Reliable energy, reduced costs, and renewable integration
Now, with the increasing availability and cost effectiveness of distributed energy resources (DERs), more and more customers—industrial, commercial, governmental, and residential alike—are taking power generation, and even storage, into their own hands.
Demand for DERs by energy consumers is growing for a number of reasons—unexpected utility power outages, planned rolling blackouts, power quality problems, increases in the cost of power, etc.
At the Grid Edge Live 2015 conference, Steve McBee, president and CEO of NRG Home, a division of NRG (a large investor-owned utility), said, “The fundamental takeaway is the extent to which technology has destroyed long-standing, centralized, provider-driven service models and replaced them with decentralized, demand-driven service models that have empowered customers in ways that are totally unprecedented.”
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One increasingly popular DER technology is microgrids. In the early days of our nation, people generated their own power. Then, over time, centralized utilities came into existence and began providing power, eliminating the need for people to generate their own power. Now, it seems, with the growth of microgrids, that trend could be reversing.
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What is a microgrid? The complete definition is lengthy and complex. However, in short, according to The Microgrid Institute: “A microgrid is a small energy system capable of balancing captive supply and demand resources to maintain stable service within a defined boundary.”
Microgrids combine various DERs to form the whole system. These can include: natural gas or diesel cogeneration (CHP); hydrogen fuel cells and microturbines; renewables (photovoltaic modules, wind, biomass); and small hydro. Microgrids also utilize batteries for storage capacity, and include energy management and automation systems.
According to a report titled “Community Microgrids: Smarter, Cleaner, Greener,” published by the Pace Energy and Climate Center at the Pace University School of Law (White Plains, NY), “Microgrids can include facilities that generate electricity, heating, and/or cooling; distribute the energy generated; and manage energy consumption intelligently in real time.”
The Pace report goes on to note that: “Microgrid generation capacity can take the form of various distributed generation technologies, including solar photovoltaic arrays and/or combined heat and power units. Microgrid distribution facilities include the wires and transformers needed to deliver electricity, as well as the pipes needed to deliver useful steam and hot or chilled water to users on the system.”
There are numerous types of microgrid models, one of which is the community microgrid. The Pace Report explains that: “Community microgrids are usually connected to the larger electric grid in the normal course of operation. The connection to the larger grid allows the microgrid to obtain energy that is not economical to generate within the microgrid system. Microgrids are typically designed to operate detached from the grid in ‘island mode’ as well. Island mode enables a microgrid to function when the main grid is down during an emergency. A microgrid that can curtain electricity demand may also participate in demand response or ancillary services markets where users receive monetary payments in exchange for curtailing energy use.”
Another report, “Community Microgrid Initiative: Innovation for a Clean Energy Future,” published by the Clean Coalition, elaborates on this definition. “A community microgrid is a coordinated local grid area served by one or more distribution substations and supported by high penetrations of local renewables and other distributed energy resources (DERs), such as energy storage and demand response.”
The Clean Coalition is a nonprofit organization whose mission is to accelerate the transition to renewable energy and a modern grid through technical, policy, and project development efforts. The Coalition works with community and utility leaders across the country to establish local renewable energy systems that provide cleaner, more reliable, and more affordable power.
“Community microgrids represent a new approach for designing and operating the electric grid, relying heavily on DERs to achieve a more sustainable, secure, and cost-effective energy system, while generally providing renewables-driven power backup for prioritized loads over indefinite durations,” says the Clean Coalition report. “The substation-level foundation of a community microgrid ensures that the approach can be readily extended throughout a utility’s service territory and replicated across utilities.”
In addition, according to the Clean Coalition report: “A community microgrid leverages existing technologies while integrating innovations in design and operations. Community microgrids feature targeted siting and sizing of local renewables and energy storage solutions, as well as utilization of advanced inverters and demand response in contest of the specific local renewables generation profile.” In addition, all of the elements are optimized based on the local grid characteristics, including customer loads, feeder capacity using connected feeders, peak shifting and reduction, and relevant transmission and distribution grid deferral opportunities.
In sum, according to the Clean Coalition, a community microgrid features:
- high penetrations of local renewables and other DERs that achieve desired levels of grid reliability, resilience, and power quality;
- local balancing and load flattening that reduce costly transmission investments and load peaks;
- ongoing, renewables-based backup power to prioritized loads; and
- a scalable and replicable solution based on the substation-level building block of the electric grid.
How do community microgrids differ from traditional microgrids? There are a number of differences, according to the Clean Coalition:
- In terms of scale, a traditional microgrid covers only a single customer location or a small number of adjacent locations, while a community microgrid spans an entire substation grid area, providing benefits to thousands of customers.
- In terms of cost, a traditional microgrid maximizes benefits for a single customer, but does little for the local grid. Replicating this approach across an entire community area would be extremely expensive and would fail to leverage and optimize the existing distribution grid assets. A community microgrid, on the other hand, offers a more cost-effective solution by achieving a much broader scale of DERs deployment and utilizes a systems approach that identifies optimal locations for DERs in context with existing local distribution grid assets and loads.
- In terms of grid resilience and security, a traditional microgrid provides backup power to only a single location or customer, while a community microgrid provides backup power to prioritized loads that are critical to the entire community, such as police and fire stations, water treatment facilities, emergency shelters, etc.
- In terms of scalability, a traditional microgrid requires tedious work to implement at each individual location—starting from scratch in terms of both analysis and physical assets. A community microgrid, on the other hand, enables easy replication and scaling across any distribution grid area.
Community Microgrid Benefits
According to the Clean Coalition, community microgrids:
- create a more sustainable, reliable, secure grid;
- achieve the desired level of local renewable generation and grid reliability, power quality, and resilience in the most cost-effective manner;
- establish a foundation for more precise and efficient grid operations;
- provide a pathway for utilities to thrive in the distributed energy future; and
- take a system-side approach to reduce dependence on vulnerable, inefficient, and expensive remote generation and associated transmission infrastructure.
According to the Pace report, the benefits of community microgrids include the availability of reliable energy, reduced energy costs, reduced carbon pollution, increased local economic development, and reduced costs on the utility’s distribution system (via the opportunity for the utility to defer or avoid otherwise necessary investments in system upgrades for constrained areas of the grid).
“Within the next five years, I expect community microgrids to go from a very rare occurrence to being a fairly standard one,” says Craig Lewis, founder and executive director of the Clean Coalition. “In the next five years, I expect 50% of all utilities around the country to have either started a community microgrid initiative or to be seriously contemplating one. Speaking for the Clean Coalition, our 2020 goal is that at least 25% of all new electricity generation in the United States will be from local renewable sources.”
Why does Lewis anticipate this kind of growth? Largely because of the benefits the community microgrids offer. “The inherent, compelling attributes of community microgrids are their ability to make use of high levels of local renewables and other distributed energy resources, to provide economic and environmental benefits to the communities in which they are located, to provide resiliency, and the pathways they create for utilities to leverage and experience a comprehensive set of DERs as part of their mix,” he says.
Jordan Gerow, energy and climate law advisor at the Pace Energy and Climate Center, also sees growth in community microgrids. “I’m not sure that the market is moving quite fast enough to speak in terms of ‘critical mass,’ at least over the next five years, but the market is certainly accelerating,” he says. According to Gerow, more states are engaging their utilities in demonstration projects, more attention is being paid at the state and local levels to clearing legal roadblocks out of the way, and more companies are gathering experience in building replicable financial models around the concept.
“Over the next five years, I would expect more success stories out of jurisdictions that were early movers in embracing the concept, particularly in the northeast, where Connecticut, New York, and Massachusetts either have grant programs in place or local government has been actively steering high-profile projects,” says Gerow. “That might give the market enough confidence to really expand on its own in those regions. Other parts of the country that have given less thought may be a little ways behind, but it should help that there are best practices being developed in some states first.”
One roadblock to the growth of community microgrids, according to Lewis, is utilities’ fear of the “brave new energy world”—one that features significant levels of local renewables and other DERs. “Another challenge is that costs are still very high, so we need to find opportunities for offsetting transmission upgrades, or we need to find utilities that are willing to pay a premium, the latter of which is a rarity in many cases,” he says.
“We are overcoming these roadblocks and challenges as more utilities are realizing that local renewables and DERs are going to be a substantial and essential part of the energy system,” says Lewis. “This is good news, and an increasing number of utilities are being proactive about these changes.” In addition, he says, economics are being driven down through experience, such as the rapid expansion of solar and innovations in energy storage.
Gerow also sees some challenges. “You need a clear legal model that developers can follow going forward, and that will require some work state-by-state,” he says. State-level issues, or maybe even municipal-level issues, include the terms under which utilities have their franchises, the process to provide some competing service, or else to develop tariffs that would allow a microgrid to operate on utility wires. Developers need to have a clear answer early in the process to the legality question.
“Once all sides are comfortable with the legal framework, utilities need to gather experience and protocols for working with developers on these projects,” says Gerow. Getting some distribution system data, even engineering support from utilities, is essential. But these things won’t happen all at once. “In New York, for example, we are blessed with a pretty clear state constitution that makes the legality of private wires a little easier to answer for. We have published two state-sponsored studies analyzing the legal framework under which microgrids can function going forward. We have gone through two years of a utility reform proceeding at the Public Service Commission that aims to be particularly supportive of microgrids, and we have been through the entire first round of microgrid development competition called ‘NY Prize.'” Developers and utilities have been consulted, done mock case studies, followed by real case studies, regulatory analysis, and more. And today, according to Gerow, Consolidated Edison is just starting to have enough comfort with the industry that they are developing their own internal microgrid interconnection guidelines. That work is underway now.
For a region to really embrace this market though, according to Gerow, you need to “till a lot of earth,” you need to answer a lot of questions, and it may take years from that first proceeding on “Do we want microgrids?” to developing a legal framework, developer confidence, utility competence, and so on. “Some states are now just beginning to look at that process,” he says.
The Community Microgrid Initiative
The Clean Coalition established the Community Microgrid Initiative to demonstrate the technical and economic feasibility of deploying high penetrations of renewable energy connected to the distribution grid.
The Community Microgrid Initiative works with electric utilities and communities, with the goal of having renewables be able to provide between 25 to 50% of the nation’s total electric needs.
The Initiative provides a scalable and replicable model that any utility and community can use to improve integrated, cost-effective, local, renewable energy systems. That is, rather than continuing the painstakingly slow process of evaluating local renewable energy projects one at a time, the Community Microgrid Initiative is set up to create a faster pathway to bring clean energy online.
According to the Clean Coalition, “By modeling large areas of the distribution grid, utilities and regulators can efficiently identify greater distributed generation opportunities and establish streamlined deployment plans. This system-wide approach enables large amounts of local renewables to come online in months rather than years.”
The Clean Coalition is working with utilities on community microgrid demonstration projects around the country, but primarily in California. Two in-process projects are located in San Francisco and Long Island, with other prospective locations being Palo Alto, Los Angeles, and the US Virgin Islands.
One project is the Hunters Point Community Microgrid Project, located in southeast San Francisco. This project has helped to develop a replicable model that any utility or community can use to design cost-effective community microgrids.
For this project, the Clean Coalition delivered:
- a renewable siting survey, identifying 50 MW of new solar potential;
- an assessment of the local energy, economic, and environmental benefits of bringing 50 MW of new solar to the community; and
- the development of DER optimization, using powerflow modeling, based on a methodology that has been validated by Pacific Gas & Electric and incorporated in the California Public Utilities Commission’s final ruling on distribution resources planning requirements for California utilities.
The Hunters Point project is projected to eliminate 78 million pounds of toxic GHG emissions, save 15 million gallons of water, and preserve 375 acres of land over 20 years. During the same time period, the project is estimated to generate $200 million in regional economic stimulation, including $100 million in local wages.
Another Clean Coalition project is the Long Island Community Microgrid Project, which was one of the first five projects to receive a New York Prize Grant, announced by Governor Cuomo in April 2015, as part of the first phase of New York State’s Community Microgrid Competition, designed to increase grid resilience and support high penetration of local renewables.
For this project, the Clean Coalition has partnered with PSEG Long Island (the contracted grid operator), the Long Island Power Authority (the grid owner), the New York State Energy Research and Development Authority (NYSERDA), and multiple community stakeholders.
Initially, the project will combine about 15 MW of local renewables with a 5-MW/25-MWh battery system. Longer term, the project is designed to showcase the possibilities for DERs being able to avoid the construction of a planned 100-MW, oil-based peaker plant that is slated to be built in 2018 on the east end of Long Island.
So what do states and utilities need to do to move forward with community microgrid initiatives? “I would advise any state to make sure that they have gone through some generic proceeding to study two key legal questions: Can I hang a private wire, and how? Can I sell power to my neighbor?” says Gerow. “Different wrinkles in state law seem to apply to those questions differently state by state, so the market will need clear answers to start moving in.”
States should also look at what kinds of services the microgrid can provide to the local utility, and whether or not there is a way to monetize those services now. Jurisdiction by jurisdiction, there are different answers. For example: Whether or not you can help pay for onsite batteries by having them provide voltage regulation to the local utility.
“Utilities need to get some familiarity with the market as well,” says Gerow. “In a rate case, you can order utilities to do demonstration projects, and that might give them some grounding on how to serve this market when it comes to information requests, interconnection studies, etc.”