Utilities get the first crack at developing special public purpose microgrids in Maryland under a detailed strategy released this week by Governor Martin O’Malley’s microgrid task force.
Non-utility companies will get a shot at the public purpose market too, but not right away, since it will mean a “paradigm shift” in state regulation, said “The Resiliency through Microgrids Task Force Report.”
Like other East Coast states, Maryland has been eyeing quick development of microgrids in case another major storm, like the 2012 Sandy, causes massive outages. But microgrids in Maryland face many of the same obstacles as those elsewhere — issues surrounding franchise rights, competition and financing. O’Malley created the task force in February to create a roadmap to overcome the obstacles.
See how other states are preparing for microgrids in our report, “Think Microgrid: A Discussion Guide for Policymakers, Regulators and End Users.“
The task force envisions widespread deployment of various kinds of microgrids in Maryland because of falling distributed generation costs. But it chose to focus on public purpose microgrids first because they offer a quick path to grid resiliency. These microgrids include police stations, hospitals, shelters, stores, government offices, and other combinations of buildings that serve critical needs.
The task force says that public purpose microgrids offer broad benefits during a widespread outages. Even customers who are not part of the microgrid may use it to, say, charge a cell phone or fuel a car.
Such microgrids also can help the state meet demand for electricity over the long-term and provide ancillary grid services, the task force said.
Under the strategy, utilities get the first crack at development because Maryland law already allows utilities to own microgrids – even though it is a restructured state. Specifically, state law allows them to own generation to meet long-term demand. Utilities also have the ability to sell services from the microgrid into the wholesale market, the PJM Interconnection, the task force said.
Changes needed for competition
Independent developers or other third parties, however, face various legal blocks that need to be sorted out legislatively, according to the report. So their entry into the market may not be as quick.
Still, the task force said that the state should push for a competitive market to encourage innovation. It warned, however, that the state would be moving into a paradigm shift in the way it regulates electricity, so the issue should not be treated lightly.
Non-utility entities can – and have – already developed microgrids in Maryland that serve one customer on a single parcel. But market design and consumer protection issues arise when they serve multiple customers on multiple properties, as public purpose microgrids would.
Under current Maryland law, the independent public purpose microgrid would face franchise encroachment issues, as well as the specter of its rates being regulated as if it were a utility — a complex undertaking.
The report recommends legislative changes to allow competition for development of public purpose microgrids. Specifically, the report calls for exemptions from rate regulation for smaller microgrids, or for those that can prove to state regulators that they serve the public interest and do not harm customers.
Under the task force plan, rules would vary somewhat depending on whether the independent microgrid built its own distribution system or used the utility’s wires. If it used the utility’s wires, the public purpose microgrid would own only the generation, storage and control systems, and it would operate similar to a competitive retail supplier.
Best areas of microgrids
The report also pointed out the importance of letting private developers know the best places to build microgrids – areas where there is congestion and line loss, or vulnerability to severe weather or attack. Utilities and state officials should work together to map out the locations, keeping in mind that some of the information needed is sensitive and private, the task force said.
The state also should set up a grant program to foster microgrids, in particular public purpose microgrids, advanced controls, and energy storage, the report said.
In preparing the report, the group held several meetings with sister states, project developers, utilities, and non-profit think tanks, as well as ratepayer advocates, legal thought leaders, and others.
“Maryland is on track to become a leader in microgrid deployment,” said Abigail Ross Hopper, O’Malley’s energy adviser and task force chair. “By tackling these important questions of deployment of prototypical projects and cutting edge technologies, we can offer Marylanders another tool to increase the resiliency of the electric distribution system.”
The “Resiliency Through Microgrids Task Force Report,” is available here.
What are your thoughts on the Maryland strategy? Will it foster quick microgrid development, and how soon will independent companies be able to compete? Join the conversation on our Microgrid Knowledge LinkedIn Group.