For the traditional electric utility business model, microgrids–self-contained, neighborhood- or campus-sized energy systems that typically combine generation and energy storage–could be perceived as a financial threat.
Rather than seeing microgrids as a threat, utilities should approach them as an opportunity. Maximizing that opportunity may require advocating for and winning changes in regulations, rate tariffs, and service-franchise territories. But as we describe below, we see many ways microgrids can be both moneymakers and cost-savers for utilities.
TRC’s microgrid team has developed multiple projects for private-sector, state, and federal clients, including partnerships with traditional utilities. We bring together under one roof all the expertise clients need to design, permit, and oversee construction of microgrids, including experts in power-delivery engineering; solar photovoltaics, wind, and other renewables; CHP; energy storage; energy efficiency and demand response; and experts in environmental planning and permitting and information technology automation and communication services.
There are two big reasons we think microgrids can work for, and not against, utilities. First, to be economically feasible, the microgrid’s generation must provide savings over current retail tariffs. But we know that reliability and resiliency comes at a cost. Those costs must be offset by the improved power quality and reduction in customer losses caused by unplanned outages. The efficiencies brought to a microgrid through incorporation of energy storage, renewable generation sources and combined heat and power systems provide the needed economic incentives for construction of the microgrid.
We believe many customers will be just as eager to turn over designing and running their microgrid to a large, capable utility as they are to turning over their payroll, office information technology, and telecommunications services to large, capable providers. Most customers, even large industrial ones do not want to be in the power business. They simply want to lower their cost for energy while improving reliability. Utility ownership of microgrids are a way to accomplish these goals in a way that incorporates new technology while maintaining the traditional utility model as a distributor of energy to the customer.
Secondly, microgrids are also proving to be a way utilities can reduce their cost of maintaining reliable service. For example, San Diego Gas & Electric struggled for years with maintaining service in lightning strikes and desert flash floods to 2,800 customers Borrego Springs, Calif., which was served by a single radial transmission line through the desert. Installing a microgrid in 2009-10 that combined diesel generators, rooftop solar, and utility scale battery storage, has proven a cost-effective way to keep power running, especially for emergency cooling shelters.
As we described on this earlier blog, we are also working with a team that includes PSEG Long Island on the engineering and design of a microgrid for Huntington, N.Y. As microgrid technology, reliability, and costs improve, utilities are seeing that microgrids can be a cost-effective alternative to transmission upgrades or redundancy. That project is seamlessly meshed with a portion of the existing utility distribution system so as to augment and relieve demand on peak demand days, and to operate autonomously through a widespread outage.
Utility business models are already evolving, as they have to. A process that started with customers installing rooftop PV is accelerating with microgrids. Utilities and regulators are working through how to price the clear value those customers place on keeping a connection to the utility grid, protecting the viability of the utility model.
Beyond that, the opportunity for deploying projects to serve customers and to rationalize network reliability-upgrade costs are why we are confident that, for US electric utilities, microgrids are a mega-opportunity.