What We Should Be Talking about When We Talk about Microgrids

Sean Casten, Recycled Energy Development

Beware of anyone who tries to say we need more research & development before we move forward with microgrids. There are no technical barriers to microgrid deployment, but lots of regulatory barriers. And therefore, every dollar spent on an R&D or pilot program is a dollar not driving real progress.

Full confession: I have a dog in the hunt. My company owns and operates perhaps the biggest microgrid in the country. It’s based on state of the art 1970s technology and operates only thanks to some much more recent regulatory creativity – and therein lies the lesson for what we should be promoting to more fully realize the benefits of microgrids.

At the simplest level, the case for full technological maturity is definitional. The Department of Energy defines a microgrid in a way that is fundamentally indistinguishable from a utility control area.

A microgrid is a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid and that connects and disconnects from such grid to enable it to operate in both grid-connected or “island” mode.

Not only have utility grids long-since figured out how to solve this technical challenge, but so – at a much smaller scale – have hundreds of hospitals, universities and industrials who have installed their own generation to provide them with better reliability than is available on the electric grid. (Note that these facilities often have their generation wired to serve multiple discrete loads on their premises in exactly the same way that the larger grid can selectively maintain higher reliability at certain critical nodes.)

So what’s new with microgrids?

In fairness, most of the discussion about microgrids is focused not on “loads” in the electrical sense, but in the consumer sense. Thus, the hospital is a load and the fast food joint next door is another load. Wouldn’t it be nice if the hospital network was connected up to serve their neighbor as well? Defining a microgrid this way – as a way to string together loads of unrelated businesses – is actually much more useful and would be a really good thing. But note that this is a definition based on commercial rather than technical considerations. After all, there are plenty of hospitals with on-site cafeterias, and a decision to outsource a cafeteria operation can be safely generalized as a not-an-electrical-engineering decision.

So why aren’t there more microgrids that serve distinct consumer loads without being run by regulated utilities? The answer is economic and regulatory, rather than technological. A hospital faces no real barriers – other than access to capital and engineering talent – to building out their own electric distribution network with on-site generation. But if that same hospital wants to run a wire across the street, it runs into local utility franchise rules and in all cases is not allowed to sell that power at retail prices. Challenging those rules raises legitimately challenging political questions. But those are the only real challenges to microgrids; focusing elsewhere is a waste of limited financial, human and political resources.

An Alternative View

In 1890, George Eastman began building the business that ultimately became Kodak – and the Eastman Business Park, a manufacturing facility that now covers 1,200 acres in Rochester, New York. For most of its life, the utility operated for the sole benefit of Kodak’s captive film, chemicals and paper-making operations. Then in the 1990s, Kodak started to divest some of those discrete, non-core business units, and in 2013 sold to us the utility operations that provide power, steam, chilled water and a host of other utilities to all the businesses in the park.

So we now find ourselves owning and operating a system with 120 MW of capacity and a 40 MW bidirectional interconnect providing all the electricity to loads that range from 30 – 60 MW, in addition to providing steam, chilled water, sewage and a host of other minor utilities to 57 distinct businesses, all nested within the Rochester Gas & Electric service territory. We can and do run independently of the RG&E system, but make real time import/export decisions to boost the reliability and cost-competitiveness of both. It’s a microgrid.

But here’s the curious thing: had Kodak never divested a business prior to our purchase, we would have had exactly the same electrical set-up, but would simply be perceived as a behind-the-fence generator with back-up capacity. Given all those divestitures, we’re perceived as a microgrid. Nothing’s different technically, but it’s quite different from a regulatory perspective.  So different in fact that New York State – to their great credit – developed a unique regulatory regime for us as a “lightly regulated” utility that allowed the transaction to proceed, and preserved the same basic economic arrangements for businesses that had existed prior to sale.

Not only am I not aware of any other state with this model, but I can say with certainty that there would be no operating microgrid in Rochester in the absence of this regulatory creativity. And it exists not because of any technological innovation (at least not in the last 30 years), but rather because of a combination of regulatory creativity and accidents of business history.   The latter isn’t a basis for energy policy, but the former certainly is.

And it’s what we ought to be talking about when we talk microgrids.