4Q 2018

Utility Microgrid Strategies Leveraging DER for Grid Benefits

The electric utility industry is at a crossroads. Deployments of distributed energy resources (DER) will exceed centralized generation in 2018, and the gap between the two categories will only grow wider (and in favor of DER) over time. Microgrids represent one platform that can transform these DER into systems that offer enhanced resiliency services outside of traditional utility offerings. While the islanding functionality of microgrids was historically viewed with suspicion, a growing number of utilities are investigating what role this platform could or should play in this market.

Microgrids are inching their way into the mainstream, though most are being deployed by non-utility vendors for third parties. Growing interest in and regulatory support for community microgrids—as well as microgrids designed to bolster the overall distribution system—are opening the door for utilities to play a larger, as yet mostly undefined role in the deployment of microgrids. Yet, microgrids do not fit neatly into the current utility toolbox. The downside to this reality is that many utilities lack clarity on how best to proceed. The upside is that those that move early, experiment, and then learn from pilot programs can help shape their own microgrid destiny. They can also offer new models for the entire utility industry.

This Navigant Research report explains why DER technology trends point to the need for new utility business models. The study discusses how utilities that move now can shape future microgrid markets to create new revenue opportunities. Three paths forward for utilities to deploy microgrids are described: a traditional regulated rate-based approach; unregulated business ventures; and hybrid approaches that could include investing in or acquiring microgrid vendors. The report also provides recommendations for utilities relative to these strategies based on existing regulatory structures, geographical and resource considerations, and expected future technology innovations.

Pages 11
Tables | Charts | Figures 2
  • Why are utilities investigating microgrid business opportunities worldwide?
  • How will microgrid ownership structures affect utility strategies?
  • What are the pros and cons of rate-basing microgrids?
  • What are the advantages of investing in microgrids as an unregulated business venture?
  • What are the four most important strategic components to any utility microgrid strategy?
  • Investor-owned utilities
  • Government-owned utilities
  • Vertically integrated utilities
  • Private sector microgrid solutions providers
  • Community microgrid advocates
  • Research institutes
  • Investor community

Spark

Context

Recommendations

DER Technology Trends Point to Need for New Utility Business Models

Utility Distribution Microgrids Are Playing a Key Role

Utilities That Move Now Can Shape Future Markets

Vertically Integrated Utilities

Disaggregated Utilities Operating in Competitive Environments

Municipal, Rural Cooperatives, and Other Government-Owned Utilities

Case Studies Showcasing Three Major Microgrid Strategies

Traditional Rate-Based Regulatory Approvals for Microgrids

Pursue Unregulated Business Venture Investments

Company Acquisitions of or Partnerships with Solutions Providers

Paths Forward for Utilities Seeking to Deploy Microgrids

Advance Microgrid Deployments That Address Specific DER Challenges

Learn from Other Utilities with Similar Structures or Grid Challenges

Develop a Short-Term Market Entry Strategy and a 10-Year Stretch Goal

Investigate More Than One Strategy Simultaneously

Engage with the Market Today

  • Total Microgrid Power Capacity Market Share by Segment, World Markets: 4Q 2018
  • Mapping Utility Microgrid Strategies
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