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Defining the model for utility-led renewable microgrids
In response to a heightened frequency of costly extreme weather events, investor-owned utilities have begun to demonstrate how distributed, renewable generation in a microgrid setting can be a cost-effective alternative to traditional transmission and distribution investments. Scaling these solutions largely depends on defining ownership structures that deliver value to both individual customers and the broader grid and offering attractive value propositions for a variety of microgrid participants.
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The case for renewable microgrids
Recent extreme weather events have channeled the nation’s attention to the importance of electric grid resilience. From catastrophic hurricanes to snowstorms and record low temperatures, the frequency and severity of weather patterns that put the grid at risk continue to increase.
Seven of the 10 costliest storms that occurred between 1980 and 2014 took place during the past decade and caused over $1 billion in damages per event. With each catastrophic occurrence, the call for utilities to take action by deploying innovative resilience solutions becomes stronger. Utilities are beginning to demonstrate how distributed, renewable generation in a microgrid setting can be a cost-effective alternative to traditional T&D investments.
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Microgrids are comprised of a diverse set of technologies and resources
Investor-owned utilities are growing their share of the renewable microgrid market
The evolution in the microgrid market is being driven, in part, by the efforts of regulated investor-owned utilities (IOUs) to integrate renewable generation into their distribution networks in a manner that enhances reliability and resilience. Value streams within the distribution network are also driving the growth of utility-led microgrid systems. Despite these value streams and how well utilities are positioned to lead development, microgrids that are integrated into the distribution system are still rare in IOU service territories.
To date, they’ve remained in a seemingly perpetual piloting and demonstration phase aided by funding from the US Department of Energy or other public grants. This “holding pattern” is due to a number of challenges that IOUs often face in attempting to deploy renewable microgrid solutions at scale. These hurdles include defining ownership structures that deliver optimal and cost-effective value to the grid, obtaining cost recovery of investments, and offering attractive value propositions for microgrid participants.
Three recent case studies depict current efforts to overcome these barriers. These regionally diverse IOUs are working with regulators and legislators to create a regulatory environment that fosters scalability. They each operate in states with electric generation deregulation policies, Oregon, Illinois, and New York, and their programs target different end-users by design:
- Portland General Electric (PGE) is piloting customer-sited solar-plus-storage installations;
- Commonwealth Edison (ComEd) has devised a strategy for building microgrids that benefit public purpose facilities; and
- National Grid is designing a model for a community microgrid in upstate New York.
To learn more about emerging business models for utility-led renewable microgrids, download the report.
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