Deciding who pays for microgrids that benefit some utility customers more than others — as well as the utility — is a thorny topic.
Should these microgrids be rate-based, and if so, should the total cost be rate-based? What’s the value of resiliency-as-a-service to individual customers and the utility as a whole?
Some argue that customers who directly benefit from a microgrid gain access to higher levels of resiliency than those outside the microgrid and that those customers should pay more for that extra resiliency.
Now comes an idea that addresses the challenge head-on. Entergy, a utility that serves southern US states, has created a resiliency-as-a-service program called Power Though under which Entergy pays for all the costs of industrial and commercial customer-sited microgrids upfront. The company then calculates which portion of the microgrids the customers should pay for and asks for repayment through the customer’s on-bill payments. The rest is rate-based. The microgrids benefit the utility, which registers them with the Midcontinent Independent System Operator (MISO) so the microgrids can reap income by providing grid services to MISO. The Power Through customers gain resiliency, and Entergy gains needed capacity.
Entergy’s new Power Through program offers a formula to bring fairness to the “who pays?” issue.
The formula
Lyndon Dupont, director of business operations for the Power Through business unit, explained that Entergy calculates a value for a customer-sited microgrid based on the cost to acquire the same amount of capacity with natural gas generators. Under the Power Though pilot programs — approved by regulators in two states — that amount is rate-based. The amount above that cost is borne by the customer where the microgrid is sited.
For example, if the host customer needs 1.2 MW and the 1.2-MW microgrid costs $1.5 million, but the capacity value of a combined-cycle gas generator in that territory is $1 million, then the customer pays the additional amount through on-bill payments.
“If the host customer needs 1 MW, anything over that capacity value, the customer pays for,” Dupont explained.
Enchanted Rock participating
Allan Schurr, chief commercial officer for microgrid provider Enchanted Rock, said, “The Entergy Power Through program is the best model for utilities wanting to provide the highest levels of reliability for their large customers. It is targeted at critical infrastructure and sensitive customers and results in an affordable full-service solution due to the additional value captured from these locally sited, grid dispatchable distributed resources.” Enchanted Rock is partnering with Entergy to provide some of the microgrids.
Indeed, numerous utilities have expressed interest in creating a program similar to Power Through, said Dupont. They include Xcel Energy, a utility in Minneapolis, Minnesota, that also serves customers in Michigan, Wisconsin, North Dakota, South Dakota, Colorado, Texas and New Mexico.
Xcel Energy in December 2020 issued a request for qualifications (RFQ) for resiliency-as-a-service, according to Xcel Energy’s RFQ.
The aim of the Xcel Energy program is to support commercial and industrial customers that need reliability. The RFQ said that the technologies funded through the program will include diesel or natural gas generators, energy storage, solar plus storage or microgrids.
“Customers will sign an agreement to pay for the resiliency asset on their bill over the lifetime of the asset, with the company retaining ownership and providing O&M [operating and maintenance] services, with the option of owning the asset at the end of the agreement timeline,” said a statement of work issued by the company.
At our deadline, Xcel Energy had not yet responded to a request to provide an update on the program.
Who’s eligible?
As for the Power Through program from Entergy, any of the utility’s commercial or industrial entities with loads ranging from 100 kW to 10 MW are eligible. These customers must have approved tariffs, which are in the works. The first pilot program was approved in Texas in 2019; those microgrids have run for a total of 526 hours through the end of last year, 500 hours for the grid and 26 hours for customer backup.
“The grid needed it more than the customer. That’s the beauty of the program. They’re our assets, and we use the microgrids for MISO economic dispatch — while they can also be used as resiliency-as-a-service for the customer,” said Dupont.
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The Texas Public Utility Commission in 2021 asked Entergy to withdraw its filing for commercial approval of Power Through while the commission works on a distributed generation filing. When that’s complete, Entergy will re-submit its program for commercial approval. For now, Texas has six contracts, three of which are in service. The contracts total 3,288 kW.
In addition, in Mississipi, the company has signed 11 contracts totaling 1,010 kW, and seven are in service.
Entergy’s goal is to install 300 MW across its five operating companies — Entergy Louisiana, Entergy New Orleans, Entergy Mississippi, Entergy Arkansas and Entergy Texas — in the first five years that programs are available.
Aiming for net zero
While the microgrids now being deployed are natural gas-fired, Entergy plans to add solar and storage and renewable natural gas microgrids to help meet its net-zero goals.
The Power Through microgrids often replace diesel generators, especially in nursing homes. The company converts Tier 2 diesel generators to natural gas generators, he said.
“Entergy is very aware of how we need to get to a net-zero generation solution,” said Dupont.
Entergy aims to cut its carbon emissions in half by 2030 — compared to 2000 emissions — and to achieve net zero by 2050. Its main challenge has been working with customers to decide how they want to repay Entergy for their share of the microgrids, said Dupont. Some want to pay the utility off immediately; others want longer contract periods.
Customer interest high
Meanwhile, Entergy isn’t working too hard to market the Power Through program; he said that customers are coming via word of mouth.
“Any critical business you could think of has, at some point, reached out to us. We expect this to be extremely popular,” said Dupont.
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