Utilities and Microgrids Friends or Foes


Utilities and Microgrids: Friends or Foes?

Throughout the evolution of the power grid, beginning with the inventions of Thomas Edison’s DC Electric System and George Westinghouse’s AC Electric System, change has often taken years or even decades to occur, and longer still for its effects to be felt. That changed when the deregulation of the mid 90s ushered in a new era of rapid innovation, impactful changes, and uncertainty.

As technology has grown rapidly, so has consumer involvement and engagement. The increased adoption of grid-edge devices is leading to further innovation that is pushing prices down and fostering more widespread adoption. This cycle accelerated the commercial maturity of microgrid technologies, ease of integration, and the development of microgrid optimization software solutions to manage the emerging dynamic energy network. As the technological capability to deal with demand and supply intermittency of a new distributed power grid (that favors microgrid and Distributed Energy Resources (DERs)) expands, should utilities embrace microgrids as friends or foes? 

Utilities who are unsure of how they should feel about microgrids, and how to strategically prepare for microgrid and DERs disrupting their resource plans, should take a look at the National Renewable Energy Laboratory’s (NREL) new rooftop photovoltaic technical potential estimate. According to the NREL, “U.S. building rooftops could generate close to 40 percent of national electricity sales.” What makes this estimate even more significant is that prices of energy storage resources have continued to drop as their adoption has spiked in recent years, which will further drive microgrid growth.

The inescapable nature of microgrids is, perhaps, best captured by Peter Asmus, a principal research analyst for Navigant Research’s Energy Technologies program. In his June Microgrid Media article Asmus reviews the changing perception of microgrids by utility executives who have been dealing with the profit drain and reliability problems caused by microgrid development. As technologies have evolved and more executives have grown to appreciate their importance, Asmus concludes that “[m]icrogrids operated/owned by utilities can serve the distribution grid first and work as a platform for new utility services.” Many utilities such as Xcel Energy, Duke Energy, Sempra Energy, and Southern California Edison are already using unregulated subsidiaries to explore and invest in third-party microgrids, according to Asmus.

Regardless of the relationship utilities adopt with microgrids, what is evident is that they can no longer afford to stick to the traditional one-way value chain. A recent article by Teresa Hansen, Editor in Chief of Electric Light & Power and POWERGRID International, highlights the growing importance of microgrids, which was reflected by the number of sessions that were devoted to them at POWER-GEN 2016, as well as the growing recognition that microgrids are receiving in the energy industry due to their intrinsic benefits to grid efficiency.

Given that microgrids provide enormous value to both utilities and their Commercial and Industrial (C&I) customers, it makes sense for utilities to explore beneficial relationships with microgrids. Now that Smart Grid technologies have reached commercial maturity, utilities can make use of them to fulfill their reliability obligations. Utilities that seize benefits like enhanced grid resiliency and Ancillary Services (AS) provided by microgrids, while using sophisticated microgrid optimization software solutions to minimize their impacts, are going to emerge as winners.