Study by EPRI and SEPA highlights microgrid opportunities, obstacles

Greater interest in microgrids is emerging as the energy landscape evolves, and a new report from the Electric Power Research Institute (EPRI) and the Smart Electric Power Alliance (SEPA) highlights the opportunities and challenges in the growing sector.

Microgrids are any small-scale, localized power system with its own generation resources, loads and definable boundaries that can be disengaged from the grid for short periods during grid outages.

“We’re at a point in the level of interest in microgrids where I think we can expect to see a lot of development in the future, and that’s what drove us to write the paper now,” Ryan Edge, SEPA program manager and report co-author, said in an interview with Daily Energy Insider. “It seems to be the right time with interest growing and folks looking for the business models to make it happen.”

Microgrids designed for specific operational, regulatory and financial landscapes are being deployed, Edge said, which leads to the opportunity to integrate more distributed energy resources.

The study found that microgrid business models are evolving along a continuum from third party- to utility-initiated projects and identified three main business models: third-party, utility and a hybrid “unbundled” model based on public-private partnerships.

In the third-party model, customers have most of the control over the microgrid as opposed to other models where the utilities gain more of the control and responsibility.

In the past, microgrids have been mostly customer-controlled. They were most often used to add an extra layer of reliability for customers in remote locations or operated by one customer, such as a college campus or military base.

In the past few years, utilities have started to get more involved in microgrid development and operation, especially grids for critical infrastructure.

This new model presents challenges. Because there are now multiple customers and multiple parties affected, it becomes more difficult to determine how to allocate costs.

The study found that clarity on price signals, rate structures and regulations are necessary for the sector to expand. A more detailed set of technical standards is also needed to help guarantee interoperable designs, communication and testing practices. Because technical, logistic and business aspects can vary from microgrid to microgrid, it is challenging to develop practices and rules that work well for all of them.

“One definite way to make progress on that problem is just understanding and better education of utilities, regulators and stakeholders,” Edge said. “If they have a clear understanding of a microgrid’s capabilities, the benefits it’s going to bring and who’s going to receive those benefits, there is more likely to be progress.”

One advantage of the hybrid business model and the move towards more varied control of microgrids is that utilities, regulators, customers and others can all bring their expertise to the table, according to Edge.

Some of the benefits of employing microgrids include improved resiliency, the potential for cost savings and the ability to better aggregate DER.

“The grid is becoming much more distributed,” Edge said. “Do you want to try to manage your grid in the minutia of all these different resources or could you aggregate them under a single resource and then just dispatch them as a larger source? That is a function of a microgrid that I believe has a lot of potential.”