We analyse the rate at which energy companies are developing and adopting microgrid technologies as well as the benefits and disadvantages of the technologies and business cases to utility business models.
We discuss challenges being experienced by utility firms under efforts to expand their portfolios of microgrid technologies and measures being implemented or suggested to overcome the challenges.
Whilst the need to expand distributed energy resources to secure energy supply, meet peak demand and reduce carbon emissions is driving the growth of utility microgrid market, on the other hand, are factors such regulatory unclarity hindering the market growth, according to Navigant Research.
The Free Press highlighted the importance of microgrids in helping utility companies reduce operational costs incurred in transmitting electricity over long distances to meet energy demands in certain regions.
With a microgrid, an energy provider generates electricity using available renewable energy resources within a region, community or service area to meet local energy demand.
New smart energy technologies have improved the way distributed energy resources are operated such that the electricity from microgrids is now being integrated into the main grid to stabilise the whole network as one.
At the same time, microgrids are viewed as a potential threat to utilities’ revenue generation and collection in the existing business models whereby they earn profits from developing and operating energy generation, transmission and distribution systems, a notion Brian Conroy, director of Network Projects and Initiatives at US utility Central Maine Power argues with.
“Distributed resources are not a problem. They’re a solution,” says Conroy.
Utility microgrid market
However, despite an increase in utility adoption of microgrids, the utility sector still represents a small segment of the total microgrid market.
Navigant Research forecasts the utility distribution microgrid market to represent 10 to 15% of the global microgrid market by 2024.
According to the energy market intelligence firm, by the fourth quarter of 2016, the total capacity of microgrids at a global scale reached 16,552MW as some 1,681 new microgrid projects were introduced in 2016.
North America dominated and is expected to continue dominating the microgrid segment with 54% share of the market ahead of other regions.
In the US alone, utility companies are expected to invest up to $917 million towards the development, operation, management and maintenance of microgrids by 2024.
Currently, reports have it that utilities in the US are engaging with state regulatory officials in developing policies which would enable swift integration of microgrids in utility business models.
Financing research and development of microgrid technologies
For instance, in states like California and New York, energy providers are working in partnership with state energy regulators in drafting new business standards as well as in piloting microgrid technologies.
Although funding towards microgrid projects remains low, the US has amongst other markets strived to enhance investments through an increase in government led funding programmes offering energy providers with grants and loans.
Steve Fine, vice president of ICF told Microgrid Knowledge: “Getting incentives right means taking into account and quantifying the range of values that microgrids can bring to the grid, as well as helping customers to understand the added benefits that will accrue to them.”
According to the Free Press, the California Public Utilities Commission has entered the early stages of a pilot in which it is providing utilities with incentives to pilot and implement distributed energy resources including microgrids.
The New Jersey Board of Public Utilities in June launched its Town Center Distributed Energy Resource Microgrid Feasibility Study in which the state is partnering with utility companies, towns and municipalities to implement some 13 pilot projects of microgrid technologies, reported Electric Power & Light.
The $2 million pilot aims to help utilities improve the use of microgrids to sustain the reliability and resilience of grid networks in the event of grid failures during bad weather to avoid interferences to the operations of government services.
The pilot includes a project to be deployed by the Camden County Municipal Utilities Authority in developing a community microgrid to provide electricity to a housing cooperative, government facilities, schools, village supermarkets, churches and gas stations.
In New York state, the introduction of the NY Prize by the state government through Energy Research and Development Authority (NYSERDA) is expected to increase the development of microgrid technologies. Under the programme, the state has provided funding to some 11 projects to research and develop new microgrid technologies.
The California Energy Commission in July announced $44.7 million in grants towards microgrid projects. The set-aside budget will be used to provide projects with grants of between $2 million and $5 million.
Microgrid proposals and utility investments
This August ComEd announced that it is waiting for an approval from the Illinois Commerce Commission to start implementing its microgrid pilot programme which includes the development of solar plant and integration with battery energy storage system at a total cost of $8 million to be provided by the Department of Energy and other project partners.
The project has been scheduled to start in the first quarter of 2018 once the proposal secures regulatory approval.
Phase two of the pilot will include ComEd spending up to $17 million towards the integration of an existing microgrid at the Illinois Institute of Technology, with a new 4.5MW microgrid and 7MW of controllable generation resources.
Directly or through consortiums, utilities are also increasing investments towards the expansion of the microgrid market. The Utility Dive reported smart energy solutions startup Advanced Microgrid Solutions securing $34 million in funding from utilities through the Energy Impact Partners and other investment firms.
French-based energy company Engie in July through its Social Impact Investment Fund announced it will provide funds to some three microgrid projects in Cambodia, India and Guatemala. In Cambodia,
In Cambodia, Engie will invest in ATEC, whilst in India in microgrid developer Mera Gao Power and in solar microgrid firm Kingo in Guatemala, reported Power Engineering International under the company’s efforts to reach its goal to provide 20 million people with access to sustainable and clean energy by 2020.
Meanwhile, Indian utility Tata Power launched a solar microgrid in the state of Odisha under efforts to provide rural consumers with affordable and clean energy. Read more…
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