Andy Zetlan, a consulting director at SGL Partners, is the guest author of this interesting article about community microgrids and financing options.
The microgrid era has begun worldwide, and investment is now creating showcase examples that enable evaluation of their economics and operational value. Most US investment has been around office campuses, including businesses and universities, and contribute to experiences with energy storage and other equipment that is continuing to progress in maturity. Financing is usually some level of public/private partnership, with funds being spent to ensure that energy for businesses, schools and other organizations is more resilient in the face of service interruptions caused by issues such as the devastating storms that have taken down utility infrastructure in recent years.
Microgrids are installed for different reasons, but in general, benefit users in the following ways:
- Provide reliable, continuous power supply
- Reduce power cost, which can remain relatively level over a long period of time (e.g. decades)
- Enhance use of renewable energy sources to help meet or exceed environmental objectives
- Provide high quality power for those processes that require it
Despite their newfound popularity, there are many impediments to microgrid deployments. In some regions, regulatory issues are prominent, with utilities and commissions working towards approaches that make sense to both, even if initial steps may run counter to current business models. Other impediments include the capital cost to transition and the level of knowledge and cost to operate. Yet others are limited by lack of adoption of more “transactive” rates, which are optional today, but are critical to enabling the growth of microgrids.
While communities have been showcased in some projects, many communities haven’t considered the use of microgrid technology. Yet cities and towns may have the most to gain. Installation of microgrids can ensure the availability of communications with emergency and other remote personnel, the consistent operation of police, fire and EMT services, and the ongoing operation of centers reserved for those impacted by lost utility infrastructure.
Communities also can apply microgrids to ensure the least disruption to other utility services like water and wastewater. While many have some backup power, microgrids could enable cities to utilize renewable energy instead of emergency fossil fuel generation in place today. This could also enable communities to address renewable energy requirements.
The major issue always on the table is financing – and I believe that microgrids are about to turn a corner on this issue soon. Typically, microgrids are financed through debt and grant financing, with both state and federal programs supporting their development. Going forward, we are seeing a new approach that may help move the microgrid business forward. Private investment is entering this market.
With private investment, the owner of the community or facility will no longer need finance and operate the microgrid with its related energy production and storage devices. Instead, the community or facility owner will contract with a firm to build and operate the microgrid. This new type of firm will fund the project in return for flat energy payments over many years at payment levels that are lower than today’s costs. The model is similar to that of an Independent Power Producer (IPP) who owns and operates a power plant, and receives payment for energy produced through contracts to supply. In the case of microgrids, the payment stream is usually the result of a single contract with the community, business, school, or other entity.
Contracts will include a Service Level Agreement (SLA) that outlines the minimum performance parameters for the microgrid, and any penalties for unsatisfactory performance. In essence, this new microgrid arrangement is similar to IPP contracts to provide power, except for the parameters that are expected from a microgrid.
Is this happening now? Not quite yet, but the opportunity is around the corner. In fact, Investor-owned utilities might want to be in the business of owning and operating microgrids, if regulatory hurdles can be overcome, but in general, the private sector is poised to move.
The opportunities to move critical energy demand onto microgrids may happen sooner than you think!
This week’s guest authors are Christina Briggs, Economic Development Manager for the City of Fremont, California, and Vipul Gore, President and CEO of Gridscape Solutions. The microgrid solution described here points to the benefits of collaborative planning and development to build resiliency for critical infrastructure and contribute to the goals of a truly Smart City.
Cities have a significant opportunity to lead by example when it comes to innovative energy solutions. But the pot sweetens even more when sustainable energy decisions also contribute to a City’s economic development strategy. In the case of Fremont, where clean technology is considered one of its largest industry clusters, public-private partnerships can promote the testing of new technology, help its local companies scale, and identify potential sustainability measures for City operations. Here’s how Fremont and Gridscape Solutions are crafting win-win scenarios.
The City of Fremont and Gridscape Solutions are teaming up to pursue a California Energy Commission (CEC) Electric Program Investment Charge (EPIC) opportunity. This state program funds technology demonstrations of reliably integrating energy efficient demand-side resources, distributed clean energy generation and smart grid components to protect and enable energy-smart critical facilities. This follows on a previously successful collaborative effort where Gridscape Solutions assembled a consortium of partners for a city EV charging infrastructure project, including the Fremont Chamber of Commerce, Prologis, Delta Products, and the City of Fremont.
The proposed project consists of deploying a microgrid at three fire stations within the City of Fremont. The close proximity of Hayward Fault line to these Fire Stations, the maximum load capacity on the transmission line, and the need to reduce grid dependency satisfy the most important grant requirements of providing energy savings, increasing electrical infrastructure resiliency, reducing carbon dioxide emissions and demonstrating islanding from the grid for up to three hours. Using the combination of renewable generation and battery technologies, the microgrid project could save the City of Fremont approximately $10,440 per each fire station and reduce CO2 emissions by 22,176 pounds per station per year.
The proposed microgrid design will provide at least three hours a day of power to the fire station in the event of a utility outage. The microgrid is also capable of responding to signals to proactively and seamlessly disconnect from the grid by using state-of-the-art microgrid controls, and advanced load controls. The implementation of the microgrid also serves to balance PV generation supply, efficient energy storage and campus loads to achieve the City of Fremont’s net zero energy goals by maximizing PV electrical energy usage behind the meter. During a utility outage, the power distribution may be isolated from the utility at the point of service by a microgrid inter-tie protection relay.
The primary goals of the project are:
- Island for up to three hours by disconnecting from grid
- Reduce energy costs and CO2 emissions
- Improve resiliency and reliability of fire station infrastructure using microgrid
- Deliver the highest value to ratepayers and the utility by optimal configuration
- Demonstrate innovation and environmental stewardship through the deployment of energy usage dashboards to the City of Fremont or CEC systems.
The priority status cities place on these facilities, combined with the tremendous innovation and market opportunity for companies in this space creates a win-win scenario. When cities leverage industry expertise in their own backyards, society stands to benefit.
I made ten predictions in January 2014 about Smart Grid and Smart City trends and changes that will occur between 2014 and 2020. Here is an update on the final five predictions. The first five were reviewed last week. You can review the full predictions here and here, and judge for yourself the quality of my crystal ball.
6. Debates about the future of the social compact for electricity services and the socialization of electricity costs continue. The Reforming Energy Vision initiative includes the objective to “enable and facilitate” new business models for utilities, customers, and energy service companies. This is just the first state activity that will generate significant discussion about how to equitably balance distribution grid investments that accommodate and integrate more distributed energy resources (DER). Since it will take time to implement and then measure results from new business models, this debate is sure to continue for the next decade.
7. EVs advance to 10% of the US car market. The current electric vehicle (EV) penetration in 2013 was just a bit over .5%. The falling costs of gasoline are putting additional pressure on EV manufacturers to reduce prices of zero emission vehicles to increase consumer adoption. However, utilities are now taking a more active role, as Edison Electric Institute members will start investing up to $50 million annually in EV service trucks and charging stations for consumers. The Department of Defense (DoD) is conducting pilots for vehicle to grid or V2G applications. Their first smart charging demonstration are exploring V2G performance, and they will also examine re-purposing used EV batteries for fixed energy storage.
8. Resiliency measures also become part of the definition of a smart building. There are a number of federal, state, and non-governmental initiatives that address resiliency, and some critical infrastructure definitions include selected buildings. The National Institute of Standards and Technology (NIST) is developing standards guidance for community disaster resilience, but this is focused on building materials and codes. Microgrids, DER and Zero Net energy codes and technologies can bridge the gap in existing resiliency initiatives for buildings. Microgrids are already in production as resources to maintain power to critical infrastructure during emergencies – one of the goals of the Borrego Springs microgrid.
9. Nanotechnologies help propel solar harvesting efficiencies past the 50% mark, and by 2020 research scientists are aiming for 75% harvest efficiencies. The number of patents filed for innovations in nanotechnology using graphene have tripled in the past 10 years. The research pipeline contains single molecule thick sheets of graphene and molybdenum that can potentially provide 1000 times more power per weight unit of material than current commercially available solar cells. The fabrication of flexible solar panels is on the horizon, which can be wrapped around curved or uneven surfaces or reduced in scale, expand the possibilities for where solar can be deployed.
10. There’s sufficient electricity production from renewable energy sources that we no longer talk about “renewables.” American grid-connected wind turbines have a combined capacity of 60,000 MW, projected to double by 2020. Solar is enjoying explosive growth. Energy storage solutions will “firm up” the intermittency of wind and solar and thus eliminate the last objections to reliance on renewables. It will just be a cheap and clean source of electricity without the price volatility of fossil fuels.
These final five predictions are well on their way to realization too, although the prediction about nanotechnology advances is admittedly a stretch goal. You’ll note that energy storage has a significant influence on the advancement of some of these predictions. We’ll keep tracking these predictions and bring you periodic updates.
Combined heat and power (CHP) technologies are sometimes overlooked as important assets that can be deployed in Smart Grids and microgrids in North America. Also known as cogeneration, it is defined in the Smart Grid Dictionary as the production of electricity and useful thermal energy from a single fuel source, typically located at or near the point of consumption. The thermal energy is typically used for heating, cooling, or applied to specific processes. CHP deserves more consideration in microgrid designs and deployments. Ongoing technology advances in combustion turbines result in much more energy-efficient equipment, and that means that the solutions are more powerful and occupy smaller form factors than in the past. That opens up more possibilities for installations within microgrids that are strategically placed to build infrastructure resiliency.
CHP technologies take a prominent role in one of the initial European microgrid initiatives, the Smart Polygeneration Microgrid (SPM) project installed in the Savona campus of the University of Genoa in Italy. The Savona campus is a research and teaching facility, and the SPM presents invaluable educational opportunities. Professor Renato Procopio, a researcher at the university, noted that the SPM serves dual purposes. “First, the SPM satisfies part of the campus’s electrical and thermal demands, integrating a number of heterogeneous sources,” he noted. “Second, it moves the university’s power systems research beyond theoretical analysis and into experimental validation and verification.”
Polygeneration refers to the microgrid’s multiple sources of energy. There are natural gas-fueled boilers plus thermal storage, electrical storage in the form of batteries, renewable generation from solar photovoltaic and concentrated solar power (CSP) equipment. The campus-based control room uses operational strategies provided by the University of Genoa. Leveraging a Microgrid Manager from Siemens, it delivers day-ahead predictions of energy production from renewable sources and provides realtime control of all the generation assets, including optimized charging and discharging of the batteries to align with the renewables contributions to the system.
The microgrid incorporates a microcosm of the electricity value chain (generation to consumption) with its inclusion of an energy management solution to monitor and control electric consumption in a student housing building. Some of the research addresses the social aspects of electricity consumption – students will receive realtime information about consumption to help them make more educated decisions about how and when to use electricity.
Installed in February 2014, the SPM is the first project in Italy that also focuses on interconnection to the distribution grid operated by ENEL Distribuzione, using smart meters to gain useful measurements about the power and energy balance of the microgrid. This data will provide an important base of knowledge for future deployments of microgrids as autonomous entities that can communicate with local distribution grid operators and provide ancillary services that could help in improving the quality of the electric energy services.
Renato Procopio will be presenting initial results of the University’s microgrid project in the Building Resiliency with Microgrids conference track managed by Christine Hertzog at European Utility Week on November 5. Join us there to learn more about the innovative solutions and array of benefits that microgrids are designed to provide.
Remember the old beer commercial with the “tastes great….less filling” debate? Microgrids provoke a multitude of views in the USA. For the Department of Energy, developing advanced microgrids holds the promise of building new electricity resources for customers, the community and the macrogrid. For the Department of Defense, microgrids deliver energy security for military bases and mobile operations. Massachusetts thinks of microgrids as enabling environments for regulatory reform. New York, in the midst of its initiative to redefine utility business models, considers microgrids as good platforms for distributed energy resources (DER). California, on the other hand, sees microgrids as crucial to supporting the integration of renewable generation into the grid.
Larisa Dobriansky, Senior Vice President, Legal, Policy and Regulatory Affairs for General MicroGrids has excellent perspectives on how microgrids can serve in these capacities. Based on her extensive knowledge of microgrid design and deployment around the globe, she notes that microgrids can become a third element in grid modernization efforts. Smart microgrids could help to contribute to a new flexible, resilient and transactive electric power value chain. Both upstream and downstream, smart microgrids could play a role in transforming our power system, using smart technologies to enable new functions and capabilities “end to end,” from source to sink.
Federal and State governments in the United States are funding pilots to assess how smart microgrids could be deployed strategically to harness cost-effectively the benefits of dispersed distributed resources and manage load; support markets for new resources; and apply information and communications technologies to advance intelligent distributed energy management strategies in developing new power infrastructure. However, sound policy enabling frameworks, at both the federal and state governmental levels, will be needed to support investments in smart microgrids – policy, legal, regulatory and institutional changes that can recognize and fully take into account the benefits and value that smart microgrid and distributed resource solutions can generate. To begin with, consistent definitions of microgrids and smart microgrids are needed.
Microgrids not only trigger different views of their primary benefits to a grid, microgrid definitions have been evolving too. A microgrid has traditionally been defined in the Smart Grid Dictionary as a small power system that integrates self-contained generation, distribution, sensors, energy storage, and energy management software with a seamless and synchronized connection to a utility power system, and can operate independently as an island from that system. Generation includes renewable energy sources and the ability to sell back excess capacity to a utility.
However, in developing economies, microgrids may be helping to eliminate energy poverty, and thus have a different degree of technological sophistication. The soon to be released 6th Edition of the Smart Grid Dictionary contains a new definition for a Smart Microgrid. It is a term used to differentiate the technological sophistication of a microgrid. In developed economies with well-established grids, it is presumed that any microgrid embeds Smart Grid technologies. In the developing economies with immature grid infrastructure, a microgrid may contain distributed sources of generation, and energy storage but exclude the advanced communications overlay that makes a grid a Smart Grid.
As a side note, it is important to acknowledge that even in the case of off-grid rural electrification, “smart” (ICT) technologies could be deployed to help build smart clusters of villages through networks of distributed infrastructure consisting of local microgrid cells.
Larisa Dobriansky will be presenting some case studies in the Building Resiliency with Microgrids conference track managed by Christine Hertzog at European Utility Week on November 5. Join them there to learn more about the resiliency solutions that microgrids deliver on a global basis.