Aug 20, 2013 | Archives

Post #2: Energy Assurance Planning – the Business Case for Microgrids

by | Aug 20, 2013 | Archives

Under the sponsorship of the California Energy Commission (CEC), California has launched a program to assist local governments in developing plans to become more energy resilient.  The California Local Energy Assurance Planning (CaLEAP) program provides funding to local governments, as the first line of defense in emergency response, to better prepare for and respond to natural disasters or other events that might interrupt the provision of electricity and other critical services over extended periods of time.  As the county has witnessed in recent events (e.g., Hurricane Katrina along the Gulf Coast, Superstorm Sandy in the Northeast), the underlying infrastructure supporting the provision of basic services to ensure public health and safety, can be vulnerable in events such as these.  And although we can never be totally protected against natural disasters of this magnitude, there are many things that can be done in preparation for these kinds of events that can make a substantial difference in mitigating their impact – especially in assuring the most basic of public services (police departments, fire departments, health care facilities) can survive and maintain effective operations.

Although Energy Assurance Plans vary in terms of their scope and emphasis, in the ones that I have been involved with, microgrids appear to be a common theme.  In many municipalities, critical facilities such as police and fire stations, city hall and emergency operations centers, hospitals, and large facilities that might be used as shelters are centrally located, creating the potential for serving these facilities on a common microgrid circuit.  In the event of a loss of electrical supply on the main distribution network, the microgrid circuit would isolate from the network and locally-sited generation would provide electrical service to those facilities on the microgrid circuit, indefinitely, until external electrical supply is restored.

Designing a microgrid for this kind of application has many challenges – everything from selecting the best fuel type(s) for the microgrid generator, proper sizing of the generation to support facilities under emergency conditions, potential hardening of the electrical infrastructure for the microgrid, as well as the systems and controls needed for proper microgrid operation.  However, one of the biggest challenges is the economics of the investment.  The cost of a microgrid is non-trivial — and the core benefits (i.e., public health and safety, minimization of economic disruption, and maintaining civil order) are realized only when, and if, a disaster event occurs.  The business case for implementing a microgrid of this type can be improved, however, if the investment is viewed not only as providing emergency power under emergency conditions, but as distributed generation that, in non-emergency conditions, can be dispatched to offset high market prices, or can generate excess energy/capacity that can be sold into the regional market.

Natural gas-fueled generators, rated for continuous duty, can often generate electricity at or below market prices for commercial and/or public facilities during many hours of the year, resulting in predictable value generation throughout the year.  Outfitted as combined heat and power (CHP) units, these generators can also be used to meet the heating requirements for a nearby facility (or facilities), providing additional value and improving the business case.  Depending on the location and size of the microgrid generation and local/regional conditions, there may be additional value potential from providing ancillary services into the market.

The economics of every situation will vary, of course, and many other issues have to be addressed.  Who owns the generation?  What sort of regulatory issues might be involved?  Who is the local electricity supplier – investor-owned utility, municipal utility – and what are their interconnection requirements?  Are there cost recovery issues – and who benefits from the offsetting value that might be created?  Should non-public facilities (i.e., gasoline stations, grocery stores) be incorporated into the microgrid and, if so, how should they be treated?

Still, the potential distributed generation value should be factored into the overall design of and business case for a microgrid.  By factoring in a complete set of potential value streams, an investment whose primary purpose is to provide sustained electrical supply to critical facilities in a low-probability, high-impact event, can be structured to be more economically viable/attractive.  If the fundamental economics make sense or, at least, can be enhanced through a more robust microgrid design and a broader economic perspective, then the chances of resolving those other issues is greatly improved – and the citizenry of a local community can be the ultimate beneficiary.


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