Are Government Incentives a Good Idea for Microgrids?

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History shows us that an injection of government funding often boosts new and promising energy technologies. But is the same true for microgrids? 

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In the US, few government incentives exist that are solely for microgrids. If that should change — and how it should change — were topics addressed in a recent Microgrid Knowledge audience survey, as well as in a discussion at last month’s Microgrid 2020 Global, a virtual event hosted by Microgrid Knowledge, which drew more than 4,300 registrants.

The bottom line?  The microgrid community appears to have mixed attitudes about the importance of grants, loans and tax credits — at least when they are stacked up against other possible regulatory and legislative actions to support the technology.

“The money is nice, yes, but I think most people within the industry know that there’s a ton of capital in the marketplace that wants to be deployed on clean energy and microgrids. The problem is the policies and regulations don’t necessarily allow enough of the projects to proceed,” said Benjamin Parvey, CEO of Blue Sky Power, speaking during a policy workshop at the virtual conference.

What’s needed more, said Parvey, are fewer regulatory barriers that inhibit competition and impede customer access to the microgrids.

Regulatory blockage

Other industry representatives at the policy workshop — Brian Levite, regulatory affairs director at S&C and Mona Sheth, senior director, federal government affairs, Schneider Electric — concurred with Parvey that more incentives are not the top priority. 

“It is a regulatory and business model blockage here that is, in my opinion, stopping up the works,” said Levite, in an opinion that was also supported by the Microgrid Knowledge Advisory Board during their discussion at the conference, where they issued a call to action for the industry.

But this opinion appears to run counter —  at least on first blush — with the findings from a recent Microgrid Knowledge survey of more than 500 readers, which found incentives to be a top priority.

government incentives

It also appears to run counter to the experience of solar and wind power industries that saw a significant rise after the enactment of federal tax credits, state renewable portfolio standards and other incentives.

But the contradictions may be explainable. For one, the federal government may not provide tax incentives directly to microgrid, but it does inadvertently. Generation technologies that receive incentives — such as solar — are often incorporated into microgrids, and the microgrid owner is often able to leverage those incentives.

“Much of the energy resources that comprise the technology, solar, storage, CHP, others, they have their own tax credit,” Sheth said.

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Audience opinion nuanced

It’s also important to note that while incentives may have ranked high in two survey questions, other responses paint a more nuanced position. Interconnection rules topped the list (62%) in the survey when readers were asked: ‘What are the greatest microgrid policy/regulatory challenges?’ In addition, cost considerations — a direct reason for incentives — ranked only third when readers were asked about the greatest challenges to the future of microgrids.

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Workshop speakers pointed to the growing affordability of microgrids as a reason that they consider new incentives less crucial. The energy-as-a-service business model allows customers to secure microgrids with no money down. Depending on the location and technology used, the microgrid may cost the customer less on a monthly basis than utility service replaced.

“Cost is no longer the big stumbling block for microgrids,” said Levite.

That’s not to say change isn’t needed to put microgrids on a more level playing field in the energy arena. Workshop speakers called for several regulatory reforms, among them: 

  • Performance-based standards for utilities that would encourage use of alternative approaches to traditional infrastructure,  such as non-wires alternatives
  • Consideration of microgrids in state and federal infrastructure plans 
  • A resilience requirement in utility integrated resource plans and distribution and transmission strategies
  • An examination by states of over-the-fence rules that can prevent development of community microgrids
  • Reform of interconnection rules

“We’ve got to change these state regulatory frameworks, which were put in place 100 years ago when the utilities asked to be regulated so they wouldn’t be broken up as monopolies. The technology is there, and advancing so incredibly quickly, we need to pave the way to allow people to serve customers — allow the market to meet the demand,” said Jonathan Voss, a pollster with Lake Research Partners, who presented an additional survey at the conference that focused on the opinions and attitudes of voters about microgrids.

Your thoughts?

With a new federal administration, increased emphasis on infrastructure spending, and the growing attentiveness of state regulators to resilience, microgrids are making their way into US policy and regulatory considerations. What do you think government priorities should be? Please post your thoughts below or on the Microgrid Knowledge LinkedIn group.

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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. It seems to me that the new tools for carbon calculations can be applied for development projects, enabling stakeholders to scrub technology-provider data for their carbon, as well as social-wellness figures. If projects raise the ire of folks suffering a NIMBY concern due to the direct effects of dirty manufacturing or indirect effects of manufacturing water usage – these practices create real costs that are have a negative history and should be part of some tax reform that puts the burden on those who can afford not repeating such offenses in the name of progress. Also, good safety and common sense environmental policy which does not drag on for years will help lagarts get with these tax-relief programs.

  2. Jane Twitmyer says:

    The best thing for Microgrids would be to make sure the large number of states that still have monopoly regulations based on profits from owning central generation are changed.

  3. Restructuring virtual net metering programs to allow microgrids to use them would go along way toward defraying the larger capital costs required to build resilient generation. The virtual net metered accounts needn’t be classified as critical in the event of a grid outage and could simply be dropped in the event capacity is needed for critical facilities. .

  4. As far as regulation goes, the recent FERC 841 and 2222 rulings have set the stage to change the Federal rules to push interconnection between grids with new transmission to allow renewables to get to market from coast to coast. The real wrestling match will be Federal ‘ownership’ of the wholesale electricity market and interconnection to all grid, ISO entities across the U.S.. Allowing a distributed grid network consisting of residential micro-grid, small business and larger commercial and industrial micro-grids to all compete in the energy market. Even city or town CCAs could include a community micro or mini-grid and participation of aggregate residential systems in a participation market as a VPP for grid services.