What Hurricane Sandy could teach us about a more distributed microgrid

My colleague Katie Fehrenbacher takes a look at the power outages resulting from Hurricane Sandy, and analyzes the fundamental nature of today’s electricity grid, which is centralized. Centralizing a power grid gives you a lot of basic control day to day until you have an outage, which can cripple the entire system because every aspect of the grid is dependent on another part.

Looking at how DARPA designed the internet to be self-healing and invulnerable to cyberattack, Fehrenbacher asks if we could one day have a more distributed electrical grid. Our internet infrastructure along with our cellular networks are fairly distributed, which means that traffic can be rerouted in emergency and that the fundamental resource is moveable. In fact the concern for data center operators is increasingly grid outages, not just servers going down.

Certainly microgrids will have a role to play here, and clean energy is at the heart of distributed power generation as fuel cells, rooftop solar, and geothermal have all demonstrated. Utilities are not, by nature, going to try to build this infrastructure because it moves generation away from them and toward the user, cannibalizing their business (some forward looking utilities like San Diego Gas & Electric are experimenting with microgrids to serve key communities with lots of distributed power already). The solution will have to involved distributed power getting so cheap and increasingly reliable that consumers decide to do it themselves. And if we further deregulate, splitting generation from distribution we might take away an incentive from vertically integrated utilities to want to control all the generation themselves.

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?

Today in Cleantech

Do green energy marketers really pose a threat to utilities’ monopoly on power? An interesting report this morning says yes, if you’re talking about  deregulated markets such as Great Britain. That’s where companies like Co-Operative Energy and Good Energy are trying to eke out customers for green power from the 99.5 percent of power supplied by the country’s six big utilities. In the United States, companies like Green Mountain Energy (now owned by NRG Energy) have constructed similar business plans around selling renewable power (mainly wind) to retail customers — different than the big, block power purchases we’ve seen from buyers like Google. As for how utilities will manage the growth of distributed, customer-owned power generation such as rooftop solar panels or campus backup power generators, that’s where microgrid operators like Balance Energy, Lockheed Martin, Viridity Energy and others want to play. It’s an interesting set of concepts to watch — and still a long way from major market penetration. Most of the United States remains non-competitive, with traditional utility-customer relationships that would make it difficult for new entrants to gain market share for their differentiated power supplies.

Today in Cleantech

India is ripe for smart grid investment — but it’s going to be a very different kind of smart grid than the ones being built in the United States, Europe and China. That’s the gist of a recent “smart grid playbook” report from Smart Grid News, which cited reports that place India as the third-largest potential smart grid market behind the U.S. and China over the next 20 years. But while the U.S. is focuing on smart meters, distribution automation and demand response, and China on its “strong, smart grid” with massive high-voltage transmission lines, India’s grid is far more fragmented, and far less reliable. The country suffers from frequent blackouts, and many large industries build their own power generation to have a reliable source of electricity — a set of circumstances that could make so-called microgrid systems far more attractive in India. Meanwhile, many rural areas lack grid power, which could open the door to clever and cost-effective distributed generation and energy storage systems. As for smart meters, IBM’s energy and utilities chief Guido Bartels notes that “non-technical losses” — a nice way of saying energy theft — remains the top concern of India’s utilities in terms of installing newer, smarter meters. Energy theft is also a big problem in South America, the Caribbean and other developing regions, making up an interesting market for lower-cost, tamper-proof smart meter systems.

Viridity Energy Takes Demand Response to Military Bases

Viridity Energy is competing for a Defense Department contract to control power use at federal and military facilities, and has already signed up one military base customer. That’s a big prize for a startup, if it can scale to match its demands.

Today in Cleantech

The U.S. military is leading the charge in the development of an interesting subset of smart grid technology — the so-called microgrid. This morning, on-site power generation and management company PowerSecure announced the commissioning of its “Smart Charging Micro-Grid” for the U.S. Army — a platform meant to control generators, solar panels, plug-in vehicles and all that power-sucking equipment that Army units use in remote field encampments. A movable microgrid is about as “micro” as these systems get — most are built to control standing infrastructure, such as the U.S. Marine Corps’ Twentynine Palms base in California, which is being outfitted to run independently of the power grid by General Electric. Eaton is also working on a grant-funded military microgrid research project. Last month, the Department of Defense said it would work with the Energy Department’s ARPA-E program to figure out how to generate and store power at more than 500 military installations around the world. Those bases need to keep running during blackouts, which gives them an excuse to spend pretty freely on microgrid projects. While the world microgrid industry was worth about $4 billion last year, according to Pike Research, more integration is needed to make their blend of home-made power and islanding capabilities pencil out against grid power. Hospital distributed power and demand response technology company Blue Pillar is working on ways that U.S. Air Force base microgrids could feed their power back to the grid to help pay for their costs, for example.

AEP: Deploying the Future of Backyard Batteries

Backyard batteries that back up nearby homes and businesses as well as the neighborhood grid could provide a lot of value to utilities and their customers, but they come at a high price. Utility AEP’s “community energy storage” (CES) pilot project should help see how the concept pencils out in the real world.

As Smart Grid Takes Off, Microgrid Momentum Builds

It’s a big week for smart grids. Billions in stimulus funds have been awarded to 100 firms to help jump-start development, which by all accounts, will lead to boom times for startups and established players that have something to offer utilities as they revamp their grids. As the smart grid takes off, its development will fuel the growth of another type of grid: the “microgrid.”

Applying Smart Growth Lessons to the Grid

The path toward the U.S. smart grid — or “grid modernization” in the language of the stimulus bill — has been compared over the last few months to the build-out of the modern transportation system in an earlier era. It’s not a bad analogy. The power grid today is a lot like the transportation infrastructure we developed then. It’s a system set up to accommodate mass production. But as the grid gets smarter, we’ll need a electrical-transport system that’s “right sized” for distributed generation.