Poised for rapid growth, the microgrid industry looks a lot like solar and independent power in earlier days.
Key players are moving into place to capture market share; regulators are trying to sort out their role; utilities are watching.
But U.S. microgrids also face some unique twists — and undeniable ruts in the road.
Two microgrid leaders, Schneider Electric’s Jim Anderson and S&C Electric’s Mike Edmonds, sat down with us Wednesday at Smart Cities Week to talk about what will hurt and help the microgrid market as it grows.
They offered insight into the 50-state problem, need for scale, New York’s leadership, and microgrid collaborations.
Their companies are fielding more and more inquiries about microgrids from electric utilities, developers, communities, campuses and others who want the power reliability, resiliency and possible revenue streams the technology offers.
“It’s a buzz; there is no doubt about it,” said Anderson, who serves as Schneider’s vice president for Smart Cities.
But that doesn’t mean it’s always easy to build a business case for microgrids, Anderson warned. For one, microgrids are not plug-and-play, but so far are built as customized projects. Customers don’t necessarily understand this, so companies like Schneider and S&C spend a lot of time educating them.
In addition, microgrid developers find themselves grappling with the notorious 50-state problem. Because electric power is regulated largely by states, developers must master 50 sets of rules, many of them now in flux. This creates complication, expense and difficulty bringing the industry to scale.
This certainly isn’t a new problem, and it’s one that independent power producers (IPPs) have noted for years. But microgrids face a unique set of circumstances that make 50-state regulation particularly cumbersome, explained Edmonds, who serves as president for US Business at S&C Electric.
True, IPPs must grapple with grid connections, long-term power agreements and scheduling. But so must a microgrid developer. Add to that the utility relationship, safety, reliability, dispatch, optimization within the grid and the integration of the buildings served by the microgrid.
“It’s not for the faint of heart. It can be figured out. But it’s complicated,” Anderson added.
Still in Reagan Era
Further, the regulatory models have yet to catch up with the new era of distributed energy resources. As Edmonds pointed out, “We have a regulatory system set up in the Ronald Reagan Era.”
In restructured states, utilities generally cannot own generation. This was done to prevent utility market dominance. But now in places like Texas, the rule inadvertently harms a new and valuable resource: advanced energy storage. Storage finds itself slotted by regulators as generation. And it’s a poor fit.
“We have states that make it illegal for the wires company to own storage. If it is illegal for them to own storage, it is going to make it impossible for them to have a microgrid,” Edmonds said.
States need to get their rules up to date for a new microgrid-driven world. The federal government could help too, the executives said.
Both the North American Electric Reliability Corporation and the Federal Energy Regulatory Commission focus on reliability, but in the bulk market, not the distribution level where microgrids reside and where attention is now needed.
“We’ve put some great technology in the transmission side. Yet when you think of our distribution grid, very little of it is automated,” Edmonds said
Building a faster road
What will ultimately advance the microgrid market?
The executives said they see the industry getting past the ruts and bumps of the early years and prospering long term.
New York is offering a glimmer of what’s to come with its Reforming the Energy Vision (REV) — the creation of a market-based distributed grid — and its accompanying NY Prize, a state competition that will provide $40 million for new microgrids.
Anderson called the NY Prize a “mini-stimulus,” akin to the larger federal stimulus that spurred smart grid and green energy development under the American Recovery and Reinvestment Act of 2009.
Edmonds said the NY Prize is a “great incubator” and an “early footprint” for the microgrid market. “I see those successful projects giving us encouragement as an industry to add more.”
Today’s big push for more energy storage also is driving a lot of interest in microgrids. Edmonds said that after customers install energy storage and optimize their buildings, they start to ask, “Oh, can I have a microgrid?’
Microgrids in smart cities
Microgrids are not only changing the way we receive power; they also are changing the way the industry operates. New industry partnerships are forming because microgrids often necessitate collaboration, the executives said.
Unlike generation or wires development, microgrids demand several kinds of expertise. After all, they are in many ways a mini-grid, containing many different elements of the central grid.
S&C and Schneider point to their own partnership in microgrid development as an example.
“We both have different but complementary channels to market, complementary technology. I think we are going to see the industry have to have partnerships like this. I know that there are some who say they can do everything. But the fact of the matter is that you cannot,” Edmonds said.
The Smart Cities movement, too, is encouraging this kind of collaboration, as companies from a wide range of backgrounds — power, transportation, water, data and automation — join together to recreate new kinds of communities. It is a coming world of driverless cars, thinking lights and the Internet of Things — and microgrids to make sure all of the intelligence remains powered.