Even as the market grows, developers struggle to obtain microgrid financing. Why? What are the obstacles? And how can project developers overcome them? The Microgrid Knowledge white paper, “How to Get Your Microgrid Projects Financed,” explores these issues through interviews with prominent developers, financiers and other sources. Below is an excerpt that focuses on the potential of standardizing microgrids.
Financing a microgrid is difficult if developers use a number of different vendors and technologies, as is common.
An integrated and standardized solution like Scale Microgrid Solutions’ (SMS) expedites the development cycles and cuts costs while simplifying microgrids, making them more appealing to financiers.
The standard SMS system is a behind-the-meter modular microgrid system that utilizes solar photovoltaics, lithium ion battery storage and natural gas generation. These assets are operated by a microgrid control platform, co-developed with Schneider Electric, that allows customers to optimize the economic, operational and environmental benefits of distributed energy resources.
Bowery Farming contracted with SMS to build a solar, energy storage and natural gas microgrid to help the facility reduce costs, increase resiliency and improve the sustainability of operations.
With this standard microgrid design, the company is able to reduce design and construction costs. SMS aims to build microgrids that are 30% cheaper than “piecemeal” or non-standardized solutions.
Standardizing microgrids can also help overcome regulatory obstacles, such as those associated with interconnecting to utilities—often a big hurdle to developers.
“We have experience with a lot of these utilities; we can more accurately predict problems. More broadly, our whole philosophy is to manage all the parallel paths that you have to go down,” says Ryan Goodman, CEO and co-founder, Scale Microgrid Solutions.
While financing has historically slowed microgrid development, standardizing microgrids simplifies the product and helps financiers know what to expect.
SMS’s goal is to provide one integrated product nd process. By managing all of the parallel paths (technological, regulatory, financial), SMS reduces risk and inefficiencies.
An example of a project by SMS is the Bowery Microgrid. Bowery Farming, recently named one of Fast Company’s 50 most innovative companies, has constructed the world’s most technologically advanced vertical farm in New Jersey. Bowery Farming contracted with SMS to build a solar, energy storage and natural gas microgrid to help the facility reduce costs, increase resiliency and improve the sustainability of operations.
The microgrid system will operate both in parallel to the grid and in ‘island-mode’ during grid outages. It will be able to provide demand response and other ancillary services to the grid.
“The solution is very modular and the overall system uses the same building blocks that we use in every one of our installations, from the hardware to the software to the contracts,” says Goodman.
With this model, Scale Microgrid Solutions hopes to help integrate decentralized solutions into the centralized grid, yielding sustainability, resiliency and cost benefits.
Moving the market with better tools for seeking financing
Microgrid developers have encountered challenges finding financing, in spite of the fact that new financing models are becoming available. The developers struggle conveying these complicated projects to financiers because they often lack experience working with financiers and don’t know the language financiers speak. In addition, lack of standardization makes financing difficult. However, by preparing information related to a project’s risks and rewards and focusing on the financier’s needs, microgrid developers will be better equipped to attract financing.
This Microgrid Knowledge special report series on microgrid financing also covered the following topics in previous weeks.