Microgrid Developer Finds Fertile Ground in the Texas Electricity Market
Texas is giving rise to innovative microgrid projects as developers leverage opportunity in a state that produces more electricity than any other.
A case in point is Electrical Midstream, one of the 12 microgrid developers selected to participate in the Microgrid Financing Connection program, launched at the Microgrid 2018 conference to help match projects with financing.
As its name signals, the startup company has its roots in the oil and gas sector, where CEO Mark Fisher previously oversaw design and construction of electrical, instrumentation and control systems.
In oil and gas, midstream refers to those companies that improve and transport the product. They are located between upstream exploration and the final downstream refinement and delivery of products to users. In a similar fashion, Electrical Midstream’s microgrids function between the electric utility (upstream) and the customer (downstream). The microgrid projects serve the utility grid — in the form of demand response, load management and ancillary services — and serves the customer by providing reliable backup power.
Microgrid for semiconductor manufacturer
Electrical Midstream captured the attention of the Microgrid Financing Connection team with an 11.9 MW microgrid project for a semiconductor manufacturer in North Texas.
Operating 24 hours/day, 365 days/year, and fully subscribed 18 months in advance, the manufacturing plant has no room in its production schedule to make up for lost time from a power outage.
Unfortunately, the manufacturer suffered 15 outages in 2017 — two related to transmission failures and 13 on the distribution system. That meant not only loss of product, but also 15 days swiped from an already tight manufacturing timetable because equipment had to be restarted and recalibrated.
“We were brought in to evaluate their electrical system to determine the most cost-effective solution for their facility,” Fisher said.
Electrical Midstream looked at various options, including uninterruptible power supply, diesel rotary uninterruptible power supply, and a flywheel and substation plus distributed generation. The final design incorporates a substation with a 15-kV microgrid powered by natural gas backup generation, sized to meet the manufacturer’s full energy demand.
Reserve power as a service
Electrical Midstream offers microgrids under what it calls reserve power as a service. Like other as-a-service business models, which are growing in popularity, the approach spares the customer from laying out capital to buy and install equipment. Instead, Electrical Midstream installs, owns, operates, and maintains the microgrid. As host to the microgrid, the customer is guaranteed reliable power, even when a grid outage occurs.
The business model focuses on putting downward pressure on the customer’s utility bill to cover the microgrid project costs, keep charges to the customer neutral, and provide a revenue stream for the owner. Electrical Midstream does so by participating in load and capacity programs offered within the Texas competitive wholesale market, among them demand response and 4CP programs.
The Texas electricity market is deregulated, so customers pay a regulated rate for utility service and a competitive rate for power. Electrical Midstream uses the microgrid to influence the utility charge.
For the customer, this means reliable backup power without increased cost.
Electrical Midstream earns revenue by leveraging the project’s load and capacity in wholesale markets run by the Electric Reliability Council of Texas (ERCOT), which operates most of the Texas grid. The customer also may choose to participate in the market, sharing in the risk and reward, by taking partial ownership in the microgrid. Some may want to participate, while others prefer to rely on Electrical Midstream to serve their energy needs, so that they can focus on their core business.
“We are very flexible as to the customer’s role in the microgrid project. The customer can have 0 to 100 percent involvement in the microgrid depending upon their available capital, operational knowledge and desire to fuel and maintain the microgrid and distributed generation equipment,” Fisher said.
“The customer can have 0 to 100 percent involvement in the microgrid”
The model also allows for incorporation of various types of generation. Natural gas or diesel generators guarantee enough power to fully backup the facility. But then wind, solar, energy storage or other resources may be added.
Mark Fisher, CEO of Electrical Midstream, at Microgrid 2018 in Chicago
Microgrid projects in ERCOT
Texas generates a tremendous amount of renewable energy, which adds to its favorable climate for microgrids, especially as costs for solar and energy storage drop. It is the top state for wind generation and ranks third nationally for expected solar energy growth over the next five years.
Microgrids help the grid absorb the intermittency of wind and solar. Able to quickly respond to any lull or acceleration in renewable energy, microgrids can increase or decrease their own operations based on the grid’s needs.
Texas will need more microgrids
Texas has experienced population and economic growth, which creates demand for electricity, especially as coal-fired plants retire. So the state will need even more distributed generation, renewable energy and energy storage — and microgrids — in the years to come.
“It will require several cycles of Moore’s Law in the solar, wind and energy storage sectors to have their performance be able to replace the fossil fueled generating facilities. Even then, as they [renewables] are not dispatchable, there will have to be generation equipment capable of rapidly responding to system calls and market conditions to support the ERCOT system,” Fisher said.
Like other microgrid developers, such as Houston-based Enchanted Rock, Electrical Midstream is positioning itself for growth in ERCOT — while also exploring opportunity in other deregulated power markets.
During Microgrid 2018, held by Microgrid Knowledge May 7-9 in Chicago, the company began talks with project financiers in private meetings set up through the Microgrid Financing Connection. The conversations helped “refine and polish the technical and financial performance of our microgrid program,” Fisher said.
“The Microgrid Knowledge conference was an excellent forum to speak with people in every area of the microgrid industry,” he said. “It was reassuring that we are on the leading edge of this industry, and we are ready to integrate additional generation and storage technologies as they become performance, financially and technologically viable.”
This is the first in a series of stories about microgrid projects participating in the Microgrid Financing Connection, which is continuing as part of Microgrid 2019. Subscribe to the free Microgrid Knowledge newsletter to follow the series.
