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?
Posted on: November 5th, 2013