Microgrid Policy: What Really Needs to be Done?

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Navigant’s Peter Asmus provides an overview of US microgrid policy and identifies what’s most needed to drive microgrid adoption. Asmus will be presenting these ideas at a special Microgrid 2019 pre-conference workshop May 13.

microgrid controllers

Peter Asmus, Navigant Research

In 2011, Connecticut was the first state to pass a law authorizing microgrids to serve community resilience. A microgrid funding program was proposed in July 2012 as a response to Hurricane Irene and gained momentum after Hurricane Sandy hit in late October 2012.

Since 2012, several other states have followed Connecticut’s lead and developed specific programs to support microgrids. These states include CaliforniaHawaii, Maryland, MassachusettsNew JerseyNew York, and Rhode IslandWashington, DC has also developed programs. Perhaps the most notable effort is not in a US state, but rather in the territory of Puerto Rico, which may redesign its entire distribution grid network around large, interconnected microgrids.

Different forms of government support

Government support can take many forms. For example, incentives such as tax credits, low interest loans, or other forms of financial assistance for enabling technologies—such as solar PV systems—help facilitate microgrid developments. These incentivesare ubiquitous, however. They are not specifically focused on the integration of these assets into microgrids. The following are among the most common program support elements that are specifically driving microgrid adoption in the US today:

  • Direct government grants for microgrid deployments
  • Government authorized solicitations for microgrids (often meeting specific state policy criteria)
  • Mandates and targets for distributed energy resources, renewables, or carbon reduction
  • Specific financing vehicles that steer public or private dollars (or both) toward microgrids
  • Utility regulatory reforms addressing existing barriers to microgrid deployments
  • Technology commercialization roadmaps
  • Approval of utility rate-basing of microgrids
Government spending on microgrids in US states and territories

In terms of sheer government spending on microgrids, New Jersey comes out on top by a wide margin, largely a result of past hurricanes on the state’s economy. The state has $611.8 million earmarked for microgrids, which easily dwarfs all other state-level investments. With its $71.9 million investment, California would rank second if the focus remained on state-level microgrid funding budgets. To date, California has funded the full development of 17 microgrid projects.

Notably, what other industry has been able to grow at double-digit growth rates in a market that doesn’t even recognize its most important value?

New York is also worth noting, since it planted more seeds for more future microgrid projects than any other state with 83 sites receiving $100,000 for feasibility studies. Only 11 of these sites, however, were awarded follow-on $1 million grants for actual project development, and then subsequent additional grants. Perhaps the most disappointing aspect of the programs analyzed was that most funding still flowed to fossil fuel capacity; only a quarter of state funding went to renewables and energy storage.

Microgrid Knowledge conference: Microgrid 2019

A recent Navigant Research report will be the basis of my presentation at the Microgrid Knowledge conference in San Diego, California on May 13, 2019. Within this report are five principles that should drive government programs globally to make microgrids a mainstream reality:

1.  Shift from grants to market-based incentives

2. Target funds toward new clean and smart technologies

3. Choose projects that foster new financing business models

4. Allow for flexibility and midcourse corrections

5. Create metrics that capture the value of resiliency

Of these five principles to guide government support for microgrids, I would argue the most critical is the last. As noted in a previous blog, the National Renewable Energy Laboratory has done some groundbreaking work in this area. Nonetheless, such conceptual frameworks often find the translation into actual policy and regulations to be difficult. Though the value of resiliency will vary by end-use market segment and region, the microgrid industry should coalesce around a framework that could be applied to calculate resiliency. Notably, what other industry has been able to grow at double-digit growth rates in a market that doesn’t even recognize its most important value?

Peter Asmus is associate director of utilities & energy companies at Navigant.

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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. My fear is we want to ensure the market itself drives microgrid demand and not solely the government, nor electric utilities and public service commissions. The government role using the five principles should foster modernization, technology deployment, removal of old out dated regulations, winding down barriers, standardizing methods and processes, codes and electric interconnections for microgrid deployment and offer creative financing support to customers. These outcomes would set the table for the 21st century modernization of the electric utility grid. The market is fostering the demand potential which is unachieved because of inertia and a lack of focus by the electric power system on the microgrid benefits of added resiliency, customer service and technology optimization using microgrid advances in controls and system advanced technology. It needs right now certainty and more regulatory resilience to access more private capital. This support from the government and private sector partnering would ensure better integration with new microgrid interest appearing in Smart Cities, harbor development, advanced telecommunications services, data centers, Indian tribe economic development, and farms and agriculture – all seeking solutions that free market innovation can provide.
    Otherwise we are trapped just using 19th century fuels in 20th century infrastructure when we need modernization driven by the power of IT and capital to better meet customer needs in the 21st century.

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