Utility owned microgrids questioned in Maryland

Baltimore Gas and Electric’s (BGE) proposal to pilot two microgrids is recommended for rejection by PSC staff.
Published: Fri 10 Jun 2016

The question of utility ownership of microgrids is attracting a good deal of interest, particularly in the US where state regulations restrict certain competitive activities by utilities.

New York, California and now Maryland are debating the issue closely – the latter the latest, and in response to a proposal by Baltimore Gas and Electric (BGE) to pilot two so-called ‘public purpose microgrids’ as a means of building resiliency into the grid. [Engerati-Baltimore Gas and Electric To Pilot Microgrids] The proposal was that cost recovery would be via a special surcharge on bills.

However, in a move which will ignite the debate, a Maryland Public Service Commission (PSC) staff report has concluded with being unpersuaded either that such utility owned microgrids are legal or that they are of sufficient public benefit to warrant ratepayer financing.

This appears to be in direct contradiction to the 2014 findings of the Maryland Energy Administration’s Microgrids Task Force, which BGE stated as forming the motivation for its December 2015 proposal.

PSC staff findings

The staff report is based on 15 sets of comments from a consultation, which “in general … are favourable to the concepts of a public purpose microgrid deployment.” However, “most raise various issues that concern ownership and operation by utilities, cooperation and consultation with local authorities, impact on retail energy markets, incorporation of energy efficiency, demand response and renewable sources, and cost recovery.”

Several also call for further investigations to be conducted on microgrids.

Much of the support for BGE’s initiative comes from public officials or authorities. Conversely, much of the objection is from commercial competitors. For example, WGL Energy, while supporting utility ownership of microgrids at pilot scale, states that in the longer term there is no good policy reason for the utilities to own microgrid generation, and that there should be a competitive procurement from third party suppliers.

A group comprised of IGS Energy, NRG Energy and Sun Edison, describing themselves as “all entities involved in bringing the benefits of distributed power to Maryland consumers”, suggest that BGE’s proposal would undermine private microgrid development. “Utility ownership of microgrids made with ratepayer funds will have the negative effect of driving private finance from the microgrid market,” they posit.

An NGO, Maryland Solar United Neighborhoods (MDSUN) also calls for BGE’s proposal to be rejected because it “does not meet the organization’s criteria for a well-designed project” because “it relies on diesel and natural gas fired generation, and fails to incorporate customer load management, clean renewable generation, and energy storage.”

Other commenters included the Microgrid Resources Coalition, the Maryland Office of People’s Council, Maryland Department of the Environment and Maryland Energy Administration.

Staff recommendations

In the conclusions the staff report calls BGE’s proposal to be denied and instead that the concept of public purpose microgrids be subject to a further generic proceeding or workgroup. It is also suggested that this may be accomplished most efficiently in the upcoming “grid of the future proceeding” associated to the Exelon/Pepco merger, which encompasses microgrids.

“The goal of the proceeding should be for the Commission to determine, whether public purpose microgrids are desirable from a policy perspective. Ultimately, if the answer to this question is “yes,” then the Commission also needs to determine what level of utility ratepayer investment in microgrids is appropriate, and the conditions under which microgrids should be developed,” concludes the staff report.

The outcomes of this issue and the debate leading up to them, will be of much interest. Clearly a fundamental issue is that of competition with commercial providers and the way this is addressed will be important for the future evolution of utilities. Utilities are well placed with the technical and other skills to manage and operate systems such as microgrids and as they become more product and service oriented these have added value. Whether the utility also will need to own the microgrid is the moot point.

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Further reading

Maryland PSC Staff Report