Colorado Roadmap Identifies Outage-Prone Communities and Microgrid Deployment Challenges

A number of Colorado communities are vulnerable to extreme heat and wildfire or are located at the end of long feeders that could be compromised by climate-induced challenges, according to a microgrid roadmap released Jan. 7 by the Colorado Energy Office.

For example, the southwest corner of the state is especially susceptible to the impacts of climate change, the roadmap said.The counties of  La Plata,

Montezuma, Dolores and San Miguel are most vulnerable to drought, extreme heat and wildfires. Many small mountain towns in the region are located at the end of long feed lines.

In addition, the Central Mountains region, a popular tourist destination, is also prone to power outages because of natural disasters such as wildfires, blizzards and avalanches.

To address such challenges in these and other parts of the state, Colorado Governor Jared Polis in June 2022 signed two bills that aimed to create the roadmap and make microgrid grants available for municipal utilities and cooperatives.

Microgrid challenges include lack of grid-services compensation

 Along with pinpointing regions susceptible to power outages, the roadmap identifies the issues that stand in the way of microgrid development. They’re issues common to other parts of the country and include:

• Lack of compensation mechanisms for microgrids that could provide grid services. This undermines confidence from investors.
• Lack of awareness about microgrids and their benefits.
• Initial costs that are seen as imposing risks on investors.
• Difficulty placing values on the resilience and reliability that microgrids provide.
• The need for ownership structures and rules relating to access to public rights-of-way.
• The need for interconnection standards for microgrids in Colorado.

“The roadmap is a good start,” said Eric Darst, founder of Community Greenfields, a nonprofit that aims to deploy community microgrids along with agriculture in Colorado. “The roadmap demonstrates the state is thinking it through and looking at reliability and resilience.”

Possible solutions to microgrid challenges

The roadmap identifies possible solutions to the challenges, including:

• Identifying the benefits that microgrids can provide and creating mechanisms for compensating the value of those services.
• Creating a vision and goals for microgrid development that support the state’s energy and climate policies.
• Boosting education and outreach about the advantages of microgrids.
• Clarifying ownership structures and rules related to public rights-of-way access.
• Updating interconnection standards for microgrids in ways that facilitate microgrid interconnection.

In its discussion of compensation methods for microgrids, the roadmap pointed to establishing utility tariffs for ancillary services or creating a distribution system operator (DSO). The roadmap also identified compensation strategies in other states.

The DSO concept has been gaining ground in other parts of the country as a way to deploy microgrids as local energy.

For example, proponents of deploying local energy in California have said that an open-access DSO could pay for the use of utility wires.

In California, a DSO would have a relationship with an Independent System Operator, and the DSO could run an electricity system at the distribution level. Under this model, a municipal entity could build and own its own DERs, then sell the power.

Maine began exploring the option of creating a DSO to boost deployments of DERs. As conceived, the DSO would operate an open-access, multi-directional, real-time market for distributed energy and act as the only interface with ISO New England, the regional grid operator.

New York’s Value of Distributed Energy Resources program a possible model

 To compensate microgrids for grid services, the Colorado roadmap also pointed to New York’s approach under the Value of Distributed Energy Resources (VDER) program.

“The New York State Public Service Commission established VDER or the ‘Value Stack’ to compensate projects based on when and where they provide electricity to the grid, and compensation is in the form of bill credits,” the roadmap said.

Under this model, compensation is based on a number of factors, including the energy, capacity and environmental value of the resource, among other issues.

Creating a regional transmission operator (RTO) that could administer ancillary service markets could also help the state achieve its microgrid goals, the roadmap said. RTOs, such as Southwest Power Pool and Western Power Pool are created to help maintain the integrity and stability of the transmission system.

Wholesale markets could benefit microgrids 

Colorado and the western states–except California–don’t now participate in an RTO. But Colorado Senate Bill 21-072 requires Colorado transmission utilities to join an organized wholesale market by 2030.  Including state utilities in these markets could potentially expand the ancillary services markets into the state. This would provide economic benefits to owners of microgrids, the roadmap said.

Microgrids have an important role to play in helping ensure residents and businesses have resilient energy, given the climate risks, said John Parks, Grid Resilience Program Manager for the Colorado Energy Office.

“Our state is committed to keeping Coloradans connected to clean and affordable electricity, ensuring continuous operation of essential services while keeping lights on, vehicles charged and homes warm in increasingly electrified communities,” he said.