What Electrification of Transportation and Buildings Means to Microgrids: Interview
The energy industry is poised for what some describe as a sizable investment shift. Oil and gas lose, and power wins with the growing electrification of transportation and buildings. So what does this mean for microgrids?
Mark Feasel, president, Smart Grid, Schneider Electric
Mark Feasel, vice president of smart grid, Schneider Electric, offered insight in a recent interview leading up to Microgrid 2019, where Feasel will be a featured panelist.
Move over oil and gas. Here comes electrification
Electricity use is on the rise. Despite massive infusions of energy efficiency, demand for power grew 4% last year, its fastest pace since 2010 when it received a jolt as the global economy recovered from the financial crisis.
And that’s just the start, given long-term growth expected as the world increasingly uses electricity to run cars and heat and cool buildings. A federal study sees potential in the US for an “unprecedented” rise in electricity use from 2016–2050 — 80 TWh/year compared with 50–55 TWh/year over the prior 34 years.
For the oil and gas industries, this mean loss of market share to the power sector. Electricity already eclipsed those fuels globally in 2017 in terms of new infrastructure investment, drawing $750 billion compared to the oil and gas sector’s $715 billion.
How to get the electricity to the charging stations?
As demand for electricity grows, so does the need for new infrastructure to deliver it — more wires, poles and substations to serve the electric vehicle charging stations that will replace gas stations.
Will utilities — which invest via slow-moving regulatory oversight — be able to build infrastructure quickly enough to serve electric vehicle demand? Not alone, Feasel said. That’s where independently built microgrids come into play.
“I do expect regulated utilities to serve the electric vehicle segment in a major, major way,” Feasel said. “But the segment’s going to be so big — and some of it is starting to emerge so fast — the microgrid is going to have to be the answer.”
Aware of accelerating demand for electricity, oil majors are beginning to diversify into power. Shell, for example, has made recent acquisitions into microgrid and distributed energy companies, among them GI Energy and Sonnen.
Microgrids are particularly well-suited for electric vehicle charging stations far away from population centers, in what Feasel called “last mile places.” As these charging stations replace gasoline stations, vast areas on the US highway will need an infusion of electricity. Utilities could build new transmission lines to deliver the power, but the projects will be expensive. Regulators might find the rate of return questionable, Feasel said.
Ports and airports
But it’s not just cars and trucks that are electrifying; so are planes and ships. And their ports are seeking more reliable energy from cleaner fuels.
Schneider Electric, for example, won a $5.2 million contract to provide a microgrid for the nation’s second busiest port, the Port of Long Beach in the city of Long Beach, California. In addition, Schneider’s recently announced joint venture with The Carlyle Group, AlphaStruxure, is developing multiple microgrids as part of the modernization of JFK Airport in New York.
Feasel noted that the infrastructure in many US airports is showing signs of aging. Few airport microgrids exist, although more are being installed to avert a repeat of the 11-hour power outage that crippled the Atlanta Hartsfield-Jackson International Airport in December 2017.
Microgrids require team work
Electrification is clearly expanding the need for microgrids, but producing them to scale hasn’t been easy. This is because microgrids are complex — in terms of technology, financing and regulation, Feasel said.
Microgrids are often tailored to customers energy needs and local regulation. They may contain a variety of energy technologies — solar, wind, energy storage, fuel cells, cogeneration, backup generators — that must operate correctly together.
Schneider is providing a microgrid for the Port of Long Beach in California, a project that will be featured at Microgrid 2019. Photo by Sergey Novikov/Shutterstock
Layer on top of that the complexities of project financing: Capitalization, tax incentives, renewable energy credits, rebates, demand response and other financial considerations. Any of these may be specific to each form of generation within the microgrid.
As a result detailed engineering, operational, and financial decisions must be made to get the best microgrid built at the best cost. It’s too much for most hosts to handle on their own.
“The incredible complexity is a lot to ask of any energy consumer that isn’t in the business of energy,” Feasel said.
Even those in the energy business often seek the expertise of partners to develop microgrid projects.
“I think you could argue that it’s extremely difficult, if not impossible, for any single technology player, even folks in the energy business like Schneider, to make all those decisions on their own — which is why so often you see us go in the market with a consortium around best in class technology providers.”
How energy-as-a-service changes the game
The industry has discovered what some call an ‘easy button’ to make development more seamless for the customer. Known as energy-as-a-service or microgrid-as-a-service, the approach allows customers to secure the benefits of microgrids — reliable local power, cost management and clean energy — without taking on the risk. Typically, the host pays only a fee for electric service while a third party develops, builds and operates the microgrid.
“Energy as a service is the story of energy smartly procured, locally produced, and efficiently consumed” — Mark Feasel, Schneider
Schneider was early out of the gate with the approach, but it is now being used by many other companies that work in the microgrid space, among them Ameresco, Centrica, ENGIE, Siemens and Veolia,
“Energy as a service is the story of energy smartly procured, locally produced, and efficiently consumed,” Feasel said. “When you can deliver those three things and address the complexity associated with technology, finance and regulation, you really have delivered a solution that the market can adopt.”
Mark Feasel, vice president of smart grid, Schneider Electric, is among the featured thought leaders who will appear on stage at Microgrid 2019: Shaping the New Electric Grid, May 14-16 in San Diego, California.
