Benefits and Barriers to Deploying Microgrids for Retail Businesses

Oct. 8, 2019
Always-on power is important in the retail sector for a range of reasons. So why don’t more retail businesses install microgrids? Here are the barriers — and the solutions.

Why don’t more retailers install microgrids? Here are the barriers — and the solutions — in an excerpt from a new special report from Microgrid Knowledge that explores how retail businesses use microgrids to reduce costs and enhance resiliency and reliability.

Always-on power is important in the retail sector for a range of reasons. Without electric resiliency, retailers cannot provide their services for the community. 

  • Access to food and water can become limited as perishable items spoil without the proper temperatures 
  • Pharmacies cannot fill prescriptions, which delays patients’ access to critical medications; items like temperature-sensitive medicines and baby formula become unusable
  • Gas pumps at convenience stores are unable to function, restricting travel or ability to evacuate in the case of a long-duration outage
  • Home improvement and lumber stores cannot provide community members with necessary safety and repair tools
  • Distribution centers are inoperative, creating delays in the supply chain of retail stores

Download the full report.

Retailers can avoid these problems through microgrid deployment. So, why don’t all retailers have microgrids? Some barriers still exist — although they are beginning to tumble. 

Cost is a common barrier — or at least perceived to be one. Microgrid costs have fallen in the past several years, and the trajectory continues downward. Navigant Research estimates overall costs for microgrids have declined by 25% to 30% since 2014. 

The No or Low-Money Down Option 

In recent years, microgrids have become more affordable with the emergence of no or low-money down financing options. 

The model is known by various names, such as microgrid-as-a-service, energy-as-a-service, and reliability-as-a-service. The retailer secures the benefits of a microgrid but is spared from making a capital outlay or taking on the risks of ownership and maintenance. In broad terms, a third-party finances, owns and manages the microgrid system. The retailer pays a fee for the services the microgrid provides. 

The as-a-service model now accounts for 81% of microgrids deployed globally, according to Navigant Research. The microgrid industry adopted the approach from the solar industry, which has used it for more than a decade. In fact, the model often is credited for the rapid growth of residential solar installations. 

Under the ‘as-a-service’ model, the retailer enjoys microgrid benefits at a fraction of the total cost of ownership. The developer is able to keep the cost low because of future revenue streams from dispatchable grid services. 

Aggregation Advantages 

Retailers sometimes have concerns about the size of backup systems. A small retailer may not use enough electricity to support the economies of scale necessary to reap the full financial benefits of the microgrid, particularly when it comes to selling its services to the grid. 

Fortunately, microgrid-as-a service opens the ability for the microgrid owner to contractually aggregate the output of multiple microgrids, even if they are spread out geographically. 

By aggregating a collection of microgrids, a third-party owner can layer revenues and increase microgrid value as they sell a variety of energy products and services to local utilities and the wholesale power market. 

The microgrid offers valuable services to the grid because its controller monitors grid conditions and acts upon the data. The entities that run wholesale power markets, Regional Transmission Operators (RTOs) and Independent System Operators (ISOs), need a variety of products and services to continuously balance the supply and demand of electricity in real time. Those services include frequency regulation, voltage support, spinning reserves, and operating reserves. 

Microgrid-as-a-service opens the ability for the microgrid owner to contractually aggregate the output of multiple microgrids, even if they are spread out geographically.

A single microgrid at a retail store might be too small to effectively offer products and services into the wholesale power market. But an aggregation of microgrids can achieve the required output to bid services into the market. 

Managing such energy transactions is not a core competency of most retailers. However, that is not a concern with a microgrid-as-a-service contract. The third-party owner manages the transactions. 

Installing a microgrid might seem out of reach or too formidable to a retailer, but by leveraging microgrid-as-service, a retailer can avoid the pitfalls of capital expenses and property ownership and gain electric reliability and cost reduction. 

Due to these advantages, microgrid use is on the rise. 

The next chapter looks at how microgrids emerged as an option for retailers and provides real-world examples. 

Also, if you missed the first two installments of the microgrid retail special report article series, see below to catch up:

Download the full report, “Microgrids for the Retail Sector: Your competition is in the dark, but you’ve got power,” courtesy of Enchanted Rock, to explore how businesses use retail microgrids to increase electric reliability and manage costs.  

About the Author

Peter Maloney

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