée into the microgrid realm. Military and corporate grids are harder, she said, because there’s less alignment of purpose. RMI sees nanogrid/building-level grids—particularly photovoltaics plus batteries—as the next wave.

Utility Partnerships

To say that all utilities are against microgrids would be incorrect, as the examples of SDG&E and ConEdison show. ConEdison’s Jamie Brennan said his company looks at microgrids as a way to manage distributed energy resources.

East Coast utilities affected by Hurricane Sandy are either voluntarily exploring new system resiliency strategies or are being required by state utility commissions to do so. Walter Levesque, microgrids director for DNV GL, noted that “resiliency has value but is not financeable.” He suggested that creating a utility resale market for power sold to the grid by microgrids might finesse the franchise rights issue.

Following up on that notion, Brennan said the utility can be a “platform” for distributed generation and microgrids. For example, ConEd is leveraging a combined heat and power plant to defer a transmission upgrade, which defers capital investment and keeps bills lower. The company is looking to expand that model to shave peaks.

In a session on smart cities and microgrids, DNV GL Energy’s Rick Fioravanti expressed his belief that “There will always be a role for utilities.” The future is one in which there is a more “symbiotic” relationship between utilities and customers, he predicted.

RMI’s Guccione said it “scares [utilities] to death” that large customers have the clout to develop microgrids, so they will accommodate them, but utilities are thinking of these first partnerships as one-offs instead of seeing an opportunity to offer microgrids to dozens of customers.

That view was echoed by Dr. Jayant Kumar, global smart grid program director for Alstom Grid. Utilities are more concerned about the distributed asset than the microgrid, because what they see is lost load growth. Instead, he suggested that utilities could provide expertise to operate microgrids—essentially providing a new service.

That model was also mentioned by Stephen F. Schneider, PE, chief solutions architect in the engineering solutions group at Leidos. The utility could own the equipment and control it except during islanding events, allowing it (at least under potentially revised regulatory scenarios) to rate-base the asset.

Valuing Resilience

Repeatedly throughout the microgrids summit, participants would note that customers value resiliency but they don’t want to pay for it, or even if they are willing to pay for it, the finance community won’t get on board with incorporating such values. As Rahul Gupta, principal, public sector clean tech and smart cities for PricewaterhouseCoopers observed, “We’ll do a ‘disaster relief fund’ post-Sandy, for example, but not a ‘resiliency fund’” for strategies like microgrids.

That attitude may be starting to change. James T. Gallagher, executive director of the New York State Smart Grid Consortium, commented that states hadn’t previously looked at the indirect impacts of electricity loss until after Hurricane Sandy hit. Now, of course, ConEd has plans to spend in the neighborhood of $1 billion on making its grid harder and smarter.

For more coverage of this microgrid event and market trends, see:

The State of the Microgrid Market: Promise and Present Realities

Military Microgrids: Wanted and Needed but Tough to Deploy

Islands Are the Low-Hanging Fruit for Microgrids

 

—Gail Reitenbach, PhD, Editor (@GailReit, @POWERmagazine).

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