When massive storms hit, we get religion. Superstorm Sandy was that kind of storm. States along the US East Coast emerged from the wreckage two years ago this week with a new devotion to creating a more resilient electric system.
Where the central grid failed, microgrids kept the lights on. So government leaders, businesses, and even some consumers began asking, why don’t we have more of these? Thus began a rebirth for a technology that has been around for a century, but received little attention before.
“There was a major sea shift in the electric industry right after Sandy,” said Darren Hammell, chief strategy officer and co-founder of Princeton Power Systems. “There were a lot of infrastructure problems after the storm, but electricity rose to the forefront. The word resiliency entered everybody’s vocabulary. The primary topic was how do we get the power back on quickly and how do we ideally not lose power. And that transitioned into much more awareness of microgrids, islanded systems, and distributed energy.”
Since then, several states have crafted policies to foster microgrid growth. Large energy contractors, engineering firms, and project developers have entered into the space, along with energy storage, solar, software, smart grid and related vendors. Not a lot of new microgrids have been built yet, but the foundation is being set.
Utility activity more than doubled
Even the utilities – often the slowest to adopt new trends – are positioning.
Just a few years ago utilities were still questioning if microgrid technology is safe, according to Peter Asmus, principle research analyst with Navigant Research and author of Microgrid Enabling Technologies.
“Now utilities are less worried about that because a number of microgrids have operated. People haven’t died – they haven’t blown up,” Asmus said. “Now utilities are more worried about the business model. They are saying, ‘How can I play a role in this market?’”
Utilities are asking: How can I play a role in the market?
Microgrid growth looks a lot like solar did a decade ago. Some utilities were slow to invest in solar and missed out on its meteoric rise. Chastened, a growing number are intent on moving ahead more quickly on microgrids.
Since 2012, “the number of utilities that I can talk about doing something with microgrids has more than doubled in the US, and has probably tripled,” said Asmus, who is now preparing a report on utility distribution microgrids, which Navigant Research expects to release before year’s end.
Central Hudson Gas & Electric has made a particularly interesting move. The New York utility wants to design, build and operate microgrids at the request of customers, who would pay a fee for the service on their utility bills. The proposal is under review by the New York Public Service Commission.
States drive microgrid growth
For those unfamiliar with the heavily regulated power industry, the market’s pace may seem slow. It is an industry that operates under a notoriously measured pace. The biggest players – utilities – move cautiously. And for good reason. Utilities must justify their investments, typically after the fact, to state regulators in order to recover costs.
Private power companies act more quickly, but also with care, often gauging each step against the emerging government rules, policies and incentives that can make or break an energy technology.
So given these circumstances, government often heavily influences early market growth. States, in particular, act as first drivers for many new electricity markets – and driving toward microgrids they are, at least along the coasts.
“Many projects are moving forward in states like Connecticut, Massachusetts, Maryland New Jersey, New York and others,” said Philip Barton, microgrid and advanced reliability program director for Schneider Electric, which is making a strong play into the microgrid market. “Yes, the industry is growing, and about where I think it would be at this point.”
“Yes, the industry is growing…” – Philip Barton, Schneider Electric
Connecticut started exploring microgrids even before Sandy. The state was walloped a year earlier by Hurricane Irene and a freak October snowstorm. Both caused widespread and lengthy power outages. So it’s not surprising that it was Connecticut that constructed the Northeast’s first state-funded microgrid, a project unveiled in May at Wesleyan University. The microgrid was one of nine that won funding in Connecticut’s first microgrid solicitation, which offered $18 million last year. This year, the state issued a second RFP that resulted in $5.1 million for two projects, one being built by Schneider and the other FuelCell Energy. In all, the state has granted about $23 million for 11 microgrid projects from two solicitations. A third one is in planning.
Meanwhile, Massachusetts recently awarded $7 million for six microgrid and resiliency projects, and the Massachusetts Clean Energy Center plans to conduct microgrid pilots. Other states, too, are pursuing rule changes, pilot programs and grants, as is the Department of Energy. (See our Think Microgrid Reports for more details on state activity.)
But New York, is perhaps, the most interesting state to watch because of regulatory changes contemplated through Reforming the Energy Vision, or REV. Now before the state public service commission, REV is expected to heighten the market standing of microgrids and distributed energy resources.
Asmus credits the commission chair, in part, for the aligning of stars in New York. “The new head of the New York Public Service Commission is Audrey Zibelman, who comes from a microgrid company, Viridity Energy, and before that came from PJM, which probably has the most aggressive, third party demand response market in the US. With that kind of background, she’s obviously an advocate.”
Governor Andrew Cuomo, who appointed Zibelman, also has been pushing microgrids through the state’s resiliency programs. Among other things, the state is planning a $40 million competition for community microgrids, called the New York Prize.
Utilities versus competitors
The microgrid industry’s prospects depend not only on utility interest, but also utility willingness to cooperate with independent developers. How easy or hard utilities make it for independents to install and interconnect microgrids will vary from state to state. Regulators can play a hand by instituting the right carrots and sticks for utilities.
As part of REV, New York is trying to tackle this problem, particularly how a private microgrid – one not owned by a utility – can serve multiple customers without running afoul of utility franchise rules. A microgrid that wants to serve, say, a gas station, community center and hospital would probably have to string power lines across utility rights-of-way, which is not allowed in many states without utility permission. (Massachusetts may be an exception.)
Connecticut tried to resolve the franchise issue by passing a law that allows construction of such multiple-load projects by municipalities. But even with that, issues are arising in the state over utility jurisdiction, according to Asmus.
“Utilities are still trying to figure out where does their ownership end and where does the other entity’s begin. So you still have issues to be worked out,” he said, pointing out that despite Connecticut’s financial support for microgrids, only one state-funded project is operating so far.
New York utilities seem more amenable to microgrids, particularly in the city, where there is no room to build a centralized power plant. “So Con Edison (which serves NYC) already has a number of microgrids operating in its service territory,” Asmus said.
Not influenced by Sandy, California regulators also are moving forward on microgrids, but in a different way than the Northeast.
“In California, it’s more like microgrids are popping up in the absence of utility support. But now the public utilities commission has started a proceeding called distribution resource planning. The goal of it is to allow utilities to procure microgrids just through standard regulatory proceeding,” Asmus said.
Utilities would plan microgrids where they make the most sense for the health of the larger electric grid – where a need exists. This contrasts to a more customer-centered approach to microgrid development – where say a data center or research facility might build a microgrid to ensure its own supply.
Greater complications and benefits
What’s become clear is that developing and interconnecting a microgrid is not a simple matter. It’s not just the regulatory rules or utility predisposition. The technology, itself, is more complex then say a rooftop solar panel installation.
As Chris Bleuher, business development manager at Schneider Electric puts it: “The reality of designing, constructing and commissioning a microgrid is much more complicated than most developers are prepared for. We feel that owning the design and development, rather than subbing it out, is critical to success, especially at this early stage where there are many eyes waiting to see how the microgrid market plays out.”
This complexity also translates into greater benefit. Microgrids offer more than just back-up power in an emergency. They can provide highly efficient electricity the rest of the time, thermal energy when they include combined heat and power units, and ancillary services (such as balancing and frequency) to the central grid.
Profound change takes time – Darren Hammell, Princeton Power Systems
A big part of the story gaining traction “is the tremendous value microgrids bring the other 8,700 hours of the year when reliability is not an issue, in terms of thermal and economic efficiency, when integrated with an intelligent smart grid design and control system – and viewed as a solution to multiple host needs,” said John Webster, director of regulatory affairs for Icetec Energy Services.
And, of course, government isn’t the only driver. Universities, research facilities, data centers, the military, and others have built microgrids for years – well before Sandy. These have resulted in several “one-off” systems, most likely to be found in areas where electricity prices are high, Asmus said.
Princeton University is one of the most famous of the early microgrids. It has won accolades for its performance during Sandy.
Since then, the university has “gotten a very steady stream of inquiries about Princeton’s microgrid and requests to teach others about its features and benefits,” said Edward “Ted” Borer, the university’s energy plant manager. “I expect peer microgrids who got through Sandy with the lights on are getting regular requests, too.”
Coming, but not there yet
The storm hasn’t been forgotten; interest in microgrids is growing. Developers report many projects in the works, and high interest among communities, institutions, businesses and other hosts. Navigant Research sees the market growing from $4.3 billion in annual revenue to as much as $36.2 billion in 2020, under an aggressive growth scenario.
Still, in terms of actual microgrids built as a result of Sandy, not many exist – yet.
Princeton Power Systems’ Hammell points out that it takes “a lot of momentum and a lot of time to see really profound change.”
If the next Sandy were to hit now, and caused massive power outages, “I’m not sure things would be all that different than they were two years ago. I don’t think a whole lot has really changed,” Hammell said. “But it is changing. It is still going to take several more years before we make a lot of progress. But hopefully we’ll be able to keep up that momentum that began in 2012.”
Learn more about the North American microgrid market from our new report, The Energy Efficient Microgrid, downloadable free of charge courtesy of Solar Turbines and the International District Energy Association.