5 reasons why microgrids are worth it to utilities

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Tom Poteet, vice president of corporate development at Mesa Solutions, outlines five key benefits utilities can unlock through the use of decentralized microgrids.

Mesa Solutions

Tom Poteet, vice president of corporate development at Mesa Solutions

After decades of pursuing “central station power” and “radial feed” distribution circuit grid design philosophies, the concept of utilities placing quasi-autonomous subsections of distribution circuitry with power generation at the edge of the grid (microgrids) can seem a little complicated, if not daunting. However, when faced with limited system power generation, many brave utilities are taking the plunge and offering demand response programs to customers and encouraging them to have decentralized microgrids. Along with our clients, Mesa Solutions has found the benefits of decentralized power generation far outweigh the costs and consider microgrids the best available solution in meeting growing power demands and overcoming grid instability. Continue reading to learn five key microgrid benefits our utility clients discovered when leveraging microgrids to power their customers and communities.

1. More uptime at little to no cost to your customers

By offering fiscal incentives to demand response participants, utilities offset or cover the cost of on-site standby and backup power generation for their consumers. That means your customer can have — for free or at minimal cost — an on-site microgrid available to them 24/7 for backup power.

On average, it costs my clients $800,000/day to be without power. That means my customers’ rented microgrids pay for themselves if they experience only one significant power outage every 16 years. Many of those customers are large oil and gas producers who stand to lose big money when facing shutdowns. However, all my customers, big and small, are financially impacted by power outages and can potentially regain microgrid rental costs by avoiding shutdowns. With growing power demands and increased frequency and severity of weather events, we know that most customers will exceed power outage rates (see chart below).

 

 

decentralized microgrids

Figure 1: Mesa Solutions rental cost recuperation (Source: Mesa Solutions, June 2021. Independent research – customer and microgrid cost analysis)

2. Minimization of catastrophic downtime during weather events

In 2020, more than 120 million utility customers were impacted by power outages. That number is no fluke. Outages are on the rise. The current five-year average of weather events is double versus the 1980-2021 average. What’s causing so many outages? Utility companies, like Advanced Energy, are reporting the majority of their outages as a result of weather events. In 2021, there were 20 natural disasters in the US — including two floods, 11 severe storms, four hurricanes, one wildfire and one winter storm — all of which resulted in power outages. With natural disasters on the rise, it means your grid is not infallible. It’s only a matter of time before you experience an outage that has corresponding national media coverage and scrutiny. But you can be prepared and help keep essential manufacturing and services operating with decentralized microgrid solutions powered by natural gas generators.

Decentralized microgrids

Figure 2: Power Outage Study by Advanced Energy (Source: Advanced Energy. Understanding and Managing Grid Reliability and Resiliency, 2018)

Many natural gas generators used to build microgrids are FEMA-approved and will run through most natural disasters. By encouraging and incentivizing natural gas generator microgrids with your customers, you empower them to power their own operations, minimize downtime and keep their communities powered through the worst of conditions at minimal cost to all parties.

3. Peak shaving savings

Over $710 million was awarded to commercial and industrial businesses in 2020 for their participation in demand response programs. However, that $710 million does not all come at a cost to the local utilities. By removing their customers’ power demands and/or adding their generated power back to the grid, utilities can peak shave, avoid rate volatility and offset the costs of their demand response programs.

4. Greater overall utility system reliability

Having backup power from microgrids provides resilient power, resulting in a more resilient solution for the utility. When you provide a more resilient solution, it improves your overall utility system reliability. That means you’re able to report better annual system reliability to regulatory authorities. The national System Average Interruption Duration Index (SAIDI) with MED (major event days) minus LOS (loss of supply) was 394 and the System Average Interruption Frequency Index (SAIFI) with MED minus LOS was 1.5 days. With sponsored programs that provide on-site generation to customers, you can let the resultant “non-outages” be considered in your index calculations, and, over time, significantly move the needle on those performance metrics and outperform national averages.

5. Avoidance of large capital expenditures

Just like demand response programs, sponsored power generation can improve the utility’s system generation capacity status and help you avoid upgrading substations and transmission or distribution systems.

For example, suppose a long, heavily loaded distribution circuit has a low voltage problem. Traditionally, the solution to such a problem would be the addition of voltage regulators somewhere on the circuit or the complete reconductoring of a significant length of the circuit. Instead, placing distributed generation along the circuit, via a sponsored microgrid, can provide the needed voltage boost and thus delay or avoid a large capital expense. Utilities can also dispatch the distributed generators to solve other problems such as low frequency or poor power factor.

utilities

Figure 3: Example of electrical layout one line diagram for Mesa clients

In conclusion, when the utility provides edge resiliency through decentralized microgrids, it helps both the consumer and the utility — making it an endeavor worth pursuing for all parties. Instituting decentralized microgrids has never been easier because of turnkey power generation companies like Mesa Solutions. By leveraging third-party power generation companies, microgrids can be executed seamlessly and quickly for both the utility and consumer. On-staff engineers work directly with customers to design and install microgrids and customize generators for their application needs. Local technicians service and maintain the equipment, and demand response experts ensure their company is working within established parameters. Even though microgrid resources are somewhat novel to utility design, utilities can take advantage of the same turnkey sourcing, support and financing that is available to customer-driven microgrid projects — making the benefits of microgrids available and easier for all.

Tom Poteet is vice president of corporate development at Mesa Solutions.

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Comments

  1. I would like to communicate with microgrid developers to let them know why I believe they need to understand why AAEC’s novel new thermal conversion tech will become the most used technology for powering microgrids in the future. Les Blevins – CEO at AAECorp.com