Navigant Research Blog

Data Centers Could Turn Microgrid Markets Upside Down

Peter Asmus — March 2, 2012

After compiling numerous reports on the status of emerging markets for microgrids, I have concluded that not a single national government has developed an integrated or comprehensive policy creating a viable, vibrant market for customer-driven commercial sector microgrids.  In fact, according to the most recent Pike Research 2012 report on the global microgrid market, commercial/industrial applications (C/I) are lagging behind all other segments: campus environments, community/utility, military, and remote.  That could change within the next few years, if plans on the drawing boards for data centers in Singapore , India and other parts of the Asia Pacific region – and the United States – move forward.

Until recently, data centers largely relied on uninterruptible power supply (UPS) systems consisting of large banks of dirty diesel generators to maintain 99.999% reliability of power service.  As data centers begin to green their operations due to environmental pressures, air quality regulations and the increasing cost burdens of diesel fuel, though, the appeal of microgrids – along with the broader notion of aggregating distributed energy sources into virtual power plants – is looking more and more compelling.

The Asia Pacific region already is projected to lead the world in microgrid annual revenues, but this is due, in large, part to anticipated growth in the remote microgrid sector, especially in countries such as India, which recently deregulated its markets to accommodate remote microgrids of less than 1 megawatt (MW) in capacity.  Rumors are swirling about projects as large as 500 MW in one Asia Pacific country – and data center microgrids of similar scale in others – indicating that the C/I sector may be the sleeping giant. Due to low labor costs and lack of permit obstacles, the rapid construction of data center projects of this scale in Asia could blow Pike Research’s current market forecasts out of the water.

Today, the commercial and industrial segment represents the least developed market for microgrids worldwide.  Currently, it is illegal around the world for a residence or business to sell self-generated electricity to anyone apart from the local utility through net metering.  This makes the concept of creating and carrying out self-sustaining microgrids in multiple-owner C/I complexes extremely difficult in markets such as the United States.

On the other hand, microgrids may hold the most value for commercial and industrial users, since power outages kill productivity as well as revenues, especially at data centers.  The cost savings offered by microgrids to this sector is not limited to the free resources tapped by distributed renewables; they also include the reduction of downtime, as islanding capabilities allow microgrid-protected commercial data centers to maintain power when the larger grid fails.  Furthermore, the advantages of direct current (DC) microgrids for data centers are being extolled by a variety of companies, backed up by a recent study by EPRI showing a 15% efficiency gain at a data center in North Carolina.

Perhaps a sign of things to come is represented by the Niobrara Energy Park proposed near Loveland, Colorado.  Boasting a potential capacity of more than 200 MW of planned natural gas, solar and wind generation, Niobrara is still seeking an anchor data center tenant, but has cleared virtually all key regulatory hurdles.  This single microgrid – if successful – could dramatically transform this segment.  The logistics of managing and controlling a microgrid of this scale, though, are unprecedented.

Swiss industrial giant ABB is especially keen on the data center microgrid market, creating a new “best of breed” consortium that includes software innovator Ventyx, as well as less known firms such as Validus DC (for DC data center applications) and Power Assure (for data center smart grid energy management.)  Not only do these companies hold the potential to develop state-of-the-art microgrids, but they also have the capacity to do something much more radical: build out virtual power plants (VPPs) for far-flung data centers.

Imagine this: Data centers operating worldwide, but owned by a single enterprise, leveraging smart grid intelligence and their sizable loads to engage in demand response arbitrage, shutting down centers where prices are high during the day, and shifting loads to markets where prices are low at night.  These enterprise level VPPs could also become a microgrid, islanding in times of emergency or peak demand.

The team and tools that ABB has assembled – most recently the smart switches of Thomas & Betts, LLC — could transform electricity management for commercial operations at the distribution level.  Throw in some storage, and data centers not only help back-up variable renewables, but when not used for that purpose, sell ancillary services to grid operators.

This kind of fun is what the smart grid is supposed to be about!

One response to “Data Centers Could Turn Microgrid Markets Upside Down”

  1. anonymous says:

    Peter,
    ZBB Energy anounced a DOD microgrid order today. Can you give your opinion on them or how in depth your Pike Reports describe their technology, potential, and shortcomings. Also splitting their inverter productd vs the flow battery products. They seem to have projects going on your areas of expertise: grid inverters, data center microgrids, DOD microgrids, energy storage, Asian partnerships and joint ventures, etc..

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