What Does 2015 Hold for Microgrids?

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Credit: Dennis Schroeder, National Renewable Energy Laboratory

Microgrids keep the lights on when the central grid fails. That’s been the technology’s selling point. But as we enter 2015, the value proposition may be changing.

Industry and government still value grid resiliency. But they also are looking more closely at other microgrid benefits, such as their economics and ability to monetize.

“The market feedback we have been getting lately is that clients are interested in optimal management of distributed energy resources for economic benefit,” said Drew Reid, a marketing manager at Schneider Electric.  “For these customers resiliency is a bonus.”

So what will drive rapid growth now? “Demonstrating that a microgrid investment will provide a payback similar to other investment,” Reid said. “The proposition is becoming increasingly attractive as the cost of renewables continues to decrease.”

Last year served as a kind of  coming out party for microgrids, with cities and states launching pilot programs and formulating policy. Meanwhile, those that already operate microgrids, such as colleges and research facilities, found themselves in the spotlight as models.

This testing-of-the-water period continues into 2015, according to Darren Hammell co-founder and chief strategy officer at Princeton Power Systems.

“We are getting out of the pilot phase, but it takes time. Microgrids, by nature, are not the kind of thing where you can replicate the same system over and over again, at least not yet,” he said. “So for 2015, I still see certain regions leading the way — California, the military, maybe the Northeast.”

Low oil prices no deterrent

North America continues to be the center of worldwide microgrid activity, particularly for grid-connected microgrids. Meanwhile grid-deficient Africa, India and the island nations  spur a market for remote microgrids.

“Even with oil prices as low as they are, running an entire island on gas generators or diesel generators is still twice the cost of running on solar and batteries,” Hammell said. “We definitely see more and more interest in either replacing an entire island system with batteries and solar, or usually supplementing it, keeping the diesel generators there, but running them a lot less often.”

Battery advances, too, are driving microgrid growth, Hammell said.

“Behind-the-meter battery storage is going to be a huge story for 2015. As people learn more about the behind-the-meter battery storage business, they are going to ask, ‘Why can’t we also use the battery for off-grid purposes to build microgrids?’”

Indeed, solar plus storage (a component of many microgrids) may follow the same kind of trajectory as solar photovoltaics, with the commercial sector making the first move and driving down costs, according to Thomas Leyden,  CEO of Solar Grid Storage.

His company will demonstrate how to monetize solar plus storage on the grid with the help of a $968,120 SunShot grant. The 18-month project will aggregate commercial and residential systems and treat them as a single storage asset. The virtual asset, expected to eventually reach 100 MW, will then bid into PJM’s ancillary services markets, offering frequency regulation and capacity and possibly frequency response, power factor and blackstart services.

Microgrid financing

Of course, it was innovative financing that  really drove the solar market to record heights in recent years. Will microgrids see similar financing options any time soon?

So far, financing for microgrids remains a work-in-progress, partly because  microgrids offer benefits the market has yet to price.

“Everyone agrees that microgrids are good for the broader community, but it’s hard to get the ‘community’ to pay for it,” said Sally Jacquemin, microgrid business manager at Siemens.

The problem? No one can agree on a price tag for resiliency.  “A great way to eliminate these debates on a price tag for resiliency would be for state and federal governments to build out larger, long-lasting incentive programs,” Jacquemin said.

Some financing exists for full off-grid systems and behind-the-meter demand response batteries, Hammell said. “Beyond that, right now it is considered almost like venture capital. It is high-risk, high return financing. Even storage isn’t quite there yet, and microgrids are another level of complexity beyond financing.”

Hammell sees value in utilities offering on-balance sheet or on-bill financing for microgrids. Meanwhile, projects like the New Jersey Resilience Bank or other government financing will act as a bridge until private financing takes over, he said.

So, microgrids captured the interest of key players last year; this year offers the chance for microgrids to prove their worth, and start to master the economics and financing that will launch real growth.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. Wernard Shoy says:

    If consumers will have an independent source of clean and sustainable production of electricity,
    then that to plan … You should not rely solely on solar and wind installations. New technology is already knocking at the door. Necessary on them should be guided, not on yesterday’s technology …

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  1. […] The program explores architectures for running the new electric grid — from having independent system operators manage the entire grid top-to-bottom, to running the grid as a network of microgrids. […]

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