Creating a Microgrid Business

Moving the microgrid from mere curiosity to becoming an industry and a business.
Published: Mon 10 Feb 2014

A major leap is required to take the microgrid from the pilot stage to a fully-fledged industry. This is according to Mike Gordon, CEO, Joule Assets, USA in his presentation Community Action & the Developments of Microgrids at European Utility Week 2013, who says that his firm doesn’t finance microgrids as they have yet to develop into a real business.

Microgrids are often viewed as combined cycles or co-generation models, or co-generation connected with solar units. In addition, there is usually only one stakeholder.

Microgrid- creating a real industry

Mr Gordon explains that utilities must identify locations that will support the effectiveness of the microgrid. They need to integrate all sources of value-the transmission and distribution system-and identify the location where the microgrid would offer the most reliability and operate the most effectively. Currently, this information doesn’t appear to be available and there is no transparency with regards to an individual feeder’s needs and growth perspective. The utility has to work out copper challenges, economic growth and opportunities.

According to Mr Gordon, what Europe is missing more than the US is clear and consistent rules of the road forward with respect to the relationship between the balance responsible parties and the balance service providers. Utilities need to make sure that the electricity purchase is separate from the attributes of the dynamic load capability, whether its demand side, storage or generation. The two resources must be separated and have clear rules of the road for interplay between the two. This is critical for developing the demand side industry and moving towards microgrids.

The opportunity of having an industry is the clear and simple distribution of value streams and the value of each resource is communicated effectively. A proper regulatory atmosphere for enhancing revenues must be established in order to create an efficient tariff structure.

The big challenge for utilities is whether they will step up to engage consumers by creating “tariffs” and by offering open access to wholesale markets and publishing their challenge locations. Utilities must be prepared to think of a different revenue model in which consumers sell and utilities provide a service.

Mr Gordon says that the decision maker should be the person behind the meter. The suggested strategy here is that service revenue should mean total transparency and 100% of the incentive payments must go to the decision-maker. He says that consumer overrides are needed and reliability should be achieved by unerring control over smaller resources to balance under- or over-performance levels.

Utilities need to build a market place with template, open access, market structures and auction platforms.

Technology

Technology, supporting the microgrid, is already developed. Utilities need to identify what their technology solutions will be for charging, emptying a charge, the measurement of bulk and controlled resources and communication.

There is a search for maturing technology-long range and low-power bi-directional connectivity breakthrough performance for industrial automation, smart grid, smart cities, and connected appliances. If the microgrid market is built and developed successfully, the list of technologies will expand.

Leading lights

The integration of sophisticated markets, empowerment and financing, foundational demand response markets and energy markets will see the development of microgrids. Multi-stakeholder grids will arise and this is where jobs will be created.

Mr Gordon says that his firm will happily fund a pioneering utility but the microgrid must become an industry not just a curiosity. Certain elements must in place to support this. He says, “Utilities must engage with stakeholders, there must be a 100% distribution of revenue and benefits, they must build a service business and find complementary and cost-effective service vendors. These companies will survive the transition with a robust business.”