Resilient power — what keeps the lights on when the central grid fails — is evolving from a concept into an industry.
Its roots lie in the realization that loss of power is at best uncomfortable, at worst dangerous in today’s electricity-reliant society. Outages also are expensive. So averting power loss has a monetary value to society.
This value is giving rise to the resilient power industry — microgrids, energy storage, distributed generation, demand response, smart grid and other energy products that either provide energy in a crisis or avoid its loss in the first place.
The Clean Energy Group, an organization instrumental in the rise of renewable energy in the U.S., is now helping to define and foster this new industry through its Resilient Power Project. The group recently issued an interesting report, “Resilient Power: What States Should Do Now: Guide to Resilient Power Programs and Policy.”
The report details some big investments states are making, particularly the Northeast, to seed the resilient power industry’s early years.
Hard hit in 2012 by Superstorm Sandy, the Northeast states invested $400 million in resiliency in the 2 ½ years following the storm. Forty municipalities in the region now have resilient power projects underway. And this year, alone, the Northeast will install resilient power at 90 critical facilities — emergency shelters, waste water treatment plants, and the like, according to the report.
Now that states have kick-started resilient power, what’s next for the industry?
It’s not yet clear exactly who the dominant industry players will be: utilities, independent companies, or both. Nor is it clear exactly how they will make money on resilient power. And that’s one of the big roadblocks for resilient power — its value has yet to be fully quantified in markets.
Some revenue streams, however, are starting to come into focus.
Independent companies are deriving revenue by using resilient power systems in demand response programs or by selling ancillary services to the grid.
As the report notes, a new kind of supplier is emerging from this opportunity. These independent developers co-locate energy storage and renewables in buildings. The supplier earns revenue by selling frequency regulation services to the grid and possibly engaging in electricity arbitrage. Meanwhile, the building owner gets more reliable energy.
PJM is known for having the best frequency regulation market, and the grid operators in New York and California are known for their demand response programs. Unfortunately, though, nationwide these markets remain “fragmented and highly location specific,” the report said.
For utilities, resilient power may offer a new profit center — and they need one with U.S. electricity demand flat and fewer power plants and transmission lines being built. By way of example, the report describes a $12.5 million microgrid project in Vermont built by Green Mountain Power. Regulators allowed the utility to rate-base the cost.
However, in deregulated states, where utilities cannot own generation, the verdict is still out on whether or not utilities will be allowed flow the cost of microgrids and storage through rates.
“Although storage does not actually generate electricity, and acts as a load as much as a supplier of power, it has not been specifically defined in most states, meaning that it is likely to be lumped in with generation for regulatory purposes, rather than considered a transmission or distribution system asset, which could allow utility ownership,” the report said.
These are some of the issues that need to be resolved to create a thriving resilient power industry.
What’s it Worth?
But an even bigger question is: What exactly is the monetary worth of keeping the lights on? And how should resilient power be paid for this service?
During power outages, microgrids serve as power oases for communities. Yet, they are not paid for this service.
See MicrogridKnowledge.com’s new report, “Community Microgrids: A Guide for Mayors and City Leaders Seeking Clean, Reliable and Locally Controlled Energy”
Knowing how you make your money is rule #1 for any new business. Yet, for resilient power, revenue streams remain somewhat murky.
That’s not to say projects aren’t going forward. With the help of early state funding, cities and towns are installing microgrids, solar plus storage and combined heat and power. Others, like colleges, hospitals, pharmaceutical companies, data centers are investing on their own to keep the lights on.
But for the resilient power to become a widespread benefit for the rest of us, for a thriving industry to develop, regulators need to better define the value of averting power loss.
Otherwise, resilient power may be a premium service, with the few able to buy groceries, charge phones and get gasoline during a prolonged outage — and the rest of us remaining in the dark.
“Resilient Power: What States Should Do Now: Guide to Resilient Power Programs and Policy,” is available from the Clean Enery Group free of charge here.