May 26, 2010
In my last posting, I summarized the highlights and key themes of the Networked Grid conference that was held in Palm Springs CA on May 18-19. For many people, the Smart Grid is about smart meters, advanced metering infrastructure and demand response but the scope of the Smart Grid is so much broader than this and so, in this column, I would like to dive a little deeper into the trend towards de-centralization of generation with the emergence of distributed generation and increased demand for microgrids. This aspect of the Smart Grid is perhaps the most exciting because it challenges the entire architecture that we have established for electricity generation, transmission and distribution over the past 100 years.
Before discussing the role of microgrids in the Smart Grid it is important to establish an understanding of what a microgrid is: It was clear from the panel discussion on microgrids at the conference that there isn’t a single definition of what a microgrid is. Some participants were discussing microgrids in terms of residential sized systems while others were discussing campus or community wide systems. Some gave the impression that the presence of distributed generation was sufficient to qualify a project as a microgrid but distributed generation alone does not define a microgrid.
Wikipedia defines a microgrid as a localized grouping of electricity sources and loads that normally operates connected to and synchronous with the traditional centralized grid (macrogrid) but can disconnect and function autonomously as physical and/or economic conditions dictate.
I’m sure there are other definitions and this one is not perfect. As somebody on the panel suggested when this was discussed, by this definition, you could make an argument that the Texas interconnect is a microgrid. Let’s accept this as a working definition, however, as it seems to be a reasonable place to start.
Pike Research forecasts that over 3 GW of new microgrid capacity will come on line globally by 2015, representing a cumulative investment of $7.8 billion. North America will be the largest market for microgrids during that period, capturing 74% of total industry capacity. In North America, the largest category will be institutional microgrids, followed by commercial/industrial and community grids. In other regions, however, the story is different and [they] expect community microgrids to be the largest category in Europe and Asia Pacific.
It is important to note that a microgrid is not necessarily green: The generating plants in a microgrid may be renewable energy sources such as wind or solar energy or they could be fuel cells, biomass or gas turbine generators.
When power is cheap on the macrogrid, the microgrid can purchase power at market rates. However, when demand spikes and the true cost of electricity rises, the microgrid has the capability to meet its own needs from local generating sources helping to reduce demand on the macrogrid. Depending on local regulations and agreements with the local utilities, microgrids may sell power back into the macrogrid during periods of peak demand. The sale of energy back into the macrogrid may occur at market rates or, in some regions, generous feed-in tariffs may apply for energy from renewable sources.
In August 2003, the great Northeast Blackout affected some 10 million people in Ontario Canada and up to 45 million people across 8 states in the US for up to two days. Five years later, Scientific American reported research by a team at Carnegie Mellon University in Pittsburgh which showed that, despite enhanced regulations designed to prevent such events, the number of blackouts affecting at least 50,000 people in the US had stayed relatively constant at 12 per year between 1984 and 2006.
Because of their ability to operate independently of the macrogrid, reducing the impact of large scale blackouts, microgrids have been promoted by researchers at UC Berkeley as a way to improve grid reliability and reduce dependence on the long distance transmission grid. Another advantage that they cite for microgrids is the opportunity to recapture heat that is often a wasted byproduct of electricity generation and use it to heat buildings in the immediate vicinity of the generating station. This co-generation of heat and power is particularly attractive because it helps to make the economics of microgrids comparable to large central generation models.
An essential element of what makes a microgrid is the capability to control the balance of generating capacity and demand within the confines of the microgrid itself. This control is essential to ensuring a stable supply of energy to the power consumers served by the microgrid regardless of whether the microgrid is connected to the macrogrid or “islanded” and operating independently. Another unique aspect of a microgrid is the fact that, because the microgrid is owned and operated by the customers that it serves, it can differentiate between users that have extremely high power quality requirements and those who have lower needs and it can prioritize the power supply to those essential services within its community.
Microgrids can be implemented by different owners to meet different objectives. Large industrial and commercial users might implement a microgrid to provide cheap combined power and heat generation. Industrial users with very high power quality requirements might design and implement a microgrid that assures them of a supply that meets their demanding specifications which cannot be realized on the macrogrid. Government entities such as the DoD are especially interested in microgrids from a power security perspective. In the event of a coordinated attack on the nation’s power infrastructure, the capability of a microgrid to island from the macrogrid provides resiliency and security for essential services.
In their book, PERFECT POWER: How the Microgrid Revolution Will Unleash Cleaner, Greener, More Abundant Energy, Bob Galvin and Kurt Yeager of the Galvin Electricity Initiative note that the idea of a decentralized model for generating and delivering electricity was what Thomas Edison had originally envisioned. However, a lack of appropriate technologies to allow such a model to scale on a national basis led to the development of a centralized model in which economies of scale and large scale generation technology advances created a more profitable, manageable, accessible and affordable solution for what was, in the early part of the 20th century, relatively modest electricity demand. With improvements in technology for small scale distributed generation, computerized controls that allow local grids to optimize their utilization of local or centralized generation and the capability to disconnect from the macrogrid and operate independently when needed, the time has come to re-think the existing model of generation, transmission and distribution. Galvin and Yeager also note the potential of microgrids to bring electrification to the many parts of our world that do not have access to affordable, sustainable, reliable power today without the need for the costly transmission networks that exist in most western nations.
The Galvin Electricity Initiative has three core objectives:
- Drive regulatory reform based on a set of Electricity Consumer Principles
- Develop Perfect Power systems. They have completed two systems including one at the Illinois Institute of Technology and another at Mesa del Sol, a sustainable community in New Mexico.
- Raise Awareness through a media and advertising campaign, speaking engagements and personal outreach to key stakeholders.
At the Networked Grid event, a panel discussion on The Microgrid Emergence: Distributed, Intermittent Renewable Power and Storage featured Tom Bialek, Chief Engineer, Smart Grid at San Diego Gas & Electric, Andrew Bochman, Energy Security Lead at IBM, Jack McGowan, CEO, Energy Control Inc and Terry Mohn, VP and Chief Innovation Officer, Balance Energy. The panel was moderated by David Leeds, Smart Grid Analyst at Greentech Media, who were the hosts for the conference.
Jack McGowan worked with the Galvin Electricity Initiative on the microgrid at IIT and his company is currently working on a project with the University of New Mexico. Andy Bochman is working with DoD to reduce dependency on local power companies for US military bases. Terry Mohn’s company develops commercial microgrids using only renewable sources of generation.
In response to a question about the biggest drivers for microgrid development in the US, the panel noted:
- Utilities are interested in developing microgrids in order to meet their obligations to meet demand and improve reliability.
- Renewable Portfolio Standards in many states are forcing many utilities to look at microgrids employing rooftop solar on customer premises because they cannot obtain approval to build new transmission lines to bring renewable power from the plain states or desert southwest.
- For the DoD, energy security is the overriding concern. Vulnerabilities associated with fuel price and availability as well as concerns about the fragility of the macrogrid are forcing them to evaluate microgrid alternatives. Scenario planning by the DoD calls for military bases to be able to run autonomously for multiple weeks. Also, due to negative reactions to the situation during hurricane Katrina when the military bases around New Orleans were fully powered while the local community had no power, DoD wants to look for ways that they can provide power to essential services off base .
- There is also a strong economic driver for customers who have the option to sell power back into the grid.
- Another factor that is important for some utilities is the regulatory practice of decoupling utility profits from increased sales of electricity which is a mechanism that regulators can use to incentivize utilities to implement energy conservation and decentralized generation programs that are of benefit to the wider community but which may result in lower overall electricity sales by the utility. Note that some consumer advocates take issue with decoupling because it guarantees utility company profits while reducing their risk exposure to lower sales that may result from these initiatives.
One major challenge that the panel noted in the widespread adoption of microgrids was the need to standardize the design of the microgrid so as to avoid costs associated with customizing the installation for each customer.
Another key challenge is a regulatory issue. Today, in the US and in many other markets, only a public utility or a government entity is authorized to run wires that cross a public street. This necessarily limits the scope of a microgrid installation to a campus or facility scale.
However, perhaps the biggest challenge to a widespread adoption of microgrid technology, at least in the modern, industrialized nations, is the need to change the incentives for the utilities so that they embrace this technology as a way to improve grid reliability, even though it may result in lower electricity sales and lower profits for the utilities themselves. If this technology really takes off in the first world, this will help to drive down the cost of adoption for the emerging markets where the potential to bring cheap reliable electricity will provide a huge improvement in the living standards of so many people in the world.