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.
We’re featuring guest authors over the next few weeks. This article by Robert D. Cormia, a member of the Foothill College Engineering Faculty, talks about a new equation for energy intelligence – where ei = cm3 (for continuous monitoring, modeling, and management). Foothill College is located in Los Altos Hills, California, in the heart of Silicon Valley.
Foothill College has been engaged in a strategy that integrates building energy monitoring and management with enhanced distributed generation capabilities. It’s an important first step on a path that could lead to becoming a ‘managed energy grid’. Towards this end, Foothill College has developed a multi-tiered model that will integrate building energy sensors with building automation controls, measuring heat exchange of hydronics (heating and cooling from a central plant); a campus-wide energy management system; inverter output from 1.5 MW solar PV and 240 KW cogeneration (heat and power); an Energy Information System (EIS) that will monitor, model, and display the energy flows into buildings and from our onsite generation and utility feed; and finally the capability to synchronize energy generation and use, and or load shift (demand shift) in a utility business model called Integrated Demand Side Management (IDSM).
The logic and premise for this future energy system is based on a three-tiered stack. First, a smart energy campus begins with understanding when, where, and how energy is being used. This leads to a better understanding of basic building operation, i.e. are building systems operating correctly, and can we control buildings precisely enough to manage energy with occupancy and use?
The second tier of the smart energy stack is significant onsite energy production from 1.5 MW solar PV and 240 kW of cogeneration heat and power, which provides 45% of Foothill’s annual electrical demand and 50% – 100% of our peak power demand. At times this generation exceeds campus load, and Foothill exports electrical energy, which currently isn’t stored to offset energy at other demand peaks.
The third tier of the stack is the analytics and visualization platform for understanding power flows throughout the day, and displaying energy use at a building and campus level. This Energy Information System (EIS), transcends the energy management and building automation software (EMS/BAS); with such a system, we would begin to model an enhanced generation capability of additional solar PV and battery storage, mainly used to generate and store electrical energy during the day, and release it in the early evening, where we often experience our greatest power demand. In order to leverage additional onsite generation, without swamping the outer distribution grid (called “backfeed”), the generation and release of energy must be carefully managed.
The EIS informs the campus energy manager about how energy generation assets, e.g. solar PV, cogen, and storage, can be combined with Automated Demand Response (ADR) to help the utility power grid better respond to large power demands, and/or shift the campus peak energy demand away from the utility¹s peak demand, which can also cause high time of use (ToU) charges. IDSM, or Integrated Demand Side Management, fits well with large distributed generation behind the meter, especially college campus distributed energy systems. In the utility model of the future, managed energy grids will participate in grid optimization, using a multilayered energy monitoring and management platform, and leveraging our new equation to deliver comprehensive and actionable Energy Intelligence.
Is it just me, or is the pace of technology innovation speeding up for you too? Acceleration is certainly evident in nanotechnology R&D. Back in December 2014 I wrote two blogs that updated my 2020 predictions first published in January 2014. Nanotechnology discoveries are now occurring on almost a weekly basis. Universities have been a hotbed of scientific discoveries in material sciences. Consider the recent news that graphene, a particularly interesting nanomaterial and photons. A photon is a unit of electromagnetic radiation that has energy but not an electrical charge. To the naked human eye, photons are sunshine. Research in Switzerland revealed that graphene can take one photon and make multiple electrons. This is what today’s solar panels do – convert photons into electrons. But graphene has a multiplier effect, with the potential to boost existing best case conversion rates from 32% to 60%.
While this announcement addresses research results, commercialization won’t be far behind, and we’ll soon be reading about new solar panels that leverage graphene materials to increase harvestability of solar potential. Other research advances focused on making solar harvesting materials more flexible. What do these research announcements mean? Here are three key points. Solar panels, like microprocessors, will shrink in size and increase in power. Second, areas that have marginal value for solar generation will get a second look as panels improve in their productivity and their flexibility to be adhered to non-traditional surfaces. Third, distributed energy resource (DER) momentum grows as a result as more rooftops, landscapes, and other building surfaces harvest solar energy and proliferate in distribution grids.Gr
Other nano research is concluding that a little stress can be a good thing for silicon crystals known as quantum dots. Around the time of the 1973 energy crisis, the popular saying was “small is beautiful”. In at least some research labs around the world, the new saying could be “small and stressed is beautiful”. One commercial application possibility focuses again on improving the energy harvestability of solar panels made from silicon. However, there’s also interest in how these nanocrystal reactions can increase the charge/discharge cycles of batteries, improve computer displays, and decrease power consumption.
Are investors paying attention? Graphene has been dubbed the “wonder material”, and big players like IBM and Samsung have been allocating money and resources into it. China has filed more patents involving graphene than any other country. One of the first commercial applications of graphene research is a light bulb that improves on the energy efficiency of LED bulb technologies. Once these new bulbs are available later this year, investors who have been hanging back will be looking for other commercialization opportunities.
From a Smart Grid perspective, graphene has exciting application potential in energy harvesting, energy storage, and even energy consumption, specifically reductions in waste heat. It’s a rapidly innovating area of materials science research that will be the foundation for disruptive technologies integrated into the electric grid. The dual impacts of these disruptors will be to increase the amount of electricity generated by DER assets and reduce electricity consumption as devices become more energy efficient. The speed at which R&D in graphene and other nanomaterials is advancing to commercialization may blast past my predictions of overall progress by 2020.
A crisis is a terrible thing to waste. It took a drought of epic proportions to force the Australian nation to radically reform its water policies and practices. California is now in the fourth year of its own serious drought, with growing negative impacts to economies, communities, and ecosystems. While there’s great value in California adopting similar actions that Australia took to manage a dwindling resource, there are great challenges as well.
For starters, California’s water laws are irrational. Senior and junior water claims are based on the timing of gold rush era prospectors nailing pieces of paper to trees adjacent to water sources. Some industry experts estimate that it would take 30 years of full time work just to sort out the claims and hierarchies on water sources before an overhaul could be started. That would be a daunting task here and in other western states governed by similar claim precedents. But it gets worse. California’s water consumers are also irrational. In California, 90% of the state’s water is dedicated to agricultural use. Much of that agriculture is focused on water-intensive crops like cotton and alfalfa. If you’re wondering why a desert climate is producing crops that are better suited to regions with significantly predictable precipitation, you’re not alone.
At that December water conference, California officials seemed most interested in the physical improvements that could be mandated in building codes (such as rain catchments) but deflected questions on how legislation could change California water laws to encourage conservation and agriculture models more suited to desert climates.
There’s an additional complication. California’s primary source of water is winter precipitation that is conveniently stored in the form of snow. It’s very difficult to measure exactly how much snow falls in any given season and accurately predict how much of that snow will melt into useable water in the ensuing summer. Snow water equivalent describes the amount of water contained in snow pack. As you can intuit, dry snow contains less water than wet snow, and sometimes the differences can be as extreme as thirty inches of dry snow for one inch of water versus five inches of wet snow yielding one inch of water.
California’s snowpack, or lack of it, is not just an important source of drinking water. It is also a source of electricity generation in the state. A shrinking snowpack impacts the hydropower that can be generated. It’s a uniquely Californian take on that energy/water nexus, and it’s not a sustainable strategy. There’s a real lack of resiliency in the current water infrastructure that also impacts energy.
There are more available solutions to address hydropower reductions than potable water reductions. The electricity infrastructure is more amenable to optimization through ongoing applications of innovative technologies, policies, and financial capital. More distributed generation plus energy storage can replace some hydropower reductions. But as far as water infrastructure goes, these systems are much more inflexible and much less optimized than their electric grid counterparts. It’s just the early days for deployment of Smart Grid technologies into water infrastructure in California and much of the rest of the USA. But more than that, we’ll need smart water policies and innovations in financing the necessary water infrastructure upgrades to address critical resiliency concerns.
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.