Cleantech Market Intelligence
Evolving Microgrids: What About Utilities?
Pike Research has issued separate reports on three leading microgrid segments: campus environment; military and remote/off-grid systems. A forthcoming report on “utility distribution microgrids” (UDMs) continues this trend of deeper analysis of specific microgrid segments, but also takes a broader look at how advances in distribution and substation automation are laying a foundation for utilities to play a much more fundamental role in future microgrid deployments. UDMs are not exactly analogous to “community/utility microgrids,” yet there is significant overlap and synergy between these two segment designations. Though already somewhat dated due to a surge of recent development activity, the following chart from Pike Research’s comprehensive look at all five microgrid segments published in early 2012 presents a good snapshot of where the overall market is going.
Interviews with leading companies involved with microgrids suggest that most utilities are still scratching their heads, trying to make sense of a very different world, with the microgrid perhaps a symbol of radical changes that could, if utilities fail to adapt, lead to their demise.
As vendors such as S&C Electric point out, the decline in prices for distributed renewables – especially solar photovoltaics – and for advanced energy storage is spurring greater interest in microgrids. Other major companies, such as Intel, a member of the EMerge Alliance, are also interested in the concept, though the semiconductor giant’s strategy likely stems from its growing interest in direct current (DC) applications. Those applications are potentially relevant to both large commercial complexes, such as data centers, and to power generation in the developing world, where alternating current (AC) power grids are often missing.
Among the U.S. utilities that have seen the light in terms of microgrids are San Diego Gas & Electric, (SDG&E) American Electric Power (AEP), Sacramento Municipal Utility District, DTE Energy, and Consolidated Edison. The prime obstacle to UDMs in the U.S. has nothing to do with technology. In regulated markets such as the U.S., investor-owned utilities (IOUs) typically have to go before public utility commissions to justify costs they pass on to ratepayers. These rate cases are typically three-year funding cycles. To date, few – if any — companies have demonstrated the costs and benefits of UDMs. As a result, the business case for UDMs is not yet fleshed out.
Among the other barriers to near-term deployment of UDMs are utilities’ cultural bias against intentional islanding, their fear of loss of native customer loads, and the lack of clear controls technology emerging from a crowded field of competitors. Utilities such as SDG&E and AEP will be armed with data that will reveal whether or not a value proposition can be made for UDMs. Since microgrids come in so many sizes with so many different generation sources operating in so many different geographies, cost/benefit calculations will be extremely site-specific.