Mega Microgrids: Decentralization Looms Large as State Revamps Energy System

What can be done to mitigate the cost, human and economic, of major power failures? And how can population centers cut the carbon emissions many scientists say are bringing about the same extreme weather knocking out the lights?

The answer to both questions may lie, at least partially, in microgrids.

Earlier this month, Gov. Andrew Cuomo announced a $40 million competition, NY Prize, intended to spur the development of several microgrids that may well become the first major brick-and-mortar demonstration of his Reforming the Energy Vision (REV) plan.

“This is an instrumental part of the broader REV vision, which is about more consumer choice, reliability, resiliency and cleaner energy,” said Micah Kotch, director of NY Prize and a strategic advisor for innovation at the New York State Energy Research and Development Authority (NYSERDA).

The governor’s REV plan calls for reconfiguring the state’s aging electric infrastructure and overhauling the regulatory framework. In pushing for decentralization of power distribution, the governor is banking on major efficiency, reliability and resiliency gains from consumer-sited generation and smart demand management. These technologies could also facilitate a transition to a cleaner energy portfolio.

The electric grid of 2015 is not all that different from the one conceived by Thomas Edison a century ago, experts note. It is based on a one-way power flow from centralized generators to a dispersed consumer network.

With self-contained generation, transmission and storage, a microgrid is essentially a miniature version of the larger electric system. While it remains tethered to the grid it has the critical ability to continue running as an “island” should the main network fail. Microgrids have been in use for decades, but while early models offered little more than backup generation, newer versions—many still in pilot stages—are capable of sophisticated operations, such as decreasing demand or providing additional power supply to the bulk system, a practice known as net metering.

Though the billions of dollars in post-Sandy funds spent on other resiliency measures dwarf the $40 million offered through NY Prize, NYSERDA hopes this latest initiative can produce at least a few models to replicate on a larger scale.

At present, microgrids tend to be sited around vital infrastructure, such as military installations, hospitals and institutions—research labs, for instance—that can ill afford power interruptions for any length of time. NYU is a good example. During Superstorm Sandy, which left 8.5 million customers in the dark, the campus stood out among a few small islands of light.

John Bradley, assistant vice president for sustainability at New York University who served on the NY Prize advisory committee, also points out that the microgrid saves the school lots of money.

“We generate [electricity] cleaner and we generate it cheaper than Con Edison,” he said.

One reason is transmission costs can add up to half of electricity bills. While this shows the microgrids’ environmental and economic potential, it also highlights its potential to disrupt a century-old business model.

“If you start peeling off their largest customers, [utilities] still need to maintain their infrastructure,” Bradley said.

In addition to the decline in demand and utility revenue, there is also friction between independent and bulk grid operators when it comes to regulation and modifying the rate structure. Most microgrids cannot be a stand-alone island and therefore rely on the main grid as either a backup or supplement source of energy. What role microgrids play in covering the cost of maintaining the grid while also securing the reliability of the system is where problems arise.

“There are complexities around interconnection,” Kotch acknowledged.

NYSERDA is counting on NY Prize to help answer questions like how much microgrid users should contribute towards maintenance of the distribution network. The question of franchise rights, and where microgrid operators can string lines in the public domain, must also be addressed. NYSERDA is also hoping the contest will incentivize further innovation in control technology, storage management, systems integration and consumer analytics.

Localized power generation not only allows for the penetration of renewable energy sources, but can also defer major capital investments in places where the bulk grid—much of which is 30 or 40 years old—has become stressed. Investor-owned utilities have identified six “opportunity zones” across the state deemed especially promising for NY Prize awards.

“For the past 80 to 100 years utilities [have been] good investments. They do well in capital markets because they get a regulated rate of return on the infrastructure that they install,” Ben Kellison, director of grid research at GTM Research, said. “That’s going to come from the rate payers. That’s going to be a rate increase.”

New Yorkers already pay some of the highest electricity rates in the nation. Microgrids are beginning to showcase their potential to produce cheap and reliable energy, potentially driving down those costs.

But cost is not the only concern. Creating environmentally conscious microgrids is also a priority.

“You can design a microgrid that is very clean and includes renewable sources, but you can also design one that’s a break-even proposition from an emissions perspective,” Jackson Morris, an energy and climate analyst at the National Resources Defense Council, said. “Or you could potentially design a microgrid that incorporates resources that end up making it even dirtier than the bulk system.”

According to Morris, NY Prize holds the potential to reduce emissions from the energy system, but not without overlaying requirements—or at least a mandatory analysis of the environmental impact of proposed projects relative to the bulk system.

Over 90 percent of microgrids are currently powered by fossil fuels, but by transitioning to a decentralized distribution system the state could lay a foundation on which to deploy more renewable resources going forward.

“It’s not a given that [a microgrid] will be an environmental win,” Morris said. “It’s going to depend on the details.”