This article explores key microgrid questions and is written for those beginning the microgrid journey. It is part of the About Microgrids series from Microgrid Knowledge.
When Peter Asmus began helping three communities create community micro-grids in California, a number of challenges arose.
First, proponents of microgrids were idealistic and enthusiastic. But they were not very aware of the problems that could bog them down.
“The interesting thing about community microgrids is that they have the broadest public support and are the most difficult microgrids to implement,” said Asmus, executive director of Alaska Microgrid Group.
Often community members do not know how electricity works. They don’t know the rules that affect microgrids, such as the fence overrun rule, which makes it difficult to transfer power across a right-of-way or public street. And, as the number of stakeholders increases, the complexity of the project also increases. People have different visions of what they would like to see in a microgrid, Asmus said.
Like communities, businesses seeking microgrids also face challenges. Often they don’t know exactly what they want in a microgrid. They often fail to plan for future technology or see projects holistically, said Gridscape Solutions partner Alok Singhania.
“90% of the people we talk to have a vague idea of what a microgrid is, and 100% don’t understand what they [microgrids] do,” Singhania said.
To help businesses and communities plan better, we have prepared this list of six key microgrid questions.
Six key microgrid questions to ask before you start
1. What are your strategic objectives for the microgrid?
Some organizations or potential users want 100% renewable energy. Some want resilience during outages. Others may be interested in raising revenue by participating in energy markets. Or maybe they are looking for a combination of all of these factors.
“It will determine how you want to pursue and how you want to do it,” Singhania said.
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2. What are the consumption patterns of the community or building?
It is important to understand how your business or community uses energy and when peak demand occurs. How does demand change during the day and over the seasons?
“People need to understand consumption,” Asmus said. “How much do we pay for electricity and how does it change from summer to winter?”
3. How will you fund the project?
Communities and businesses often assume that microgrids are too expensive. They don’t look at funding or available incentives. Some states offer incentives, such as California’s Self-Build Incentive Program, that can help fund a project. California also offers incentives for building microgrids in low-income communities disproportionately affected by climate change. Potential microgrid users should understand that many financing options are available. Businesses and communities have the option of signing energy-as-a-service agreements under which they pay little or no upfront cost. This is a good idea for companies with limited capital. A third party or microgrid developer owns and operates the microgrid and bills the customer per kWh, similar to how a utility bills its customers.
Companies and communities can also seek investors. For example, Georgia-based Solar Tyme USA is seeking to finance the construction of a solar micro-grid and solar power plant in Sierra Leone. The solar installation and development company hopes to raise $1.75 million in debt or equity financing for the project.
4. How important is resilience and what are you willing to pay for it?
“A microgrid in many cases [but not all] will provide a higher level of resiliency and reliability, but my experience is that users are unwilling to pay much more for reliability,” said Fred Fastiggi, Principal and Managing Director of Shoreline Energy Advisors. “They see it as a new and improved feature, like adding a whitening agent to a fluoride toothpaste, but they expect to pay the same price they paid for toothpaste without a whitening agent.”
It is important to compare the cost of the microgrid per kWh to that of the incumbent supplier. Is it worth the extra cost if there is a premium for reliability?
The most cost-effective solution may not provide enough resiliency. Or a high level of resilience may be too costly, Singhania said. Potential microgrid customers need to know what they are willing to pay for resilience.
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It’s also a good idea to identify how many resiliency hours are needed, said John Igo, vice president of business development for Mainspring Energy.
Is several hours enough, or does the business or community need days and weeks of resilience? You may want to consider multiple fuel options, in case one type of fuel supply is interrupted during an outage or fuel costs and supply volatility occur.
5. What technologies will be included in the microgrid?
Communities and businesses researching microgrids should keep in mind that the technology will likely change over the life of the microgrid. They must sustain the project. Ensuring the project can evolve over time to incorporate new technologies is essential, according to Singhania. For example, potential microgrid users should identify an electric vehicle (EV) strategy. As a first step, electric vehicle charging could be included in a microgrid. But, over time, this will likely evolve to include electric vehicles offering vehicle-to-grid options.
You should be independent of power, Singhania said. You can start with solar, but 10 years later you might want to integrate new technologies. Be sure to take a holistic view.
“With distributed energy, there will be new revenue streams to participate in the market. If you only take a piecemeal approach, you are leaving money on the table,” Singhania said.
6. How will fuel for distributed resources be purchased?
Users should want to have some control over the fuel component of the energy cost. They may want to do their own shopping, rather than relying on a microgrid operator, Fastiggi said. “A user must analyze and understand all the pricing formulas that determine what they pay for electricity from a microgrid. This would include fuel, operation and maintenance, standby or other loads, credits for thermal generation in the case of cogeneration or credits related to environmental benefits,” he said.
Asking the right questions and educating yourself, your business, or your community will lead to the most successful projects, Asmus said.
“For community microgrids, a lot of it is about education,” he said. “You have to be patient.”
This article, Key Questions to Ask About Microgrids Before Getting Started, is part of our About Microgrids series. Learn the basics of microgrids by exploring this series.