Balance Energy Quietly Building a Web of Microgrids

Military bases have been some of the pioneers for so-called microgrids — systems of self-generated electricity and intelligent controls that can be disconnected from the grid at large to keep the lights on when the utility can’t provide power. The idea is that a tree falling on a power line or a transformer malfunction due to a heat-seeking squirrel shouldn’t compromise the nation’s defense.

But Balance Energy — a San Diego-based offshoot of British military contractor BAE Systems (s BA.L) — sees the bigger promise of microgrids in the private sector, not as islands of power unto themselves, but as trading partners, making and sharing electricity with each other and the grid at large.

Balance Energy’s fully functioning, interconnected microgrids don’t exist yet, though many are being worked on in a pilot project fashion. But as far as Terry Mohn, Balance Energy’s chief innovation officer, is concerned, the time has passed for doing tests — “We’re doing deployments,” he said.

Mohn is a former smart grid chief at San Diego Gas & Electric, a subsidiary of Sempra Energy (s SRE), who joined Balance Energy last year and introduced the company in a September coming-out party at the GridWeek event in Washington DC. (see Greentech Media). Since then, the BAE Systems subsidiary has kept a military-level veil of secrecy over its activities, posting little on its Web site beyond hard-to-read industry white papers.

But in an interview last week, Mohn said the company has been involved in “dozens” of projects, ranging in scale from 500 kilowatts to as large as 50 megawatts, though the larger projects may require linking several smaller ones together to reach scale.

While he declined to name any customers, it’s likely that Balance Energy could be continuing its partnership role with SDG&E’s plan for a microgrid at the University of California at San Diego campus — although that project may be scaled back after it failed to secure a $100 million Department of Energy smart grid grant late last year.

Balance Energy’s role in all this is to integrate the variety of systems — distributed generation, energy storage, load control and demand response systems, power quality management devices, and the all-important point of connection to the larger grid — that make up microgrids, Mohn said. BAE’s decades of experience building and managing complex military IT systems are likely to serve it well in that task, he said.

The military contractor’s deep pockets will also serve it well, noted Steve Luker, vice president of business development for BAE:

“If you look at a microgrid, the majority of cost is still on the generation side,” he said. “We have a significant portion of the company that’s out developing renewable generation projects that can be used in the context of the microgrid, along with demand response, control system side, storage side, and the pricing mechanism side.”

But, unlike many other microgrid proponents, Balance Energy isn’t focused on solar and wind power for its renewable generation goals, he said. That’s because wind and solar power are intermittent, while Balance Energy is primarily focused on power that can improve better overall grid stability — though it will look at wind and solar if they’re economical, he said.

Instead, Balance Energy is looking to fuel cells that operate on biogas and natural gas  — “We have heavy projects around those,” Luker said, mostly in California. Biomass gasification and municipal solid waste gasification, as well as small hydro, are also on the company’s renewables list, he said. Just which fuel cell, gasification and hydroelectric companies Balance Energy is working with, he declined to say. (On that note fuel cell maker Bloom Energy launched yesterday and has been selling its fuel cells, which operate on natural gas and methane, to companies in California, to take advantage of the state subsidy).

As for the question of whether utilities will help their customers build their own microgrids and integrate them, “We are starting on the customer side, and inviting utilities to participate,” Mohn said. Eventually, “We think that utilities will take an investor stake into customer assets. We’re negotiating with utilities now to do that. It’s going to take some time to get there, but it’s certainly a preferred method.”

Other military contractors have been working on microgrids as they’ve shifted into the smart grid space. Lockheed Martin (s LMT) is working with some dozen utilities on smart grid projects, including a few microgrid projects (see Greentech Media), and Boeing(s BA)’s smart grid work includes a DOE stimulus-winning project in New York with Consolidated Edison and microgrid management software maker Viridity Energy.

But Balance Energy envisions linking multiple microgrids together in a web of dispatchable (always available) power and demand response capacity, and that sets the firm apart. Achieving that ambition will require plenty of sophisticated controls and predictive analysis technology, but then, BAE’s been doing that kind of stuff for military clients for some time, Luker noted. In fact, the idea of multiple microgrids all linked together is quite like the general concept of the smart grid — a point that hasn’t been lost on many of the key thinkers working on smart grid systems.

Eventually, Mohn said, utilities could find ways to utilize Balance Energy’s technology for linking multiple microgrids to accomplish tasks like sharing power between one another. While entities known as independent system operators (ISOs) and regional transmission organizations (RTOs) manage that task in parts of the country, much of the South and Mountain West doesn’t have such entities in place, he noted.

As for whether Balance Energy intends to own and operate its own microgrids as a way to generate revenue, or it will build and maintain them on behalf of clients, Luker says: “I think we can do both.” “In some cases, it may be that the utility prefers to manage the microgrid themselves, and we’d turn over the NOC license to the utility. In other cases, it may be a campus, or an industrial campus, or working with our own customers on the military base side — they’re basically small cities — that may want to manage their resources themselves.”