Not everyone sees the NY Prize as a big deal. After all, they say, the end stage of New York’s competition for $40 million is construction of about five community microgrids.
That’s not a world-changing number for a technology likely to underlie a coming grid-of-grids – a nationwide interactive network of distributed energy that will revolutionize the way electricity is owned and consumed in the United States. Nor is it a lot for a state that wants to drive this change.
But look a little deeper at the NY Prize, and it’s hard to miss the genius behind its design, and the likelihood that it will spur far more than the handful of community microgrids that will win the final jackpot in 2018.
NY Prize is not an old-school subsidy program — it is not underwriting technology until it can stand on its own. Nor is it research and development money.
“We’re not looking for science projects. These need to be designed so that there is a survivable business case,” said Micah Kotch, NY Prize director, during a recent interview. “It is an exercise in market animation.”
“Market animation” has become the catch-phrase of New York’s Reforming the Energy Vision (REV), a policy being carefully watched by energy insiders nationwide because of its intent to shift market dominance from centralized technology and ownership to decentralized local energy. It aims to make communities and homeowners key market players in a space now largely monopolized by utilities and large power plants.
The NY Prize is part of REV and carries the same emphasis on setting up rules so that the new market can flourish — creating market animation. While REV focuses on distributed energy in general, the NY Prize focuses on community microgrids in particular.
NY Prize Seeding a Microgrid Market
But what exactly makes the NY Prize a kind of Johnny Appleseed of microgrids in the state? It has to do with how its three-stage competitive structure creates a path to attract private investors.
In the first phase, NYSERDA offered $100,000 awards for communities to conduct microgrid feasibility studies. After an overwhelming response, NY Prize made 83 awards, rather than the expected 25 awards.
Most of these communities will probably receive no further NYSERDA funding. But that doesn’t preclude their projects from moving forward. With feasibiity studies done, their chances are greater of finding private financing. The studies will include cost and site analysis.
And next comes Stage 2 of the competition, expected to begin in November, where communities will vie for $1 million prizes to design their microgrids. And again the approach is clever — it welcomes new applicants, not just those who won feasibility study money. So now, private investors and companies will have insight into an even broader pool of prospects.
“We think by funding feasibility and by funding design we are going to help identify where these good projects can actually be found. The third-party capital will find the right projects,” Kotch said.
In the final and third stage, winners will receive up to $5 million to put toward microgrid construction. But in truth, both winners and losers, could attract a lot more private backing along the way.
Private Players See Value
It remains to be seen if the NY Prize will enliven markets — but it certainly is enlivening market players. Teams of private companies are in New York assisting communities with their early planning. Many significant microgrid players — among them Anbaric, GE, IPERC, NRG Energy, S&C Electric, Schneider Electric and Siemens — are helping not just one but multiple communities.
“We’re really excited to be involved in several projects for the NY Prize. I think it’s groundbreaking. What’s really different about this is the planning that went into this by NYSERDA,” said Philip Barton, director of microgrids and distributed energy resource management at Schneider Electric.
In particular, Barton said, NY Prize leadership had the foresight to involve the state’s seven investor-owned utilities and identify trouble spots on their systems that might benefit from community microgrids and distributed energy. This makes the competition a win for utilities, rather than a potential competitive threat.
The NY Prize has a side benefit too, according to Kotch. Communities will take a close look at their energy systems as they undertake the feasibility studies. This will illuminate opportunities for energy efficiency and distributed energy, he said.
Moreover, the program is going to generate a vast amount of data. By February, when communities finish the feasibility studies, New York will be the custodian of more data on microgrids than anywhere else in the world, Kotch said.
How will New York use that data?
“We’re going to want to look to look for patterns. We think there are mechanisms where we can use that data to inform changing regulations and policy. We think there are important metrics to be tracked around the potential for job creation, the potential for emissions reduction and the potential for systems efficiency,” Kotch said.
NY Prize End Game
It remains to be seen how many microgrids New York will produce. But all indications are that there will be many. And lessons learned in New York are likely to influence development elsewhere.
Kotch described the quality of the microgrid projects offered by communities so far as “tremendous.”
“But it is a competition and it is going to be a really difficult decision regarding the projects that move from feasibility to design, I would fully expect, though, that there will be some projects that move forward on their own and I think that is fantastic,” Kotch said.
So distributing the final money in 2018 may mark the end stage for the NY Prize, but clearly not the competition’s end game.
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