Municipal Microgrids
Description
Jon Creyts and Eric Maurer:
"Whether through physical decline, natural catastrophe, or misguided malice, our grid is subject to increasing threats that can and will lead to more frequent failure. Meanwhile, our centralized architecture, which is largely based on hub-and-spoke generation and transmission, only adds to the brittleness of the system.
One solution to these emerging infrastructure challenges that have been receiving increased attention is the use of Microgrids: small, self-balancing networks that have the ability to fractally break apart from the larger grid for autonomous operation and then seamlessly recombine to function as part of the whole on demand. Such networks have a single point of common coupling to the grid, and include sources of generation (such as diesel and/or gas generators, distributed solar, and distributed wind resources), as well as electrical loads that can be managed in a coordinated manner. Demand response and energy efficiency -- and increasingly, storage and EVs -- often figure prominently in design and operation to flexibly manage supply and demand requirements on the microgrid.
Today, the United States has nearly 1,500 megawatts of generation operating in microgrids, but because such systems help to resolve reliability issues and enhance the performance of the larger grid, they also -- like distributed energy resources such as rooftop solar PV -- potentially threaten the traditional utility business model." (http://www.greentechmedia.com/articles/read/microgrids-and-muncipalization-can-you-micro-municipalize-a-utility)
Discussion
Jon Creyts and Eric Maurer:
"In the past year, the long-term repercussions of the growing momentum behind distributed generation, energy efficiency, and demand response have received considerable attention (see, for instance, EEI’s summary of the challenge by Peter Kind or RMI’s own discussion from our eLab initiative). These business-model issues are probably most visible in solar development due to the challenges around managing net energy metering.
However, adjusting utility rates and debating the right to sell self-generation back onto the grid pale in comparison to the consequences for utilities of the complete defection of customers made possible by microgrids. In traditionally structured markets, this defection would knock utility cost recovery practices out of tilt. Within restructured markets, it introduces new wholesale market participants and shifts operating dynamics. The process of activating microgrids is akin to the impacts of the municipalization of grid assets -- only at a much smaller scale -- that, once aggregated, could spell big change.
The municipalization of parts of the electricity system is a theme that has often been met with opposition by centralized utilities for a number of reasons, not least of which is the loss of valuable customers. Between 1980 and 1997, at least 40 proposals for the municipalization of electricity assets were made in seventeen states. While these have slowed in more recent years, Boulder, Colorado’s ongoing high-profile municipalization effort continues to progress and is a reminder of the challenges associated with breaking off assets in a highly interconnected operational and financial system.
But take the complexity of this challenge and now reduce it down to that of an individual customer on the grid: a campus, a hospital, or even an individual residence. Sprinkle in currently low gas prices, declining renewable generation costs, a preference for cleaner energy than the grid can provide, a desire for resiliency and performance assurance beyond what the utility can muster, or any number of other wishes, and you have the potential for “micro-municipalization” to occur -- the creation of microgrids that give customers the option to secede from the larger grid at will, in some respects the functional equivalent of municipalizing those grid assets and taking them out of the hands of utilities.*
To be clear, these customers do not necessarily want to “defect” per se (neither do municipal utilities, which often retain wholesale contracts with providers outside their service territory), but the option for self-sufficiency that a microgrid provides and the prospect for value optimization in the center of a host of other supply options is extremely alluring for some customers. To find potential interest, talk to customers in the Northeast and mid-Atlantic, where ice storms and hurricanes have left individual feeders and in some cases whole communities without power for days multiple times over the last decade, or others on the Gulf Coast, where every hurricane incident threatens a long and slow path to recovery for devastated communities. In light of such threats, microgrid access can appear a reasonable insurance policy.
The size of this customer demand could be quite substantial. If Navigant’s forecasts for microgrid development cited above prove correct, the United States could be creating the equivalent of one major utility with approximately $25 billion in assets annually. Of course, this capital would be distributed broadly across the country. And with recent announcements by NRG and SolarCity looking to market fused self-generation and storage solutions, the prospect of a simple, microgrid-able package being available to force the discussion in the near term is an inevitability.
It is this prospect that will force the discussion of business models faster than has happened to date. The challenge is not one where the proliferation of microgrids is going to “eat the lunch” of a utility anytime soon. However, key customer defection and/or curtailment of revenues may very well start “nibbling at dessert,” which can make serving the bulk of the remaining customers a little less financially appetizing." (http://www.greentechmedia.com/articles/read/microgrids-and-muncipalization-can-you-micro-municipalize-a-utility)
Example
Jon Creyts and Eric Maurer:
Can you “micro-municipalize” a municipal utility or co-op?
So with all this talk about “micro-municipalization,” we have to ask ourselves if microgrids pose a similar challenge to publicly owned power as well. Our view is that any publicly funded infrastructure program requires a careful rethink in the face of a powerful dislocative force such as what microgrids embody. However, we see a clear opportunity for municipal electric providers and cooperatives to lead in showing how to practically integrate and promote these projects.
This is, in fact, what is happening in Fort Collins, Colorado. In this city of 150,000 people, the municipal utility is part of a multi-stakeholder effort to develop a 2.5 square mile net-zero energy district. The district, called FortZED, will produce or procure as much electricity from renewable sources as it consumes. One of the first projects in FortZED demonstrated the coordination of distributed energy resources like solar PV and demand response to reduce peak load by 20 percent. Up next for the team is to build on this effort and test the use of these assets as an islanded microgrid. And as the team pushes forward with microgrids, the municipal utility is also working with RMI and its Electricity Innovation Laboratory (e-Lab) on new approaches to scale investment in distributed renewable resources throughout the city. Rather than run from or ignore the challenges that microgrids create for the utility, Fort Collins is tackling them head-on, looking for the opportunities they create for the utility and its customers.
To be clear, we are in the very early stages of working to integrate microgrids into our electricity network. At RMI, we see early evidence of new and additive value that these resources can provide, adding flexibility to operations and stimulating dynamic power markets that result in more resilient and cheaper power. With the right business models, these outcomes can be achieved faster and with greater benefits for all." (http://www.greentechmedia.com/articles/read/microgrids-and-muncipalization-can-you-micro-municipalize-a-utility)