Weekly Update

Microgrids for the developed world?

In places like India where the electric grid needs massive updating to reach its users and provide them with adequate power, microgrids, which are loosely defined as a systems of distributed power resources that can parallel or island from the grid, are proving an attractive alternative. But it’s not just the developing world where many are asking whether microgrids could have value.

Part of what is driving interest in microgrids in the developed world is concern about the reliability of the grid. In a recent Pike Research webinar, Horizon Energy Group CEO Steve Pullins cited data showing that in the U.S. the average outage duration is 120 minutes and getting worse. This compares to the 10 minute average in the industrialized world. Perhaps more distressing for utilities is that capital asset utilization rates are around 45 percent, meaning for the amount of money being deployed on power generation and distribution, a relatively low portion of that is being used to provide power.

So for organizations where uptime is critical, manufacturing facilities and more recently data centers (Apple, eBay), the prospect of creating a microgrid to generate reliable megawatts is enticing. Add to this the fact that consumers are now self generating more than 5 gigawatts a year through onsite generation like rooftops solar, and the reality is setting in that utilities no longer will control all of the power generation on the grid.

A role for the utilities?

Pullins noted of the trend toward off the grid energy generation that “one of the concerns from the utility side of the meter is reduced revenue.” He added “you’re not going to prevent consumers from self generating. How do you become part of that bandwagon?”

We’ve seen the discomfort from utilities in the recent net metering controversy in California where the state decided to allow customers with distributed solar installation to sell excess electricity back to the grid. The utilities argued that they were responsible for maintaining the grid and they now were losing revenue.

But some utilities are experimenting. Forward looking San Diego Gas & Electric is testing a 5 megawatt Borrego Springs utility distribution microgrid project. San Diego has a high penetration of solar PV in its service territory and it has a thousand diverse load customers participating in the trial. The more distributed renewable energy a utility has, the more a microgrid starts to make sense since you have a mix of generators and consumers in your system. The project includes energy storage as well as distributed automation capabilities.

Pullins was also getting at a larger question. If distributed renewable power generation is inevitable, is getting cheaper, and is getting more attractive to not just residents but large companies, what role could the utilities play?

The pitch to utilities is as the role of partner for its big rate paying customers and aiding them in their deployment of microgrids. The argument includes the fact that capital asset utilization rates are higher on microgrids because of greater thermal efficiencies, which translates into needing less actual power generating capacity to meet the needs of customers.

Microgrids also allow the tailoring of generation mix with the needs of customers, meaning it’s possible to align the attributes of a power generation technology like solar or fuel cells with the specific demands of a customer, including the amount of power it needs and when it needs it.  What this is driving at is the elimination (or reduction) of demand response payments because you need less overall energy capacity.

Pike Research has forecast that the global remote microgrid market will expand from 349 megawatts to 1.1 gigawatts by 2017, translating into more than $10.2 billion in revenue by 2017. There’s a clear trajectory of growth for the market though a lot of this is slated for the developing world. But as renewable energy allows consumers to take increasing control over their power generation, might the utilities want to step in and actively develop their own microgrids to meet the needs of their customers?




Question of the week

How optimistic are you about microgrid development in the developed world?