Total energy production in the United States increased for the sixth consecutive year in 2016 per the U.S. Energy Information Association (EIA). During the same period, electricity generation from wind, solar and other distributed energy resources (DER) also grew, ushering in a “New Energy Landscape.” A significant amount of this growth is behind the meter, meaning behind the meter resources including cogeneration now make up about 10 percent of the U.S. grid!
In response to these new dynamics, new grid technologies like microgrids have emerged, providing a combination of innovative hardware and software that solves for DER integration, while introducing a more affordable and sustainable energy mix. In fact, microgrids have become one of the most efficient ways for utilities and end-users to manage DER—GTM Research expects microgrid operational capacity in the U.S. to reach 3.7 gigawatts by 2020—and they incorporate critical support services such as energy supply, frequency control, voltage stability, power quality and storm/outage management in one solution that make them an attractive resource for many grid services.
At the same time, energy generation costs, primarily from solar PV, combined heat and power (CHP) and natural gas have declined rapidly, making it more cost-effective in some states to generate energy than procure it. With a combination of mature technology and cost-effective resources, the only barrier to greater adoption was the business model.
Innovating Commercial Models with Microgrid-as-a-Service
Until recently, the business model for microgrids was an obstacle for many organizations. Construction and deployment required a costly capital expenditure that was passed on to the ratepayer or taxpayer, in the case of utility applications or public-sector deployments, or a hit to the bottom line for many private installations. However, the advent of new financing mechanisms reduced the barriers to entry. For example, Microgrid-as-a-Service (MaaS) is a new, industry-leading financing mechanism that enables organizations to deploy microgrids without any upfront investment. This financing model allows municipal, district, institutional, commercial campuses and large buildings to stabilize long-term energy costs and upgrade critical energy infrastructure without capital outlay. In many higher cost areas, microgrids with distributed solar or cogeneration mean that microgrid power can be less costly than utility power. In other cases, the delta is spent on electrical or resilience upgrades.
The Microgrids-as-a-Service model removes the financial risk and complexity, enabling more microgrids to become a reality. In addition to providing the hardware and software, MaaS providers arrange the financing and the operation & maintenance agreements to make microgrid deployment an affordable turnkey solution.
MaaS helps solve concerns faced by many facilities such as:
To put this into perspective, Montgomery County, Maryland, recently began construction on a microgrid leveraging MaaS with a 25-year modified power purchase agreement (PPA). As an alternative to buying two microgrid systems outright, the County chose to partner with Schneider Electric and Duke Energy Renewables to develop, own and operate the systems, thereby incurring zero upfront costs. Energy created onsite will be used to power the County’s Public Safety Headquarters and Correctional Facility, allowing the County to generate its own sustainable energy and add resiliency to these critical facilities. This arrangement also enables Montgomery County to modernize its critical campuses and improve the capabilities of its facilities at minimal added operational cost while also reducing its environmental impact.
View all SMART GRID Bulletins click here