The Microgrid Resources Coalition has proposed a new microgrid participant — the microgrid organizer — which it hopes will eliminate complexities and confusion in regulating multi-customer microgrids.
The advocacy organization described the new entity in recent comments filed with the New York Public Service Commission as it reviews policies associated with Reforming the Energy Vision. REV creates dramatic changes to New York’s electric market structure that elevates use of microgrids and other forms of distributed energy.
Baird Brown, a partner with Drinker, Biddle and Reath and counsel for MRC, offered further details about the microgrid organizer concept in an interview with MicrogridKnowledge.com this week.
When a microgrid serves a single entity, say a university, it is clear who is in charge — the university. But it’s less clear when there are multiple entities served, as is the case with many of the emerging community microgrids. They might include a combination of businesses, homes, schools and institutions.
Who within the microgrid is responsible? Should they all be regulated? Or just certain ones. And if so which?
The microgrid organizer would serve as a much-needed single point of regulatory contact for these complex microgrids.
“The alternative would be to grab everybody who had anything to do with the micorgrid and regulate them all,” Brown said.
In fact, MRC is concerned that New York is moving toward regulatory over-reach because complex microgrids now have no one clear point of regulation. The commission has put forward language that suggests the possibility of going so far as to even regulate microgrid equipment manufacturers — those that provide lighting, solar panels, combined heat and power, geothermal and energy storage.
But it makes little sense, Brown said, to regulate the relationship between these equipment providers and the customer. Ultimately, this could mean regulatory reach that goes so far that it applies even to the relationship between the homeowner and the solar panel provider.
New Business Opportunity
Instead, under the MRC proposal the microgrid organizer becomes the entity liable for ensuring that the microgrid complies with state regulation.
Who would play the role of microgrid organizer?
It could be any of several entities, such as a microgrid developer, a competitive retail supplier (called ESCos in New York), an aggregator, a large industrial customer within the microgrid, or a government or environmental organization. The microgrid customers and developers would designate who the organizer will be — “rather than making the role the subject of rigid definitions,” MRC said in its filing.
As conceived, the organizer would operate under contract with the various participants in the microgrid, and might be required to meet certain financial obligations or other requirements.
In addition to being the regulatory point of contact, the organizer could serve other purposes as well. For example, the organizer might hire contractors to build or operate the microgrid or provide other services for the customers. Or it may provide services to the microgrid, such as islanding (and energy services while the microgrid is in islanding mode), thermal energy sales, collective sales of services to the grid, and other energy optimization services.
A private company serving as the microgrid organizer would be compensated. So the concept could give rise to a completely new type of business within the power industry, something like a competitive retail supplier, but not quite.
Like a competitive retail supplier, the microgrid organizer would be responsible for ensuring that the microgrid customers receive power at all times, so would manage contracts for power with outside entities. But the microgrid organizer’s scope would be smaller than that of a competitive retail supplier. So the MRC is encouraging the PSC to create a special regulatory category for microgrid organizers “that recognizes their compact geography, limited number of customers, contractual service requirements, and local, physical supply base.”
New Role for DSP
Under New York’s REV model, a kind of distributive energy grid forms, which is managed by what the state calls a distributed system platform or DSP.
The DSP was originally envisioned as something akin to an independent system operator that managed distributed energy in an auction process. But the concept has evolved differently, Brown said. State regulators are now viewing the DSP working more through request for proposals and load shaping tariffs with perhaps auction markets to follow. The MRC supports this approach.
Under this newer model, the DSP acts something like a utility that creates a resource plan and then fulfils the plan through competitive solicitations for power, energy efficiency, and other resources. However, in the microgrid world it’s not actually a resource plan but a “problem plan,” Brown said. Rather than identifying capacity needs, the DSP would uncover problem areas on the grid — say places in need of better electric reliability. Microgrids or other distributed energy providers would then bid to solve the problem.
These contractual models, along with MRC’s proposed microgrid organizer, hint at just how much New York’s REV is likely to change the electric power industry and its players — especially if New York becomes a model for other states, as some expect. More than a decade ago electric industry restructuring created the competitive retail supplier. The industry is re-creating itself again, and the microgrid organizer could become a next new market entity.
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