Issuing a request for proposal is a common way for a facilities manager to find microgrid developers and vendors. How can you create a microgrid RFP that attracts high quality responses? Erik Svanholm, vice president, non-wires alternatives for S&C Electric, offers insight.
Suppliers and integrators of microgrids are in the business of meeting their customers’ energy needs, and the most common way for supply to meet demand is through requests for proposal (RFPs).
Through this formal procurement approach, microgrid end-users try to find the greatest value among detailed proposals submitted by capable suppliers. For mundane equipment purchases or construction projects, the RFP is an easy and effective way to ensure competitive pricing and desired functionality.
For microgrids, however, successful RFPs require hard work and careful consideration. Understanding the key elements of building a successful RFP up-front will help everyone throughout the process.
Define your microgrid needs
Determining which microgrid proposal promises greatest value requires a clear definition of what “greatest value” means. Without clear metrics for value it’s impossible to rigorously compare and rank proposed solutions.
Microgrids usually offer multiple sources of value, including economic, resiliency, and sustainability factors. The relative importance of those value sources will vary in the eyes of different stakeholders. Identifying the operational priorities of a contemplated microgrid before crafting the RFP is important because, when everyone understands the task at hand, the proposed solutions will match the problems to be resolved.
Determining specifically what a new microgrid must do — and what it doesn’t need to do — are the most challenging tasks in microgrid development. Part of this work is determining existing constraints at the microgrid site, including load profiles and site limitations. Is there an existing data infrastructure that will allow the microgrid components to communicate, or will building the data infrastructure be included in the project scope?
Determining long-term responsibility for operations, maintenance, and system cybersecurity are part of this effort, too. These difficult questions must be answered eventually, so having the answers early on makes the process much easier.
Thinking through technical, financial, and stakeholder matters while shaping the scope of a microgrid project requires a hefty effort.
For example, one commonly required microgrid feature is black start, meaning the ability to energize without any external power source. But answering the basic planning question, “Is black start capability required for my microgrid?” requires more than a yes or no answer.
The important detail of how fast the microgrid is expected to come online must be evaluated and included in an eventual RFP. An instantaneous, electrically seamless response is much more complex and costly than allowing a two-minute startup time. Many variables in microgrid design are sensitive to specifics such as this.
Similarly, each additional use case included in a microgrid design not only increases potential value, but it also increases complexity, cost, and risk. Being strict about separating needs from wants in the functionality wish list goes a long way toward keeping the project scope and budget on target.
Determine financial considerations
Central planning tasks also include a review of the financial considerations around a new microgrid. Deciding whether the budget is flexible based on proposed system capabilities or is set as a fixed sum is important because the adage “you get what you pay for” tends to apply strongly to microgrid projects. The choice between procuring microgrid functionality as a capital investment or as a long-term service plan will also affect which companies respond to the RFP and the resulting system designs.
Develop a long-term view
Thinking through technical, financial, and stakeholder matters while shaping the scope of a microgrid project requires a hefty effort. Skipping the preparation step altogether and jumping straight to writing the RFP with these considerations left open-ended can be tempting, especially if the need for the microgrid is urgent. This accelerated approach is sometimes rationalized as a way to obtain the widest possible solution set from the market, but it may just as easily have the opposite effect.
The risk of trying to hit a fuzzy target may discourage experienced suppliers from responding, and bidders that do respond are forced to make a variety of assumptions that are sure to drive up contingency budgets and overall system cost. Worst case, misunderstandings and severely diverging expectations might be discovered only after the project is awarded and underway.
Fortunately, many resources are available to help microgrid end-users answer critical planning questions and organize their procurement plans to make the process easier for everyone involved. Universities, non-profits, and microgrid suppliers and integrators offer case studies, white papers, and guidebooks to help customers orient themselves to all the important considerations. They developed these tools to help guide the process and will happily respond to requests for assistance, whether formally or informally.
Still, microgrid buyers will often find it a better investment to split the procurement process into two parts: A planning phase and an execution phase. Engaging an experienced party to create a feasibility study or master plan will help ensure all stakeholders are included and priorities and constraints are aligned.
For complex projects, the most experienced microgrid suppliers may also be the best consultants at this stage. Time and money spent on this phase makes it easy to write the subsequent RFP.
In an RFP, less is not more
Thorough preparation sets the stage for the second element of the RFP equation: obtaining detailed proposals. Naturally, detailed proposals are only possible if the RFP also includes specifics. The more information and data that can be provided by the end-user in the RFP, the better prospective suppliers can understand the situation and come up with effective system designs. Maps, electrical one-line diagrams, and detailed load profiles are very helpful in this regard.
Performance requirements for the new microgrid should be quantified to avoid confusion. For example, when describing goals for resiliency operations, the phrase, “optimize on-site generation in islanded mode” is ambiguous while, “provide four megawatts of power for 48 continuous hours” is precise.
The reward for carefully preparing and broadly publishing a strong RFP may be a small mountain of proposals from bidders large and small. Filtering the responses to make sure the final short list is limited to truly capable suppliers is the third element of the RFP process.
The best indicator of supplier capability is its previous experience, and many RFPs require documentation of relevant past projects. An even better approach is to require references and to interview leading bidders’ past customers directly. Savvy microgrid buyers will strike from consideration any prospective suppliers that can’t provide several references for this purpose.
The process of validating providers’ skillsets is time-consuming, so rather than inviting all comers to respond using a “full and open” RFP, it may be more efficient to pre-select a small number of qualified suppliers to compete for the project. This could be done by simply tapping several companies with the credibility of satisfied customers or by conducting a formal request for qualifications (RFQ) process before proceeding with the RFP and creating a short list of RFP competitors from those.
The RFQ path is particularly beneficial for complex projects where the breadth of necessary expertise encourages or requires responses from teams of companies rather than individual firms. Whether for individual companies or teams, this “down-selection” approach limits the volume of proposals to review while ensuring competitive pricing. Additionally, because the selected suppliers know their chances of winning are closer to, say, one in four than one in 50, proceeding this way increases the chances the selected competitors will deliver their most creative and aggressively priced proposals.
When undertaking projects, author Stephen Covey advised “beginning with the end in mind,” and that is certainly good advice for microgrid procurement using requests for proposal. Doing the hard work early and investing in the process to understand, quantify, and prioritize will quickly yield returns through faster and easier crafting of a strong RFP. From there, capable suppliers will provide detailed proposals, and deciding which delivers the greatest value becomes a streamlined process.
Erik Svanholm is the vice president, non-wires alternatives for S&C Electric.