Special Report

How Microgrids are Bolstering the Nation’s Power Infrastructure

Rather than drain power from a nearby plant, these systems create energy of their own, making for a more sustainable future

(© Edward Rozzo / Corbis)

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While resiliency has long been key to the appeal of microgrids for facilities with critical power loads, shifting energy prices and technology advances are now bringing microgrids within reach for cities and neighborhoods that want local control of their power supply or cleaner energy than that offered by their utility.

Solar photovoltaic panels now cost 80 percent less than they did in 2008. The consulting firm McKinsey & Company predicts that lithium-ion battery prices could fall to $200 per kilowatt-hour by 2020, from about $500-$600 per kilowatt-hour today. Facilities that build microgrids can also save money year after year by buying less electricity from their local utility or, in some cases, selling power to the utility when supply is tight.

“It can be a significant cost savings if a university or a hospital can actually sell power based on the real-time market pricing for power, not just at the rate they would normally pay,” says Carey, of PwC. “Prices can swing dramatically, from 15 to 20 cents per kilowatt-hour to single digits dollars per kilowatt-hour.”

According to Byron Washom of UCSD, the university saves $800,000 per month on its power bills by generating 92 percent of the electricity it consumes. The FDA says its campus microgrid saves the agency $11 million annually in energy-related costs.

Rapidly maturing technology is enabling better integration and optimization of microgrid components. Washom notes, for instance, that improved solar forecasting tools inform the campus energy management system when to charge or discharge batteries. “We are witnessing superior control systems that can manage a microgrid as well it can manage an entire facility,” he says. “There’s a whole variety of new tools that are emerging to how you manage your supply, your demand, your storage and your imports.” Soon, Washom says, energy managers will be assessing the readiness of the system’s assets every few minutes to anticipate or respond to changing conditions.

While technology races forward, however, experts say new policies are needed to hasten microgrid adoption. Marnay says current U.S. policies at the state and federal level are advancing individual energy technologies, such as solar, wind and energy storage, but more support is needed for deployment of these technologies in complex systems like microgrids.

Already, the Department of Energy has partnered with local and state officials to adapt military microgrid designs for civilian applications. In New Jersey, for example, where Hurricane Sandy knocked out public transit and left some residents without power for a week or more, DOE is working with the state transit agency to design a microgrid that would help keep electric-powered trains running during a natural disaster.

The Energy Department has also begun to take a more active role in setting standards to guide design and operation of future microgrids, as well as their integration with existing power infrastructure.  Even the definition of what makes a microgrid is changing: the scale could reach as large as 60 megawatts in coming years. A group of experts from the agency are developing a plan for a commercial-scale microgrid system capable of reducing outage times by more than 98 percent at a cost comparable to a diesel-powered backup power supply while reducing emissions and improving system energy efficiency by at least 20 percent by 2020.

Standardization, Carey says, should streamline the project development process, reduce costs and improve access to financing by making it easier for banks to evaluate risk. “Having to have specialized engineering for every microgrid is obviously a very costly proposition and a big burden to their deployment,” says Marnay.

At the end of the day, microgrids threaten to upend the centralized generation and distribution model that has dominated the U.S. electricity system for more than a century, and utilities have been slow to embrace the new model. “Utilities see microgrids as a threat to their revenue streams,” says Carey. Yet the benefits of having power supplies that can split off or sync up with the traditional grid as needed are increasingly winning over utilities like SDG&E. Says Carey, “It should allow them to keep the grid more stable.”

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