Cleantech Market Intelligence
Microgrid Matchup: The Military and The Utilities
One of the compelling storylines in the cleantech industry is the emergence of the U.S. military as one of the leading proponents of increased reliance upon renewable energy and microgrids. In contrast, utilities are often painted as being obstructionists toward the same two technology categories.
Not surprisingly, a closer examination reveals not a black-and-white contrast, but several intriguing shades of gray.
The U.S. Department of Defense (DOD) is indeed committed to bringing online 3,000 megawatts (MW) of renewable energy capacity by 2025. This new generation will largely take the form of distributed energy, such as solar photovoltaics (PV). And that means that much of this new capacity will be aggregated and optimized through microgrids.
However, the difficulty of doing business with the Pentagon cannot be overstated. The inability of the Department to pay a premium for anything, along with the need to rely almost totally on private outside sources of funding because the federal government is essentially broke, introduces complexity and delay in the procurement process. Furthermore, when it comes to microgrids – networks that can provide reliable power even during combat – the DOD still seems quite attached to its diesel generators. For example, in its so-called SPIDERS program, initial demonstrations will shift the entire load of the microgrid to diesel generators and then bring online the remaining generation and/or storage assets gradually. This approach to microgrid islanding is not exactly what the smart grid was supposed to be all about. (I learned this at the recent Defense Renewable Energy & Military Microgrids conference, in Washington, D.C.)
The Supreme Threat
What about utilities? While most of the new renewable generation capacity being installed within their service territories is being developed by third parties, some utilities, such as those in California, are installing relatively large amounts of solar PV that they themselves will own or incorporate into their rate base. California’s three investor-owned utilities alone are scheduled to add roughly a third of what the Pentagon has committed to in terms of renewable capacity over just the next four years.
The majority of utilities, particularly those that are privately owned, view microgrids as the supreme threat to their existence. Yet when it comes to different forms of public power, these utilities are playing a leading role with both grid-tied and remote microgrids. While I can’t reveal the Pike Research forecasts for these different segments just yet (look for a new report on this topic in the next several weeks), it’s safe to say that utilities have already brought online far more microgrids today than the military has. Along with forecasts of three different categories of utility microgrids, the analysis in our upcoming report will also quantify the economic benefits grid-tied microgrids bring to the overall power delivery system.
What’s most remarkable about both the DOD and utility microgrid sectors is that at present there is no comprehensive policy framework promoting any microgrid application whatsoever. For a variety of reasons, however, North America (and especially the United States) still represents the best overall market for all microgrid segments in terms of aggregate capacity. Connecticut appeared to be the first state moving forward with a policy program to promote microgrids, in response to Hurricane Irene in August and then a rare blizzard in October 2011. Both events led to massive power outages. However, the focus of this effort – which identified over 300 viable microgrid sites – was on the more traditional customer-driven microgrid model of development, and it collapsed this past May due to special interest infighting.