One of the most underreported stories in the U.S. energy industry today is Connecticut’s ambitious electricity pilot project—one that could have a widespread ripple effect across the country. On July 24, state government officials announced plans for nine microgrid projects as part of a Microgrid Pilot Program aimed at ensuring electricity grid resilience and reliability during severe weather events.
“Microgrids” are essentially small-scale electricity generation and distribution systems that integrate various distributed energy resources and can be managed locally and, if necessary, independently from the main grid. Diesel-powered microgrids are common in the rural areas of many developing countries such as Haiti, Indonesia, and the Philippines, and some military bases, telecommunications bases, and Internet server farms have done the same, in order to ensure a steady flow of power even if a natural disaster or terrorist attack should take down the main grid.
More recently, and in response to security concerns and prolonged power outages, the concept of creating a microgrid within an existing electricity grid has gained traction. The goal is to increase the security of local power supplies in the face of natural disasters and cyber threats, while at the same time creating a robust market for solar energy and other small-scale generators. Several microgrids are already complete or under development in the United States. Among the first adopters are educational institutions like the University of California-San Diego, New York University, Utica College, and Cornell University. The U.S. Department of Defense is also blazing trails, having installed microgrid infrastructure at multiple army bases already. Now, Connecticut is the first state to develop an explicit policy on microgrids.
Prompted by the blackouts that crippled much of the mid-Atlantic coast in the wake of Hurricane Irene in 2011, Connecticut lawmakers charged the Department of Energy and Environmental Protection (DEEP) with implementing a microgrid pilot program. The initiative gained momentum after Hurricane Sandy swept across the region in October 2012. Late last year, DEEP opened up the application process and nearly three dozen Connecticut cities, towns, universities, hospitals, and companies applied to participate in the $18 million Microgrid Pilot Program. Once complete, power from renewable, fuel-cell, and fossil-fuel sources will be delivered to the project areas on a 24/7 basis, without having to connect to the larger grid for support.
The nine applications that were ultimately selected represent a cross-section of important institutions and businesses that the state wants to safeguard during severe storms: police stations, supermarkets, university dormitories, city halls, senior centers, fire departments, gas stations, cell towers, and emergency shelters. These projects will include fossil-fuel and renewable energy generators with capacities ranging from 50kW to 5MW, along with some limited battery storage options as well. If the main grid falters, these microgrids will be able to maintain power on their own. Construction of the projects will be underway soon, with several coming to completion by the end of 2013. In addition to these pilot projects, Connecticut Governor Dannel Malloy has appropriated another $30 million for additional microgrid projects over the next two years.
A micro idea with macro potential for developers
The energy industry will be watching Connecticut’s progress closely because this pilot program could point the path forward for potential microgrid sites around the country—nearly 24,000 in the estimation of one microgrid development company. Ideally, most of these grids will harness the best in renewable energy technology, advanced metering infrastructure, and electricity storage to form an independent and self-healing system. These projects could provide more generation capacity and stability to the larger grid system, and can also be disconnected (“islandable”) at a moment’s notice if severe weather or some other emergency require transmission operators to shed load from the main grid.
Waiting in the wings are the big equipment suppliers, most of whom have built the giant fossil fuel and nuclear plants that have dominated electricity generation in the past. General Electric, ABB, Siemens, Boeing, and Honeywell may soon be competing with the smaller firms such as Spirae,Integral Analytics, and Power Analytics that have pioneered the sector so far. Some analysts forecast that the global microgrid market could be valued as high as $40 billion by 2020.
A micro idea presenting macro challenges for utilities
Not everyone is happy with the micro-power revolution. Many investor-owned utilities feel threatened by the rising competition and are unsure whether to embrace or shun this new technology. Microgrids present a dual challenge to these utilities. Their history and expertise lie with large-scale power plants, and they are understandably concerned that smaller and, in some cases, more intermittent generators will undermine the number one task they are mandated to fulfill: keeping the lights on. And since micro generators tend to be owned by local businesses and individuals rather than large power companies, utilities fear a loss of business—and potentially an end to the near monopoly status they still hold in many states.
Microgrids strike at the heart of the prevailing utility business model since it would give their customers the option of reducing their dependence on the local utility—and perhaps one day severing the cord entirely. If the utilities compensate for this lost revenue by raising rates on the remaining customers, yet more departures could be ensue, eventually triggering a “cascading natural deregulation”—in effect, a death spiral for the power industry we know today.
Some utilities have seen the writing on the wall, concluding that “if you can’t beat them, join them.” Thanks to a $10 million grant from the Department of Energy and the California Energy Commission, San Diego Gas & Electric (SDG&E) recently completed a pilot project in Borrego Springs, California that integrates many microgrid elements including smart meters, distributed generation, and storage. A few other utilities, including some municipal utilities like Austin Energy and the Sacramento Municipal Utility District, are also moving forward with smart grid and microgrid-like projects. It is difficult to say what the role of utilities will be as microgrids advance, especially after Connecticut’s pilot program. But if the experience of other deregulated industries—such as telecommunications—provides any guidance, the new electricity industry will be more vibrant, more economical, and more secure than the one we depend on today.