The Emerging Power Markets’ New Player – the Microgrid Operator

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March 2, 2015

The concept of microgrids is gaining momentum; their share in the energy space is growing. The microgrid is not a novel concept, as in most remote communities self-containment is the only feasible approach to power supply. For many years, localities without access to major power grids have been served by diesel-fueled power generators hooked up to local distribution systems. Also, it has been almost common for hospitals to have backup, off-grid power supply systems. Nowadays, we are witnessing modernized versions of those microgrids, and this concept expands beyond just providing a backup support for live-critical operations or solving geographical constraints.

Spun off from the smart grid concept, these modern microgrids incorporate similar bells and whistles, such as smart meters, substation automation, energy storage, bidirectional electric vehicle charging, etc. In fact, they are at times being referred to by some analysts as “smart microgrids.” Meanwhile, the concept of scaling down the power supply systems and segregating them from major grids has been gaining larger ground.

Nowadays, independently-run, self-sufficient, and self-reliant grids support the operations of not only hospitals, but also jails, university campuses, and data centers. The microgrid concept is expanding from the level of buildings to municipalities; microgrids are being considered by local authorities to ensure regional sustainability and/or reliability. Thus the East Coast, heavily impacted by weather almost every winter, has been looking for solutions that can ensure power supply to the communities in an “island mode” during times of major grid failures. There are currently several microgrid projects on the table in New York State, ranging from 10 to 200 MW installations.

Those who adopt goals of high penetration of renewable generation and prefer relying on local resources are also lining up for microgrids. Low carbon-based and renewable-based technologies are the main focus of California authorities. On February 3, 2015, the California Energy Commission announced winners of over $20 million that the state allocated to fund microgrid and electric vehicle (EV) charging projects that serve exactly these purposes.

The impact from microgrids on traditional utilities raises reasonable concerns. Obviously, microgrids are taking over the clientele, resulting in utilities losing large demand pockets. Some utilities, like Consolidated Edison in New York, take preventive measures and embark on developing mutually beneficial solutions together with microgrid operators. The most common approach is to view these microgrids as assets to support major grids’ operations. In fact, microgrids can be treated as a special customer class with bidirectional supply. During times of demand spikes, microgrids can become just another source of power supply to the grid.

The next step is creating technological platforms that are capable of monitoring and optimizing microgrid operations. Microsoft and Apple are couple of the first pioneers to provide software platforms and apps. GE and Siemens are working on the hardware side. But this is just a beginning. We have yet to see what types of new contacts and services are developed between microgrid operators and utilities, as well as ISO/RTOs, and how microgrids will fit into their dispatch stacks. But there are many gaps that microgrid developers have yet to close, from finding sustainable and less expensive batteries to reducing dependence on diesel or oil-fueled power generators, which are still the most available and reliable generation source. When this happens, we will move one step closer to a new paradigm with a new type of energy markets player, the microgrid operators. In this paradigm, conventional grids and microgrids will work in sync complementing each other.

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