Power outages are intolerable. Paying peak period energy prices is painful. Microgrids offer an attractive solution to both of these challenges. Today’s innovative microgrid electric systems deliver standby power generation to commercial/industrial accounts, entire neighborhoods, and even the utility itself. Choosing to deploy microgrids can give your utility customers the reliable, resilient, and cost-effective electric services they demand.
What Is A Microgrid, Exactly?
A microgrid is an on-site energy system that integrates one or more kinds of distributed energy resources (solar panels, wind turbines, diesel or natural gas generators) to produce electric power. Many newer microgrids contain energy storage, typically from batteries. Some also feature electric vehicle charging stations.
A microgrid operates as short-term provider of electric service, not as a full-time means of operating independently from the electric utility grid. A microgrid is able to provide customer load for at least 24 hours.
A microgrid is a localized system of distributed energy resources and loads that normally operate connected to and synchronous with the traditional centralized electric grid, but can also be ‘islanded’ to operate independently from the main grid, and controlled locally. More on this, below.
Any Time, Any Location
A microgrid provides temporary local energy generation at any location in times of crisis or to avoid peak demand charges. For a big box retailer, a school campus, an office complex, a pharmaceutical manufacturer, a military facility, or a planned development, a microgrid keeps the lights on and operations uninterrupted. And a microgrid can pay for itself by avoiding the higher rates that utilities charge for using electricity during high demand periods.
Microgrids Take Hold
A report by ResearchAndMarkets.com states the microgrid market in North America reached a value of $8.14 billion in 2018 and is forecast to reach $15.39 billion by 2024. According to the report, the market is being driven by the increasing availability of microgrid systems providing reliable, stable, and affordable power. In addition, the usage of microgrids in defense and remote areas to enhance security against cyberattacks and threat of grid outages have also increased its demand. Additionally, Wood-MacKenzie’s “U.S. microgrid forecast H2 2019” denotes that one of the main themes across industries is continued forecast and adoption in industries such as healthcare facilities, food processors, manufacturers and retail stores…driven largely by the ongoing need for reliable power and microgrid expertise.* (Source: Wood MacKenzie Grid Edge Service, Microgrid Tracker)
Modes Of Microgrid Operation
A microgrid is capable of three modes of operation.
Grid Connected Mode
In grid connected mode, the microgrid sits dormant because the main utility grid is operating normally. The utility grid is present and stable, the utility main breaker is closed, and all electric loads are fed by the utility grid.
In island mode, microgrids operate isolated from the grid in the event of an outage. When the grid goes down due to anything from a severe weather event to a knocked over telephone pole, a facility with a microgrid is disconnected from the utility grid—or “islanded”—in order to produce electricity. The microgrid provides electric service when the larger grid goes out. In island mode, the utility main breaker is open, and the distributed energy resources (fossil fuel generators, wind, solar, batteries) are active and feeding the load.
Island mode doesn’t necessarily mean a utility outage has occurred. There are instances when organizations anticipate a disturbance and place their microgrids into island mode to avoid power quality issues or damage from an approaching storm or other natural disaster. For example, hospitals and large manufactures with power sensitive operations will often go into microgrid island mode if they anticipate a threat to power quality or supply.
A microgrid can operate in parallel or dual mode with the utility’s electric service, supplementing or reducing the amount of grid-provided power to avoid paying high utility prices during times of peak demand or address power quality issues. The utility grid is present and stable and the utility main breaker is closed.
The most critical component of the microgrid is the controller. The central brain of the system, the controller manages the generators and batteries. The controller orchestrates multiple resources to meet the energy goals established by the microgrid’s owners. They may be trying to achieve lowest prices, cleanest energy, greatest electric reliability, or a different outcome. The controller’s software increases, decreases, or mixes of any of the microgrid’s resources—or combinations of those resources to achieve the customer’s goals—pay lower energy prices, boost reliability, or optimize clean energy solutions.
An advanced controller can track real-time changes in the power prices on the central grid. (Wholesale electricity prices fluctuate constantly based on electricity supply and demand.) If energy prices are inexpensive at any point, the controller may choose to buy power from the central grid to serve its customers, rather than use energy from, e.g., its own solar panels. The microgrid’s solar panels will instead charge its battery systems. Later in the day, when grid power becomes expensive, the microgrid may discharge its batteries rather than use grid power.
The choice of controller is the most critical decision of the microgrid deployment to effectively maximize investment and resources.
Benefits Of Microgrids
The benefits of the decentralization of energy generation via microgrids include:
- Emergency short-term supply of power
- Increased electric system reliability and resiliency
- Reduced peak power requirements and costs
- Improvements in power quality
- Reduced carbon footprint
- Economic development opportunities for the community
- Scalability of generating capacity as power demand grows
Microgrids provide an increasingly attractive solution because availability of reliable electric service is critical to the nation’s security and economy. In addition, the structure of the wholesale power market is making it possible for utilities to save enormous amounts of money through the use of microgrids.
For example, in North Carolina, public power utilities in the eastern part of state have a coincident peak component to their wholesale power agreement. Each month, there is a one hour peak that makes up between one half and third of their entire month’s energy costs. Using microgrids to peak shave this one hour can save customers a significant amount of investment. Microgrids can pay for themselves in a few years, and some deals can be structured to be cash positive in its first year.
There are different avenues for financing microgrids. First, organizations must determine if it’s better to invest in a microgrid as a capital expenditure (CapEx) or as an operating expenditure (OpEx).
Funds that fall under capital expenditures are generally for major physical goods services that the company will use for more than one year. The life of these purchases extends beyond the current accounting period in which they were purchased. A company might incur CapEx to improve its fixed assets, for example. The capital expenditure is recorded as an asset on the balance sheet under the property, plant, and equipment section. It’s also recorded on the cash flow statement under investing activities because it’s a cash outlay for that accounting period. Once the asset is being used, it is depreciated over time over time to spread the cost of the asset over its useful life. Organizations look closely at the expected return on investment of capital expenditures.
- One-time purchase
- Return on investment
- Usually budgeted for core projects that are business critical
- Tax implications
Operating expenditures are the ordinary and necessary expenses that a company spends to operate its business each day.
- Company’s annual operating budget
- Based on expected revenues and operating expenses to deliver those revenues
- Greater flexibility – microgrid as a service
- Cash flow from savings can make investment cost neutral
Because capital improvement budgets are often constrained and carry tax implications, organizations often prefer treating technology and energy improvement projects as an operating expense. Businesses will utilize the hardware from a vendor paying a fixed service fee instead of buying it outright. The decision to treat a microgrid purchase as a capital or operating expense depends on the organization’s financial and tax situation. Microgrid solutions providers are offering flexible financial packages to meet the unique needs of their customers.
Microgrid Case Studies By PowerSecure
Microgrid solutions from PowerSecure deliver on-site power during high-cost, peak demand periods and provide backup power when grid power is interrupted. The industry’s leading developer, PowerSecure has managed over 2GWof installed microgrids, and is a partner of Hometown Connections, the national organization providing innovative technology and management solutions to community-owned utilities.
Working with municipal utilities and joint action agencies, PowerSecure provides innovative energy solutions in distributed generation, energy storage, renewables, and energy efficiency. A turnkey energy solutions supplier, PowerSecure provides in-house engineering, procurement, construction, and commissioning services. After more than 1700 installations, PowerSecure supports microgrids as long-term living assets with the highest reliability in industry and attractive rate of return.
Borough Of Berlin, PA
The Borough of Berlin is a small community located in south central Pennsylvania, serving about 1,100 meters peaking out at about 4MW. The Borough purchases wholesale power through its joint action agency, American Municipal Power, Inc. (AMP), working with AMP to secure power from wind and solar resources. Eager to address their escalating transmission and capacity costs, the Borough worked with AMP and PowerSecure to build a 3.75MW emergency standby generator that produces 2.2MW of peak savings. Because the community is located in the foothills and suffers frequent outages, the citizens of Berlin approved the project primarily for its ability to provide emergency standby power for the entire community. In addition, the financial savings of the microgrid are substantial. The Borough of Berlin is located within the PJM regional transmission organization that coordinates the movement of wholesale electricity in the mid-Atlantic. The Borough runs its microgrid 60 to 100 hours per year to avoid PJM coincident peak charges, enabling the microgrid system to save about $300,000 per year and in effect pay for itself in less than 10 years.
PowerSecure partnered with Alabama Power to develop the first community-scale microgrid in the southeastern United States. The microgrid feeds 62 homes in a new subdivision, providing emergency power from clean energy resources. This was a turnkey project for PowerSecure, which designed a 400kW solar array providing 800kW hours of power storage and emergency generation for prolonged outage. The neighborhood is financing the microgrid through a fee similar to a homeowners’ association structure. Being able to buy a new home in a community that provides backup electric service became a top telling point for the developer. All of the houses in the subdivision sold within a few weeks.
For a large technology company in Silicon Valley, California, PowerSecure built the most advanced microgrid in world. To ensure campus operations from electric service disruption, the system combines 4MWs of fuel cells, 6MWs of conventional generation, 16MWs of rooftop solar, 12.MW/4.2MWhs battery storage, and 2MW of EV charging. The total connected load for the facility is 41MW, serving 15k employees. Loss of power would result in loss of productivity. Therefore, the company installed the crème de la crème of microgrids, able to isolate from Pacific Gas & Electric and operate for many days.
See A Microgrid in Action: Virtual Resources
PowerSecure maintains a 400,000 sq ft. distributed infrastructure manufacturing and development campus across three buildings. This “Microgrid 360” approach showcases a variety of microgrid options in action. In today’s virtual environment, visitors are welcome to virtually tour the facility via request, and see up close the management of rooftop solar, battery storage, EV charging, fuel cells, EPA Tier 4 Final Generation, and a research & development test bank. There’s an equipment showroom with demonstrations of the microgrid controller and monitoring. To select a virtual tour, visit the company’s website at www.powersecure.com/microgrid360 to learn more. Additionally, visit THIS LINK to view a library of videos profiling PowerSecure’s Microgrid solutions for community-owned utilities.
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Business Developer, Public Power