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What Regulators Need to Know About Microgrids

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Microgrid

It’s been here for years: The hackneyed opening to an energy conference presentation where the speaker tells us the industry can’t agree on an exact definition of a microgrid. Who cares? Well, regulators for one. They are trying to understand how to modernize their frameworks to spur utility innovation and investment for the grid of the future. They are working hard to understand the solutions available so they can create the new rules of the game.

Microgrids are custom-tailored to regulators’ stated desires of improved reliability, more distributed energy resources (DERs), and a flexible, self-healing grid. And yet, utilities are seeing little interest or support from regulatory bodies to include these systems in a rate case. Why is that?

Well, when many regulators hear the word microgrid, they think of something that is complex, expensive, and only helps a small number of people, potentially at the expense of others. That doesn’t sound like a great deal. However, the microgrid industry has changed so much in the last five years from greater industry experience, innovative new business models, and lower equipment costs. The modern microgrid can be an incredible asset in a utility’s portfolio for transitioning to the grid of the future, so is it time to stop calling them microgrids?

Instead, we could talk about non-wires alternatives that incorporate DERs to improve resilience, reliability, and flexibility while avoiding larger investments in line upgrades or substation equipment. Instead of talking about complexity, we could talk about flexibility. Instead of talking about serving a few customers with a single microgrid, we can talk about serving multiple communities with fleets of microgrids keeping critical infrastructure up and running. Instead of worrying about which kinds of assets utilities can and can’t own, we could tout innovative ownership and financing structures, and new business models.

While behind-the-meter microgrids can deliver value to end-users, leveraging all the valuable use cases these systems can deliver requires complex ancillary services agreements between private microgrid owners and utilities, as well as upgraded switching equipment. By placing DERs directly into the distribution system and including controls for islanding critical facilities, utilities gain direct access and control of those capabilities.

Even in states where utilities can’t own generation, there are a myriad of lease and service contracting mechanisms where they can obtain DER generation from the market while owning the controls, switchgear, and energy storage. Of course, this requires regulators to both allow for this shift and, ideally, reward it with performance incentives built upon reliability, non-wires alternatives, and resilience.

The grid of the future will be an amalgam of minigrids, microgrids, and picogrids. Instead of worrying about what each of those terms of art specifically means, we should focus on what we want this energy system to be able to do. We want load control and frequency regulation, renewable energy and reduced peak demand, and maximum uptime and resilience in the face of disaster.

For utilities to deliver all of that, they’ll need microgrids. If that name alone is holding us back, maybe we shouldn’t use it.

My colleague Chris Evanich posted on this topic previously, but the lack of clarity continues. I’d be interested in learning your thoughts on this issue in the Comments below.

Expert

Brian Levite

Publication Date

October 7, 2019