The Commercial and Industrial Microgrid: A Growing Number of Corporations Going Green

Corporations install microgrids to achieve the dual goals of reducing costs and greening their operations, as explained in the fifth post from our series on clean energy microgrids. Here we focus on the commercial and industrial microgrid.

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A growing number of corporations are going green. According to the Rocky Mountain Institute, nearly two-thirds of Fortune 100 companies and nearly half of Fortune 500 companies have set ambitious renewable energy targets.

They use a variety of ways to meet those goals, but increasingly corporations are looking for additionality in their sustainable portfolio. That means they are no longer content to buy renewable energy credits (RECs) and claim success. They want their efforts to have more impact. They are looking to invest directly in renewable energy projects that will displace plants fired by fossil fuels.

Corporations from Google to 3M are buying power directly from newly developed power projects and are even taking part in developing wind and solar projects themselves. In many cases, one of the most cost-effective ways a corporation can invest in a renewable energy project is by investing in a microgrid.

Microgrids have the ability to aggregate and control a variety of renewable resources. By including both wind and solar sources, for instance, a microgrid can overlap the intermittency of those generation streams, and by using baseload power from a CHP plant or a fuel cell, a microgrid can combine enhanced reliability with a lower emissions profile.

Unlike power supplied from a central station grid or a single renewable energy plant, “a microgrid has the flexibility to use a wide range of energy sources increasing renewable energy supply options while improving resiliency,” says Michael Bakas, senior vice president at Ameresco.

How the commercial and industrial microgrid achieves a favorable payback

But even at the greenest corporation there is still a keen focus on the bottom line. Corporations have to cut costs to compete, and microgrids can help meet both goals. For a lot of corporations looking at investing in a microgrid, their top concern is payback.

There are many ways a microgrid can cut costs and contribute to the bottom line, but the first thing a business should do when looking to invest in a microgrid, says Bakas, is look at energy efficiency and demand reduction measures.

A 5-MW CHP plant is far more expensive to construct and operate than a 3-MW plant, he says. “If you can reduce your energy load (possibly through a self-funded approach like energy performance contracting) thereby directly lowering your construction, operational and fuel costs of the facility, along with any additional incremental volumes of energy purchased from the grid beyond the supply of the CHP facility, why wouldn’t you?”

One of the most direct ways a commercial and industrial microgrid can be used to cut costs is as a means to hedge power prices. The system controls of a microgrid can be programmed to optimize for price. For example, a microgrid could use utility power until prices rise and then switch to its own, lower cost power. A microgrid’s ability to use a variety of generation sources—from natural gas to solar or wind power—gives it more pricing flexibility. And, because a microgrid’s generation is local, there are no line losses.

In locations where there are transmission constraints, a microgrid coupled with some distributed generation can save a company money by avoiding congestion charges. In some parts of PJM, congestion prices are higher than energy prices, says Bakas.

Future proofing with a business microgrid

“A microgrid can also give some control of its future back to a business,” says Bakas.

“Building small local generators can be accomplished much more efficiently and in a shorter time frame than waiting for a power company to build a central power station or put in a new substation,” he says. “And that gives a business much more flexibility to expand their plant on their own time line.”

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But one of the biggest values a microgrid can provide can be harder to quantify. Microgrids can enable a business to weather a storm or continue to run when the utility grid loses power. When disaster strikes, the value of resiliency and reliability rises astronomically.

“Placing a value on resiliency can make or break a business case,” says Bakas. One of Ameresco’s clients, BMW Manufacturing Corporation of North America, maintains their largest manufacturing plant in the world in South Carolina. In 2016 BMW manufactured 400,904 cars at its Spartanburg facility. Assuming an average sale price of $55,000 per car, losing power for one day could cost more than $60 million.

“They cannot afford, nor will they tolerate, disruption of service; their product is their life line,” says Bakas.

The same is true for a supermarket chain, as some learned during Hurricane Sandy. Losing power for four hours could mean throwing away as much as $400,000 of food per store.

Dairy manufacturer HP Hood installed a 15 MW microgrid at its facility in Winchester, Virginia, to ensure it could continue to operate if the surrounding grid went down. Even a short loss of power requires the plant to shut down for up to 12 hours to re-sterilize its equipment. The prospect of lost income was a compelling reason to set up the microgrid. But Hood was also driven by the prospect of cutting costs and even being able to generate income by selling ancillary services into the PJM Interconnection’s wholesale power market.

A good example of how a commercial and industrial microgrid design can come together is the project being built at the Philadelphia Navy Yard.

A good example of how a commercial and industrial microgrid design can come together is the project being built at the Philadelphia Navy Yard. The 35-MW microgrid includes a peaking plant plant that will enable it to island from the grid and generate revenue by selling voltage, frequency, and power quality management services to PJM. The project is expected to reap over 61,000 MWh in energy savings over the course of the microgrid’s life.

Given all of the benefits microgrids offer businesses, it’s little surprise that they are embracing the concept. In fact, the commercial and industrial sector is poised to install microgrids faster than any other, surpassing even early adopters like the military, according to market data collected by Navigant Research. Data centers, manufacturers, hotels, mining, resorts, airports and railways are among those choosing a technology that offers sustainability, reliability, resiliency, efficiency and favorable economics.

Over the next few weeks, the Microgrid Knowledge series on clean energy microgrids will cover the following topics: