Report Finds Interest in Microgrids and DERs among Utilities’ Industrial Customers

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Utilities are finding that their industrial customers want to deploy microgrids and distributed energy resources (DERs) and are seeking their help, according to research by the consulting firm Deloitte.

industrial park microgrid

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Their interest is driven by the desire to cut costs, achieve resilience and meet sustainability goals, said Marlene Motyka, US and global renewable energy leader and a principal in Deloitte Transactions and Business Analytics, in an interview about the company’s report, “Smart Energy Management for Industrials: An Ecosystem Approach to Reduce Energy Costs and Achieve ESG Goals.” ESG refers to environmental, social and corporate governance goals.

The report noted that in a previous survey 70% of manufacturers said their utility is a key ally.

Nearly 40% of utilities getting requests for microgrids

The new Smart Energy Management study found that 39% of utilities surveyed said they are receiving requests from companies for help implementing microgrids.

And 61% of the utilities surveyed said that they see revenue potential in helping customers develop microgrids.

In addition, some utilities are helping deploy community microgrids as cost-effective ways to boost resiliency and provide power during peak usage, the report said.

“Microgrids can power a facility when the centralized grid is offline. This allows you to boost resilience and can help cut costs. You can use microgrids to optimize for electric prices and switch from local generation sources to microgrids when the utility price is high,” said Motyka.

The report is based on two surveys conducted in March, one to more than 70 industrial manufacturing executives and senior leaders, and the second to more than 30 electric utility executives and senior leaders. Deloitte also interviewed utility executives and energy management solution providers.

Interest in on-site generation and energy storage is also high among industrial customers, according to the report.

Sixty-one percent of utilities surveyed said they’re receiving requests from these customers for help with on-site generation, and 65% said they’re receiving requests for help installing battery storage. Seventy-seven percent of utilities surveyed said they see revenue potential in aiding customers with battery storage, and 68% said they see revenue potential in solar energy systems.

The desire to ensure energy resilience and to lower costs are important factors driving customer interest in storage, said Motyka.

“Because of all the issues we’ve had with snowstorms, fires, hurricanes and massive weather events, resilience is driving this interest, but also industrial customers are learning that battery storage can be combined with on-site generation,” Motyka said. If, for example, industrial customers store on-site solar in batteries and use it when utility costs are higher, they can lower costs.

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Businesses getting ready for EV fleets

Utility customers are also expressing interest in getting utility help with electric vehicles (EVs) and EV chargers. Sixty-one percent of utilities surveyed said they’re receiving requests from commercial and industrial customers for assistance with these resources, and 77% of utilities surveyed said they see the revenue potential of EVs and chargers.

“Commercial and industrial customers want EV chargers in their location to help electrify their fleets. Vehicles could range from forklifts to service trucks,” said Motyka. “In general, if utilities partner with industrial customers and offer greater electrification, they will see larger electricity sales revenues,” she said.

Manufacturers surveyed are interested in flexible load programs, the report said. Thirty-three percent of the companies surveyed said they have already implemented flexible load programs. While interruptible rates have been available for many years, there’s more of a focus on flexible load right now. The main focus is on demand response, which can cut customers’ costs and help them reduce overall carbon emissions, said Motyka.

Utilities are also receiving general requests from manufacturers for assistance reaping additional value from distributed energy resources, said the report. Thirty-nine percent of utilities said they have been receiving requests aimed at this goal from manufacturers.

Microgrid financing misconceptions

In spite of the significant uptick in interest in DERs, some challenges remain, such as a lack of understanding about the availability of microgrid financing, such as energy as as service contracts.

implementing microgrids

When the report’s authors asked survey participants to name the top challenges preventing implementation of DERs and other solutions, the top response was lack of capital. Interestingly, that’s often cited by microgrid suppliers as the main misconception holding back sales of microgrids.

To help speed the implementation of DERs, electric customers and utilities need to be educated about the costs and benefits of DERs and the available financing solutions, said Motyka.

Costs are dropping dramatically, but people aren’t aware of these price drops, she said. “They shouldn’t look at the straight cost of capital. They have to look at what they gain and what’s the payback.” She noted that customers can also take advantage of programs like energy as a service, under which they pay no upfront costs.

“The key is that different kinds of business models are coming out, increasing the opportunities of using these solutions,” said Motyka.

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