Connecticut to Take Deeper Look at Microgrids; Plans New CHP Incentives

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You might say the honeymoon is over and the real work of developing microgrids has begun in Connecticut.

The state described some of the microgrid challenges ahead within a draft integrated resource plan released this week. Issued every two years, the plan maps energy strategy for the next decade with an eye toward electricity costs, supply, technology and policy.

Connecticut was one of the first — some would argue the first — U.S. state to seriously pursue microgrids, focusing on the technology even before the 2012 SuperStorm Sandy.

Given its early entry into the market, it’s fitting that Connecticut is now taking on some of the tougher challenges associated with integrating the new tech into an old grid.

The state took on a decidedly ‘knuckle down’ tone about microgrids, describing a need to develop  standards and guidelines and overcome technical, operational, and economic issues.

“Microgrids are a rather new technology being implemented across the world. As the projects are being installed and operated, there will be challenges encountered and lessons learned,” said the Department of Energy and Environmental Protection in the draft plan.

For example, much is left to figure out about microgrid economics — who pays for what. Microgrids present a complicated equation since they are built to benefit specific locations, yet can serve the broader grid. It’s also not clear who should pay for microgrid maintenance and major capital requirements as the system ages — or who will operate the microgrids when they go into island mode, DEEP said.

“The cost and reliability impacts on microgrid versus non-microgrid customers need to be carefully considered,” DEEP said.

The state plans to offer an incentive of $450/kWh to businesses that want to install CHP.

DEEP also described “diseconomies of scale” associated with the energy security offered by microgrids.

“Thus, it is important to balance the costs versus benefits (including reliability benefits) of any microgrid system,” DEEP said.

The state plans to continue its push for more microgrids, combined heat and power (CHP) and other  distributed technologies that can help it overcome some persistent problems. Connecticut already has some of the highest electricity prices in the country, and now foresees a 63 percent rise in the generation service charge to customers by 2024. Natural gas shortages in New England,  caused by a lack of pipeline, are driving up wholesale power costs.

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“If we fully take advantage of these opportunities, the state will be much closer to its goals regarding climate change, ensuring an adequate and diverse energy supply system in the future, and remaining competitive in a global economy,” DEEP said.

DEEP specifically called for new incentives to add 160 MW of combined heat and power in the state. CHP “can provide special value in locations where it can power microgrids,” as well avert upgrades to utility distribution system, and reduce natural gas use and electricity use, the plan said.

The CHP incentive, offered to businesses, will amount to $450/kWh. The state figures this is the right amount to allow businesses to achieve a reasonable payback, considering the estimated cost of installations, the value of the energy offset by the system, and the overall cost effectiveness of the system.

DEEP envisions creating a competitive process that offers CHP incentives in “blocks.”

Separately, Connecticut also is planning a third microgrid solicitation at a date yet to be specified. To find ways to improve the program, DEEP held a meeting with stakeholders on November 10 and conducted an online survey. The agency is reviewing the comments in preparation for designing the third solicitation.

Connecticut awarded nine microgrid projects $18 million from the first solicitation and two projects $5.1 million in the second.

DEEP is accepting comments on the draft integrated resource plan through February 11. Comments can be emailed to

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About Elisa Wood

Elisa Wood is the chief editor of She has been writing about energy for more than three 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.


  1. Do you need to check your figures? $450/kWh energy delivered or $450/kW installed capacity? I think the latter, or else $450/kWh is maybe ~2000x the average retail rate of electricity.

    • Yes, you are correct as far as I know it’s per 450 per KW which is a lot less then other states incentives and less then the value to the system is worth especially as compared to solar or fuel cells thats listed as micro grid but efficiency is poor for $ spend.

    • Elisa Wood says:

      Hi Will. Yes its $450/kWh. Here is the exact language from the plan:

      Furthermore, in order to ensure an open and a competitive process, the new CHP program will contain a proposed schedule for offering the incentives over the duration of the program. The schedule would provide for “blocks” that result in a total of 160 MW of CHP capacity. The incentives would commence at four-hundred and fifty dollars per kilowatt hour and are intended to be sufficient to meet the customer’s reasonable payback expectations, considering the estimated cost of installations, the value of the energy offset by the system, and the overall cost effectiveness of the system. Any attributes associated with such systems will be maintained for the benefit of all ratepayers. The incentives will decline over time and will automatically move to the next block once DEEP has committed the resources for a block. The Department can modify the approved schedule before it issues its next plan to account for changes in state or federal law or regulation or developments in the CHP market when these changes could affect the cost effectiveness of the program or are no longer in the interest of ratepayers. The Department welcomes comment on this program design or alternate approaches to supporting CHP deployment in Connecticut.

      Hope that helps.