The emerging power of microgrids

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A new Sierra Club report estimates that the off-grid, clean energy services market, including so-called “skinny grids” that bundle solar and energy-efficient LED lighting in developing countries, will be worth $12 billion annually by 2030. Navigant Research forecasts that remote microgrids will represent an $8.4 billion industry by 2020, with the largest number of deployments occurring in the developing world and activity increasing in North America and Europe.

On the Danish island of Bornholm, isolated in the Baltic Sea, local utility Østkraft A/S is building a showcase microgrid demonstration projectincorporating a mix of low-carbon solutions, including three-dozen wind turbines, biomass-fired district heating plants and a biogas power plant. Renewable energy microgrids are also expected to expand in areas with universal electricity access, especially in markets such as California where solar and energy storage have taken off.

Last fall, Chris Marnay, a microgrid expert recently retired from Lawrence Berkeley National Lab’s Grid Integration Group, told me: “It’s the facilities that want abnormally high-quality power where we see most of the action at the moment” — military bases, research facilities, and data centers.

But the market is tipped to break open to more sectors. GTM Research says U.S. microgrid capacity will exceed 1.8 GW by the end of 2017, up from around 1 GW today, with cities, communities and public institutions fostering the next round of microgrid adoptions. And, according to GTM Research’s Mike Munsell, the share of microgrids that integrate solar “will grow significantly over the next three years.”

“This development is happening whether the utility, or regulator, encourages it or not,” note the authors of a report published by the California Public Utilities Commission in April.

[stextbox id=”custom” float=”true” align=”left” width=”300″ bcolor=”d2d0d1″ bgcolor=”dbdbdb” image=”null”]In February 2014, the U.S. Department of Energy announced $7 million in funding to advance the design of community-scale microgrids with a capacity as large as 10 megawatts.[/stextbox]

The report recommends that regulators “consider the utility as a distribution system operator” responsible for ensuring that it can distribute electricity generated on the customer or the utility’s side of the meter.

It suggests developing appropriate standards and requirements to ensure that microgrids can reliably and safely interconnect and interact with the grid. And it also encourages regulators to survey the state’s grid to identify locations best suited for microgrids, such as those that experience frequent outages or grid congestion, and areas of high penetration of renewable energy.

Getting the policy right is critical, but so too are financial incentives. In February 2014, the U.S. Department of Energy announced $7 million in funding to advance the design of community-scale microgrids with a capacity as large as 10 megawatts, and also recently unveiled a proposal offering $6.5 million in matching grants to technologies that address the challenges of integrating renewable energy and storage into the grid.

In California, Governor Jerry Brown recentlysigned a bill reauthorizing the Self-Generation Incentive Program. Over the next five years, the program will provide $415 million in incentives to microgrid components installed on the customer’s side of the utility meter, including wind turbines, waste heat to power technologies, fuel cells, and advanced energy storage systems.

The funding is expected to help California regulators meet the state’s landmark energy storage mandate, which requires investor-owned utilities to add 1.3 gigawatts of energy storage to their grids by 2020. Greentech Media’s Eric Wesoff reports that in 2013 more SGIP applications were submitted for energy storage than for any other technology.

What the future holds for renewable energy microgrids depends on many variables: regulations, incentives, the future role of the incumbent utilities and more. But if current policy, technology and pricing trends are any indication, the conditions are clearly in place to facilitate mainstream adoption of microgrids that can provide a secure, clean and increasingly affordable complement — or alternative — to the conventional power grid. View Ensia homepage

This article first appeared in ensia.com (July 3, 2014) and is reprinted here under the terms of a Creative Commons License.

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