This explainer is the third part of a series by Sara Harari and Nate Grady on how microgrids are being used to transform the electrical grid.
As climate change becomes the new reality, policymakers must decide how to invest limited resources in advanced technology and infrastructure. At the heart of this challenge is the debate over adaptation versus mitigation: should we focus our efforts on avoiding the worst effects of climate change (i.e. reducing the amount of greenhouse gasses we release going forward), or should we divide our resources and invest simultaneously on adapting to the most likely effects of climate change?
Historically, most international efforts have focused on mitigation; if we can quickly revamp our economies to operate without emitting CO2, then further adaptation won't be required. However, if the rate of emissions reduction is insufficient, we will be left unprepared for increasingly severe climate impacts. Investing exclusively in mitigation efforts is to put faith in the widespread adoption of powerful emissions reductions policies and protocols.
Yet much of the world is already feeling the impacts of climate change. Governments worldwide have begun to invest in adaptation towards climate-resilient systems and infrastructure in parallel with carbon-reducing solutions.
These divergent approaches are on display today in Norway and New York State, where policymakers in each region have identified community microgrids as a climate change solution, but have done so for distinctly different reasons.
In Norway, microgrids are viewed as a way to enable greater penetration of clean energy technologies, such as solar, and thereby increase investment in these mitigating solutions. In New York, community microgrids were prioritized following Superstorm Sandy to improve the local resilience of individual communities in the face of more frequent and extreme storms. In addition to their primary resilience benefits, microgrids in New York are also being advanced to reduce grid congestion, leveraging new types of generation for system-wide benefits. These divergent motivations shape the design and ultimate use of the microgrids and therefore provide an interesting case study on the evolution of microgrid deployment.
NYSERDA’s NY Prize Program
As described in earlier pieces in this series, the New York State Energy Research and Development Authority (NYSERDA) initiated the NY Prize program in 2015 to provide grant funding to communities interested in building microgrids. This program is designed to support communities interested in developing resilient power systems, and contribute to research on how these interventions can provide system-wide economic benefits during normal operations. As a state that has experienced increasingly severe weather in recent years – creating heightened concern among policymakers and residents about power outages and other impacts to the electricity system – adaptive solutions such as microgrids are becoming an increasing priority.
The program was structured to prioritize support not only to critical facilities, but also to areas facing grid constraint. This allows the NY Prize programs to directly benefit local communities, while also improving conditions and keeping costs down for all ratepayers in a utility territory. NYSERDA hoped that this program could open the door to future community microgrid projects by reducing project development soft costs - a significant barrier for individual municipalities - and building stakeholder experience in the state.
Lack of local awareness of energy resilience and distribution challenges is a significant barrier to tackling outage and congestion issues in a scalable and economically viable way. By building a knowledge base about these issues generally, and microgrid solutions in particular, NYSERDA hopes to unlock peer-to-peer learning opportunities. This will help scale these solutions among all communities, not just those receiving NY Prize support.
As such, projects that received funding through the first two stages of NY Prize had to meet specific criteria:
Participation and/or support from both the local government and the distribution utility
Must be able to operate in island mode for a minimum of one week
Must include at least one facility providing a “critical service” to the public that is connected to other buildings in the area by a network of distributed energy resources
NYSERDA received over 120 applications to participate in the initial phase of the program, and awarded funding to 83 communities to develop initial feasibility reports. Eleven communities have moved on to Phase 2 and are currently working on detailed engineering and economic designs.
Enova’s Feasibility Study Program
Enova SF is owned by the Ministry of Climate and Environment and contributes to reduced greenhouse gas emissions, development of energy and climate technology and a strengthened security of supply.
Enova is working to achieve scale by jointly supporting market development opportunities (such as addressing cost hurdle and awareness barriers) for existing clean energy technologies, and emerging solutions through demonstration pilots. Enova supports households, organizations, and corporations to develop or implement new solutions.
The Konseptutredninger program funds feasibility studies for innovative energy and climate solutions through a competitive process. Proposals are evaluated based on their ability to apply new solutions or use existing solutions in an innovative manner. In the period of 2016-2017, 66 projects were funded, of which 8 projects included a community microgrid.
These projects focused on developing low carbon solutions for existing buildings and planned new construction, and included a mix of energy generation, distribution, and storage technologies. In all cases, the proposals were evaluated based on their contribution to emissions reductions as compared to the target community’s incumbent energy sources.
In line with Norway’s climate goals, to receive financial support from the program, projects had to demonstrate considerable reductions in carbon emissions. The projects are evaluated on the utility value they create for the industry as well as their knowledge generation.
Following the feasibility studies, five of the microgrid projects applied for further financial support to develop the projects, two of which were selected and are now pursuing implementation.
Comparison of the NYSERDA & Enova Programs
Although both programs focus on the deployment of community microgrids as a solution to address climate change, the core objectives differ. To further highlight how these differing objectives shape the ultimate use of this technology, we’ve segmented each by stakeholder type and motivation, and generation and design components.
Due to project funding structure, the stakeholders are inherently different. Under the Enova program, most projects are initiated by property owners (“Offtakers”) although utilities and municipalities play a critical role, and occasionally share ownership of the microgrids. While external consultants have participated in these projects, there are no projects championed by consultants.
With the NY Prize projects, NYSERDA intentionally supported diverse projects to maximize findings. While a majority of the projects are championed by either a municipality or offtaker, external consultants play an important role in exploring the potential of community microgrids as a revenue generation source.
There is a clear split in stakeholder motivation between the two settings. Resilience and cost savings rank highest in New York, while sustainability, contribution to municipal climate targets, and collaboration are the primary motivators in Norway. Sustainability can in this context be interpreted as carbon reduction.
In New York, many of the NY Prize projects were initiated by organizations or individuals that were impacted by Superstorm Sandy in 2012. These organizations either lost power, or saw the chaos that followed such a major outage, and so grew interested in finding solutions to tackle this new reality. Microgrids quickly emerged as a priority option, since they can provide both storm hardening benefits and reduce costs or even create revenue for major commercial and industrial offtakers. Though many of these stakeholders are intrinsically interested in supporting lower-carbon power options, they consider sustainability an added benefit, rather than a core design requirement.
In Norway, the focus is on developing innovative deployment strategies for renewable energy technologies, specifically as a means for meeting local and regional policy targets. Cost savings are also important for stakeholders in Norway but are seen as an added value rather than a primary motivation. While mitigation is a priority, solutions that aren’t economically attractive are unlikely to get implemented. No one motivator, including sustainability, is quite as consistent a microgrid development priority in Norway as resilience is in New York.
In Norway, a majority of the projects under consideration are anchored by solar - meaning solar is the primary generation source serving load in the grid. As resilience is not a motivation for the Norwegian program, there is no requirement for how long the microgrids must be able to exist in island mode. This further enables designers to select and size generation for emissions reductions rather than the length of operation, black start capability, or other common characteristics.
Though solar is the primary generation technology, the Enova projects use a variety of ancillary generation sources. Both electric1 and bio boilers are a common choice, as well as combined heat and power plants (CHP). The selection of ancillary generation equipment depends largely on the existing infrastructure and accessibility of fuel supplies on project sites.
In New York, as a result of the focus on resilience, microgrids are most often anchored by natural gas CHP plants. NY Prize requires that microgrids are able to sustain operations for a week in isolation from the grid, necessitating a non-intermittent anchor source. CHP is popular for its reliability as well as its ability to supply high-quality thermal resources, further increasing the resilience of communities. Furthermore, since many of the projects in NY Prize are located in cities where physical space is expensive, space efficient generation sources like CHP are prioritized.
However, like Norway, communities are interested in incorporating low-carbon technologies in microgrids to achieve sustainability goals. With this increased interest in incorporating alternative generation resources, most New York projects have incorporated solar, hydro, or storage elements as ancillary generation resources. The choice in ancillary generation technology is driven by community interest and the design expertise of each team.
Areas of Overlap, and Recommendations for Regulatory Change
Regardless of the difference in motivation of participants between the two locations, both NYSERDA and Enova designed programs to maximize the benefit of investing in energy projects. Both have identified microgrids as a method for meeting policy goals. Both programs support new stakeholder cooperation, with the ultimate goal of freeing up grid capacity to allow for more flexible future load growth.
However, the approaches differ significantly. The Enova projects consider microgrids a mitigating solution - a way to spread solar and other low-carbon alternatives to hard to reach areas, and gain some reliability benefits in the process. The NY Prize projects instead prioritized microgrids as a climate change adaptation strategy - a way to address outage and congestion issues in a cost-effective way, with carbon reductions seen as a co-benefit2.
Despite the differences between the two programs, both have encountered similar hurdles to implementation. Most prominently, regulatory oversight has created confusion about the operation and ownership of these new systems.
Community microgrids are a new ownership model that present specific challenges to the regulatory status quo. To fully unlock their benefits, the regulation of projects such as these will need to evolve.
Although the technology required to implement a microgrid is already well established, project owners can face significant financial risk if they initiate these projects without more clarity from policymakers. This raises the cost of capital and reduces net benefits to the community. In order to properly leverage community microgrids as a tool of either adaptation or mitigation, there must be increased clarity.
In order to effectively pave the road to community microgrids, regulatory guidance should be established to resolve several key issues:
Utility involvement: Provide guidance on the role that grid operators/distribution utilities will play in community microgrids. Who will be allowed to own and operate the assets and how will they be compensated?
Regulatory requirements: Provide guidance on the reporting and governance burden for community microgrids. Will microgrids be held to the same level of regulation as traditional electricity providers?
Interconnection guidelines: Provide guidance on interconnection standards. Who will bear the cost burden for interconnection and who will control the energy that microgrids supply to the grid? How will that energy to the grid be compensated?
The electricity mix in Norway is dominated by hydro power
For New York, microgrids are seen as a compliment to the robust wind, solar and storage deployments taking place under the Clean Energy Standard and REV, as well as a pathway to integrate increasing levels of renewable energy over time.