by C. Baird Brown, Drinker Biddle

Microgrids bend the rules. By inte­grating distributed generation, load management, and storage (thermal and electric) in smart networks, microgrids achieve unprecedented energy efficiency and commensurate cost savings for their owners. They enhance resilience by iso­lating their owners from the grid and self-generating and self-balancing in emergencies such as Hurricane Sandy. But they also transform passive load into responsive resources in the larger, whole­sale grid, providing energy, ancillary services, and demand management.

Federal Energy Regulatory Com­mission (FERC) rules for the wholesale electric markets under its jurisdiction were designed for a world divided into generation and load. FERC is work­ing to recognize and compensate some microgrid services in the wholesale mar­kets, including demand response and frequency regulation. Even in these mar­kets, however, tariffs do not adequately categorize or compensate microgrids for providing dynamic response and capacity, for reducing congestion, or for contributing to reliability. Outside of FERC-regulated markets, the contribu­tions of microgrids to the balancing of the generation, transmission, and distri­bution systems go unrecognized.

State energy regulation can limit microgrids’ ability to serve multiple customers. In most states a single facil­ity owner, such as a college or research campus or a military base, is a good can­didate for a microgrid. In many states, however, a microgrid serving multiple customers, or in some instances simply serving multiple meters, would violate the rules. Even in these states, landlords, co-operatives, homeowners associations, or community choice aggregation juris­dictions may be able to provide collective solutions. Municipal utilities already serve as microgrids in many respects, but often have not adopted the smart management and efficiency strategies of state-of-the-art microgrids.

Many existing microgrids just grew through the integration of existing gen­erating, storage, heating, and cooling assets into a smart management system with a wholesale market interface. But today it makes sense to plan for integrated capabilities when such diverse assets are being deployed and financed. There are well-traveled paths for financing cogene­ration and renewable energy assets to take advantage of existing energy tax credits. Battery storage included in a solar array can qualify for tax credits as well. The remaining assets in a microgrid, ranging from heating and cooling equipment to advanced controls, are the kinds of energy efficiency measures that can typically be financed based on the energy sav­ings. Efficient financing for microgrids is within reach.

We need our grid to deliver reliable power. Microgrids can improve grid per­formance while achieving efficiencies and generating new revenue streams. The federal regulatory environment is improv­ing, and states such as New Jersey, New York, and Connecticut are undertaking initiatives to deploy microgrids. Proven financing techniques are available.

Have you tried the new microgrid?

With 650 lawyers in 11 offices nationwide, Drinker Biddle provides clients with unparalleled service in matters ranging from billion-dollar deals to complex class actions, across a broad spectrum of industries. The firm’s priorities are knowing its clients’ business and providing the value they need so that the firm can be an integral part of their success. Clients choose Drinker Biddle for the firm’s sophisticated yet efficient approach to handling their most important business transactions, litigation and government affairs efforts.

C. Baird Brown is a partner in the firm’s Environment and Energy Practice Group. His practice includes the development and financing of electric generating facilities, waste disposal and recycling facilities, water and wastewater facilities, and other infrastructure projects. Baird currently focuses on renewable energy, energy efficiency and sustainable infrastructure. He can be reached at 215-988-3338 or