Extreme weather events, renewable energy development, and poor electric infrastructure lead to unreliable and unstable electricity supplies but microgrids have the potential to put an end to these problems. Increasingly, microgrids are meeting both the reliability and stability criteria that have always been met by baseload generators. This is obviously cutting into the generation and the distribution revenue streams that are paramount to the traditional utility business model so it comes as no surprise that many utilities view the microgrid as a threat to their current business operations.
For a while now, universities, military bases and remote islands have adopted the microgrid strategy to lower energy costs, boost economic growth, improve reliability, decrease carbon emissions and even generate revenue. Consumers and businesses can supply valuable services to the grid in return for payments from the serving utility or independent system operator. This includes demand response, real-time price response, day-ahead price response, voltage support, capacity support, and spinning reserve to name a few. Additional consumer revenues can also be generated from distributed power generation, plug-in electric vehicles and carbon credits.
Utilities ‘afraid’ of microgrids
But, for the aforementioned to be made possible, utilities have to be onboard and many aren’t yet, according to Markus Reischboeck, Lifecycle Manager at Siemens, who will be attending European Utility Week 2016.
“Utilities seem to still be afraid and weary of losing customers and clients to microgrid development. They don’t see the opportunities in leveraging new business models in this direction. The current business model is compromised due to the many changes in the industry but many utilities have no look at how new technology and business models could be leveraged to increase revenues.”
Reischboeck adds that it is important that utilities recognize the potential of microgrid development for their business. “Utilities must participate in microgrid development if they are to stay in the game.”
But what is holding utilities back?
Equipping utilities of the future with microgrids
Reischboeck says that some utilities simply don’t have the man power, knowledge, technologies and expertise they need to embrace the opportunities on offer. “Microgrid technology and business model is new to utilities so this can prove to be very challenging for them. It is therefore important that they look for assistance and e.g. rely on industry providers for proper consultation and on someone who can provide the appropriate IT infrastructure for them.”
He adds that utilities “need to get a grip on what’s changing and how to react. They need a partner who is forward thinking and can provide the appropriate technology.”
From an overall perspective view, microgrids require technologies, software applications and of course operational capabilities. Although a threat, utilities can get involved with many aspects of community microgrids, be it technology, business strategy or operation. “These communities mostly still need someone to maintain and operate the grid infrastructure and the applications required. Utilities can help provide the grid capability and even set the market place for trading local energy and moderate it.”
Reischboeck’s advice to utilities is to be open to the opportunities that microgrids offer. “Utilities need to understand what is possible with the microgrid and should not view its development as a threat. Communities need the utility as a service partner. They can be asset operators as well as trading moderators.”
“Utilities should and can work towards closing the gap of selling electricity and being an operator instead of microgrids.”