MGK Editor Take II: Energy Markets are Complicated, Unpredictable and Perfect for Microgrids

Aug. 24, 2023
The energy transition landscape is no different, regardless of whether the fuel is coming from shale plays or the sun and the wind or lithium mined from the soil. Markets are tricky, unpredictable things, and new markets hide even more unknowns

The economics of energy change all the time—and always have.

Anyone who’s read Ruth Sheldon Knowles’ incredible history of the early oil industry, “The Greatest Gamblers,” has learned that the booms and busts of energy prices were there nearly from the beginning. A new thing high in demand begets good prices, which begets higher production, which begets over-production and then lower prices and then bankruptcy and then under-production and so on. What goes down comes around.

The energy transition landscape is no different, regardless of whether the fuel is coming from shale plays or the sun and the wind or lithium mined from the soil. Markets are tricky, unpredictable things, and new markets hide even more unknowns and challenges, as a new report from the Institute for Energy Economics and Financial Analysis noted earlier this week. Owners of traditional gas-fired power generation are having a difficult time in the competitive PJM market and other unregulated territories, given the new landscape with renewables installed all over the place.

Utility-scale renewables are on the rise and gas-fired power is holding steady, but making the economic sense of it all in a competitive format is so tough that utilities such as Dominion, Duke Energy, PSEG and American Electric Power are moving away from that part of it. They increasingly value the safety of a regulated market where rates are set at a more stable, regulatory level going forward, according to reports. Risk is reduced and long-term planning is a whole lot easier.

Microgrids and other distributed energy systems, meanwhile, are flourishing in PJM and other deregulated markets, such as California, where customers know all too well the impact of weather events such as hurricanes, superstorms and wildfires. FERC 2222, opening competitive markets to aggregated distributed energy resources, has been around a while now and may further change the future in transformational ways.

Utilities are hardly abandoning microgrid systems. Just last week, Pacific Gas & Electric tried a two-day experiment utilizing mobile Tesla battery systems to island test a microgrid in northern California. The diesel generators are still there as needed backup, but the innovation was to supply easily movable battery systems to create an adaptable, island-able microgrid.

The market moves are ever changing. As Microgrid Knowledge reported last week, infrastructure planner Fidelis New Energy wants to create a West Virginia microgrid complex utilizing natural gas, hydrogen, renewables and carbon capture to create net zero data centers. The upfront investment totals in the billions of dollars, but if successful the long-term benefit is enormous and economical.

Energy transitions are hard to see in the short term, as the visions may not be fully realized for decades. Think of the automotive and oil industries in the 1910s, for example. We know from history that fits and starts are a normal part of the course.

But the course is going forward for microgrids and distributed energy. Lags and busts will happen, but the fruits of experimentation and progress will prove to be overwhelmingly positive in the long run. You can gamble on that.

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About the Author

Rod Walton, Managing Editor | Managing Editor

For Microgrid Knowledge editorial inquiries, please contact Managing Editor Rod Walton at [email protected].

I’ve spent the last 15 years covering the energy industry as a newspaper and trade journalist. I was an energy writer and business editor at the Tulsa World before moving to business-to-business media at PennWell Publishing, which later became Clarion Events, where I covered the electric power industry. I joined Endeavor Business Media in November 2021 to help launch EnergyTech, one of the company’s newest media brands. I joined Microgrid Knowledge in July 2023. 

I earned my Bachelors degree in journalism from the University of Oklahoma. My career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World, all in Oklahoma . I have been married to Laura for the past 33-plus years and we have four children and one adorable granddaughter. We want the energy transition to make their lives better in the future. 

Microgrid Knowledge and EnergyTech are focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.

Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.

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