The market for microgrids is attracting increasing attention from a variety of institutions, ranging from state governments such as New York, which is requiring an islanding functionality for new combined heat and power (CHP) facilities funded by the New York State Energy Research & Development Authority, to the World Bank, which is seeking clarity on new business models that wrap remote microgrids around cell phone towers popping up in Africa, India, and the rest of the developing world.
One of the least noticed, but significant, developments in the microgrid arena for North America, the global hot spot for grid-tied microgrids, is the recent merger between Horizon Energy Group and Green Energy Corporation. While large players such as General Electric, ABB, Siemens, and Lockheed Martin – just to name a few – tend to grab the headlines, I find the smaller players in the space the most interesting. Why? Unburdened by selling legacy systems, they can come to the microgrids controls challenge with a fresh approach.
Both Horizon Energy (including its sister company Horizon Microgrid Solutions) and Green Energy Corporation have been working out a software-as-a-service concept for microgrids, so the merger makes sense. Furthermore, both companies are committed to an open source controls platform. Perhaps the most unique differentiator for the new combined company is its application of the power purchase agreement (PPA) model that has fueled the recent boom in solar photovoltaic (PV) systems to microgrids.
The vast majority of microgrids tracked in Navigant Research’s Microgrid Deployment Tracker are either funded by government agencies or academic institutions as R&D projects, or by the asset owners themselves. The newly expanded Green Energy Corporation will instead serve as an integrator/developer, absorbing any performance risk for the microgrid while taking care of the financing. The combined company claims in excess of 15 projects on the drawing board, with one 11-megawatt (MW) project in Connecticut under current development that incorporates diesel, CHP, solar PV, small wind, and advanced energy storage, and which will save significant money over the long run.
I had lunch with Steve Pullins, a microgrids guru and the former president of Horizon Energy Group, at an Infocast microgrid conference occurring in Arlington, Virginia on April 29th. Unlike some firms quickly expanding their portfolios of microgrids by focusing on high value aggregations of existing fossil assets, such as Blue Pillar, his efforts with Horizon have focused on retrofits that green up operations and also rely upon sales of ancillary services to utilities as part of the business model. Pullins claims the sweet spot for grid-tied microgrids is 2 MW to 40 MW. Anything smaller, and microgrids don’t really pencil out – unless they focus on renewables.
While it may seem counter intuitive, Pullins claims the lack of maintenance and ongoing fuel risk exposure with diesel generators or natural gas-fired capacity adds uncertainty and cost over the 20- to 25-year life of the microgrid PPA. With solar or wind and storage, the operating costs are minimized for projects as small as 500 kW.
Tags: Distributed Renewables, Mergers & Acquisitions, Microgrids, Policy & Regulation, Smart Energy Program
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