Microgrids: How Electricity Can Follow Tech's Example

21 January 2009 Publication


This article was first published as the headlining editorial in Energy Central’s Transmission and Distribution Reliability Topic Center e-newsletter on January 21, 2009.

The U.S. Department of Energy has forecast steadily increasing energy demands over the next two decades. To meet these demands, utilities must construct thousands of megawatts of new generation capacity and invest billions of dollars in new transmission lines. Failure to upgrade the aging energy infrastructure could result in blackouts and power outages across the country, costing power consumers untold billions of dollars. In addition to addressing the massive infrastructure overhaul, utilities may face tougher environmental and climate change standards under the Obama administration. The proposed carbon cap-and-trade program could impose additional costs throughout the industry.

Faced with seemingly overwhelming hurdles, the electricity industry can take heart: stealing an idea from the technology industry, the nascent implementation of microgrids may provide utilities with a useful tool to combat the ever-increasing pressures.

Currently, the nation's power generators operate on a centralized network. Massive baseload plants generate thousands of megawatts of electricity. Intricate webs of transmission lines then move that electricity across the nation to distribution systems, which deliver it to individual consumers. To add generation capacity, utilities must build new power plants. These plants often engender opposition from local communities through the NIMBY (Not In My Back Yard) phenomenon. This opposition makes it difficult to expand generation capacity. Moreover, the centralized nature of electricity generation means that an isolated failure can cause the entire regional grid to crash, as we saw happen in the great power outage of 2003, where a single tree falling onto a power line resulted in much of the eastern United States losing power.

A Lesson from the Tech Industry
The problems of centralization are not unique to the electricity industry. Within the past decade, computer technology faced a similar obstacle. The tech industry utilized a small number of supercomputers to act as servers and operate websites. While the centralized supercomputer approach allowed for increased efficiency, it also left little margin for error. This increased dependence meant that if a single supercomputer failed, entire websites and file systems could be taken off line.

A variety of enterprising companies, spearheaded by search giant Google, found a way to tackle that problem. Instead of utilizing supercomputers, Google moved over to distributed computing, with hundreds of thousands of small, more easily replaceable servers sharing the load. While there were efficiency losses through economies of scale, Google found that a large number of smaller servers provided greater reliability and security than a handful of supercomputers. Even if many of these computers failed at the same time, there were still a sufficient number operable to pick up the slack and keep the system online. Additionally, it was much easier to replace smaller computers than large supercomputers, providing reduced maintenance costs.

The distributed computing revolution quickly moved from the server room to the rest of the computer industry. From the massive Search for Extra-Terrestrial Intelligence (SETI) program (which uses excess cycles from millions of computers to parse data) to peer-to-peer file sharing (where millions of computers across the world combine to transmit large digital files) distributed computing allows for decentralized assets to conduct operations that would be impossible with a handful of supercomputers. Yet, even with greater individual failure rates, the distributed networks maintain greater reliability and security than the supercomputers.

Applying Tech's Lessons to Electricity through Microgrids
The electricity industry can similarly address some of its potential problems through distributed energy resources (DER). DER is a means of moving away from centralized, base-load generation facilities and toward a more decentralized and distributed method of generation. The move toward DER can be facilitated by microgrids. The Consortium for Electric Reliability Technology Solutions (CERTS) defines a microgrid as:

an aggregation of loads and microsources operating as a single system providing both power and heat. . . . [The microgrid] present[s] itself to the bulk power system as a single controlled unit that meets local needs for reliability and security.

That is, a microgrid is a collection of entities that the bulk power provider treats as a single aggregated load. Though presented to the grid as a single unit, a microgrid can encompass a building, a factory, or even entire facilities or universities. The microgrid is a simple aggregation of electrical loads and generation, though to the bulk power provider, it is indistinguishable from a single consumer.

In theory, a microgrid, by covering a relatively small area, can more readily implement smart grid technologies and utilize net-metering concepts within the microgrid. The microgrid draws its energy from microturbines (using natural gas or fuel oil as fuel sources) and fuel cells. While implementations vary, microgrids typically generate less than a megawatt of electricity.

Perhaps the most significant advantage of a microgrid is its ability to use waste heat through combined heat and power (CHP). In the traditional centralized model of electrical generation, large utilities have waste heat that causes environmental concerns and disposal problems. Some new combined-cycle power plants use the excess heat for additional generation, pushing efficiency up to the 80% mark. CHP programs take these innovations, localize them, and then implement them on a smaller scale. In a microgrid, a CHP system can reuse the waste heat from electrical generation for things such as space heating, domestic hot water heating, sterilization, space cooling, and refrigeration through absorption chilling. Older generation facilities typically cannot employ CHP technologies to make use of the waste heat.

The Benefits of Microgrids
Microgrids provide a variety of benefits. A microgrid can allow for significant cost savings. Energy delivered from the bulk power system often includes costs for things such as transmission losses, congestion pricing and customer service overhead. These costs can exceed the simple generation cost. Through day-ahead marketing information, a microgrid can act to mitigate the electricity cost to its constituents by generating some or all of its own electricity needs.

Microgrids provide for greater reliability. By combining a localized set of generation and load sources into one unit, a microgrid has the flexibility to drop off the regional grid in the case of a large scale blackout. But blackouts are not the sole cause of reliability concerns: even a one-cycle interruption -- less than 1/60th of a second -- in power from bulk supplier can cause sensitive technologies such as computers to crash. To minimize these risks, a microgrid can utilize inexpensive (and minimal) battery and flywheel technology to provide for a steady stream of power during short-term interruptions. A microgrid thus offers power-sensitive customers with a mechanism by which to ensure the consistency of their energy supply and mitigate against power interruptions. Similarly, by decentralizing a portion of the generation and distribution, microgrids can relieve transmission congestion and provide cost savings from line losses.

Microgrids enable consumers to supply some or all of their own electricity needs. In doing so, consumers can use renewable generation sources. While not all areas of the country have access to equal wind and solar capabilities, a microgrid provides the option to tailor the electricity mix to the consumer's liking. This bottom-up consumer approach can reduce reliance on fossil fuels and lower greenhouse gas emissions.

Finally, microgrids encourage efficiency by making the marginal cost of energy more transparent. If the microgrid itself purchases energy from the bulk power producer and then distributes it to the entities within the microgrid, these entities have access to dynamic pricing. The marginal generation costs are more transparent; this enables customers to earn a direct benefit from energy-efficient investments. This transparency also moves more toward the demand response incentives that public utilities have supported for years.

Potential Drawbacks of Microgrids
Despite the promise of microgrids, some drawbacks exist. In particular, the current regulatory structure was designed to address the traditional, centralized method of electricity generation and distribution, and it is not well suited to the DER model. Issues such as standby charges and net metering may pose obstacles for microgrids. There may also be some questions raised about the public utility status of microgrids, and whether they would be FERC-jurisdictional under the Federal Power Act. Microgrid operators would be well served to contact legal counsel to determine the intricacies of electricity regulation and whether they would need to take any additional steps to be in compliance with the overlapping state and federal regulatory regimes.

As microgrids take shape, interconnection standards will need to be developed to ensure consistency. As of this writing, the interconnection standard proposed by the Institute of Electrical and Electronics Engineers -- IEEE P1547 -- may end up filling this void. Before embarking on a wholesale move over to a DER microgrid, operators should contact their bulk power provider to clarify the interconnection standard to be used.

Finally, DER and microgrids may create new security issues. Because the generation sources are distributed, generation owners have a more difficult time securing the decentralized generation sources. Centralized generation allows for economies of scale in security operations, while microgrids provide a larger number of relatively easy targets for those wishing to wreak havoc on the electricity grid. While securing any particular generation source may be more difficult in a microgrid, microgrids offer offsetting security advantages: because of the decentralized nature of DER, the loss of a single generation source within a microgrid would have far fewer effects on the regional grid that would currently happen under the traditional, centralized approach.

Microgrids: Looking Ahead
Microgrids and DER provide the electricity industry with a way to take an idea from the distributive computing revolution and apply it to practical problems of electrical generation, transmission, and distribution. Microgrids provide their customers with greater reliability and transmission stability, all while potentially lowering costs. When coupled with smart grid technology, microgrids also encourage energy efficiency by making marginal generation costs more transparent. This demand response mechanism may promote more efficiency, greater conservation and more environmentally friendly energy usage.

At the same time, microgrid technology may fall through the cracks of a regulatory system designed for traditional, centralized generation. Some concern exists about the status of microgrids under the Federal Power Act, and any serious adoption of microgrid technology will necessitate standardization of interconnection protocols. Microgrids offer mixed results from a security standpoint: while DER increases the number of vulnerable generation sources, DER also lessens the impact of the loss of any particular generation source. Similar to the Google server model, even if a few sources go offline, the rest can pick up the slack and keep the system functioning.

Despite the potential roadblocks, the future is bright for microgrids. Ever-increasing energy demands, coupled with lack of transmission infrastructure and higher environmental standards, pose significant hurdles for the electricity industry. By adopting an idea from the tech industry and applying it to the electricity industry, public utilities may be able to meet those increasing demands.

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