industry report - 三菱東京ufj銀行 【 要約 】 industry report javed siddique strategic...
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【 要約 】
Industry Report
JAVED SIDDIQUE
STRATEGIC RESEARCH
(NEW YORK)
MUFG Union Bank A member of MUFG, a global financial group
2016年 11月
【ニューヨーク駐在報告】
米国マイクログリッド
「マイクログリッド」とは、既存の一般的な電力網の小型版と言えるもの
であるが、電力供給先、運用形態、電力源、先進的な運用技術等という点
に特徴を有している。
「マイクログリッド」は、既設の電力網に接続されている状態、あるい
は、既存の電力網から切り離された状態(Island Mode)のどちらでも運用
可能。一方、電力供給先は、一般的に、他と明確に区分された一定区域内
に限定される。また、電力源については、火力、再生可能エネルギー、蓄
電システム等が含まれており、先進的なソフトウェアやコントロールシス
テムによって、バランスよく最適化されている点が特徴的。
「マイクログリッド」導入には、多額の初期投資が必要であり、リスクも
大きい。従って、「マイクログリッド」は現在、政府のインセンティブに
強く依存している状況にある。政府のサポートがなければ、「マイクログ
リッド」の更なる本格的な普及には時間を要すると考えられる。
実際、総発電設備容量に対して「マイクログリッド」が占める割合は足
元、僅かなものに過ぎない。但し、①電力供給の信頼性向上、②長期的な
電力コストの削減・効率化、③環境責任遂行、④排出ガス削減を目的に、
「マイクログリッド」の設備容量は急速に増加しており、2020 年までの
年平均成長率は 21%に達する見込み。Siemens、ABB、日立製作所といっ
た、発電インフラに強みを有するプレイヤーの参入も進んでいる。
「マイクログリッド」の普及は導入主体により、異なるものになると考え
られるが、まず、公共性の高いサービス、大学、軍施設での活用が有望視
されるほか、各地自治体での導入も相応に進展すると想定される。
「マイクログリッド」の本格的な普及には、現状、多数の課題があるもの
の、参入事業者、行政、利用者によって、持続可能なフレームワークの構
築が徐々に進むと考えられる。
1
【Summary】
Industry Report
JAVED SIDDIQUE
STRATEGIC RESEARCH
(NEW YORK)
MUFG Union Bank A member of MUFG, a global financial group NOVEMBER 2016
Microgrids
Microgrids are exactly what the name implies – smaller versions of the modern
electrical grid that we are familiar with today. What enables microgrids to stand
out, however, are a number of key features that define customer loads, operating
modes, sources of power generation and advanced intelligence.
Microgrids can operate connected to the macrogrid or in a stand-alone fashion
(island mode). Customer loads for microgrids exist within clearly defined
boundaries. Generation fuels include a balance of renewable, thermal and
storage, optimized through advanced intelligence software and controllers.
Due to the significant upfront capital investment and risk required to adopt
microgrids, the industry is heavily dependent on government incentives.
Without government assistance, it would be significantly more challenging for
microgrids to gain traction.
Although installed capacity is a small piece of the overall grid today, it is
growing rapidly, at a CAGR of 21% through the end of this decade. This
growth will be driven by a number of factors including 1) reliability 2) longer-
term cost reduction/efficiencies 3) environmental stewardship and 4) emissions
reductions. These drivers have brought in major players that have built on
previous experience in the arena including Siemens, ABB and Hitachi.
Adoption will depend on the type of microgrid application, with the highest
likelihood of penetration occurring in critical services, campus/university and
the military, followed by cities/communities.
Although there are a number of challenges that exist, industry players, regulators and
customers are likely to gradually work towards establishing a framework that will
last going forward.
2
Table of Contents I. Background ......................................................................................................... 3
1. Microgrids Provide the Origins for the Modern Electrical Grid ........................ 3
2. Drawbacks of the Macrogrid – Microgrids as a Solution ................................. 4
II. What is a Microgrid? ............................................................................................ 4
1. Overview ....................................................................................................... 4
2. Features ........................................................................................................ 5
3. Installed Capacity .......................................................................................... 8
III. Financing ............................................................................................................. 8
IV. Drivers of Microgrid Adoption .............................................................................. 9
1. Reliability ....................................................................................................... 9
2. Longer-term Cost Reduction/Efficiencies ..................................................... 10
3. Environmental Stewardship ......................................................................... 10
4. Emissions Reductions ................................................................................. 12
V. Types of Microgrids ........................................................................................... 12
1. Critical Services ........................................................................................... 13
2. Campus/University ....................................................................................... 15
3. Military ......................................................................................................... 15
4. City/Community ........................................................................................... 16
5. Commercial ................................................................................................. 17
6. Data Center ................................................................................................. 18
7. Industrial ...................................................................................................... 18
VI. Major Players .................................................................................................... 19
VII. Challenges ........................................................................................................ 22
1. Technical ..................................................................................................... 22
2. Ownership ................................................................................................... 22
3. Regulatory Landscape ................................................................................. 23
VIII. Conclusion ....................................................................................................... 24
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Microgrids l November 2016
I. Background
1. Microgrids Provide the Origins for the Modern Electrical Grid
Microgrids planted the seeds for today’s electrical grid.
Today’s microgrid actually draws its origins from the early days of the electrical grid that we
are all familiar with today. At the beginning of the 20th
century, most major cities in the US
operated their own electric grids that were islanded from each other. Even as late as 1918,
half of electric customers in the US were still receiving their power from small-scale isolated
power systems with generation plants sized well under 10 MW in capacity. The areas served
were less than a few square miles, and the power systems in individual towns were not
connected with each other. This setup is similar to the microgrids of today.
However, there were severe limitations in those microgrids of the early years of electricity.
First of all, these systems were not very reliable since all the energy for each microgrid was
supplied from a single power plant or two. It became clear to system engineers soon enough
that interconnecting small systems and pooling resources would improve the reliability of the
grid. Interconnections would also provide generator redundancy to back up power plants if
one plant could not handle the load. Connecting these microgrids also provided load
diversity, which helped balance out the demand for electricity over different time periods.
Eventually, the potential to realize these benefits fostered various technological innovations,
enabling the interconnection of the many isolated microgrid systems throughout the country
into a macrogrid. This macrogrid was primarily comprised of large-scale central plants
connected by transmission lines – in other words, the macrogrid is defined as the electrical
grid we are familiar with today.
This macrogrid model worked well for the remainder of the 20th
century and still provides the
prevalent structure for the grid today, driven by the following advantages:
Aggregation of many users and large, robust systems help to provide balance between
load and generation and minimizes distortions.
Increasing the size of generation plants to serve a larger load profile provides economies
of scale.
The variability of renewables, such as wind and solar, can be smoothed over larger areas.
A broad range of options for generation allows for fuel flexibility and more economic
dispatch.
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Microgrids l November 2016
2. Drawbacks of the Macrogrid – Microgrids as a Solution
Microgrids can help to resolve some of the shortcomings of the macrogrid.
While the macrogrid has shown many advantages, future grid expansion faces challenges.
One issue is that the cost of building new transmission and substation infrastructure has
significantly increased in most areas. There have also been delays for approvals and
permitting access to rights of way in highly populated urban areas, not to mention general
public resistance to the construction of new lines.
For the more remote customers, long distribution lines and service drops have added to
service costs and increased losses. Macrogrids have also faced challenges in recovering from
damage to lines in areas with significant exposure to trees, wind and flooding – particularly
during severe storms and natural disasters.
There are multiple solutions available to cope with these macrogrid challenges. One of the
answers is the microgrid, which can help to alleviate some of these drawbacks by providing a
complement to the traditional macrogrid approach.
II. What is a Microgrid?
1. Overview
Microgrids are smaller versions of the macrogrid, with a number of key features that
distinguish them from their macrogrid counterparts.
Microgrids are exactly what the name implies - smaller versions of the macrogrid that we are
familiar with today. What enables microgrids to stand out, however, are a number of key
features that can be described as follows (Figure 1 and Figure 2 on p. 5):
Figure 1: Microgrid Features
o Operating Mode:
Connected to the macrogrid (grid-connected mode) or
Stand-alone fashion (island mode)
o Serve loads within clearly defined electrical boundaries
o Incorporate multiple sources of power generation, including distributed energy
resources, as well as heating and cooling
o Advanced intelligence using sophisticated software and controllers to manage the grid
autonomously and optimize configurations
Source: MUB Strategic Research, Department of Energy
5 Microgrids l November 2016
Figure 2: Typical Microgrid Structure
Source: IHS
2. Features
Key microgrid features include operating modes, customer loads, sources of power
generation and advanced intelligence.
1) Operating Modes
Microgrids can be operated in grid-connected mode or island mode. The mode used depends
largely on the balance between the strength in demand and availability of supply at any given
time.
If a microgrid power plant fails, it can rely on the macrogrid to fill the supply gap. If the
macrogrid is running low on supply, it can turn to the microgrid for support. A typical
instance would be during peak demand periods in the summer where there is significant
cooling demand stressing the generation capacity of the macrogrid. In these instances, the
macrogrid can draw on surplus power from the microgrid.
When there is a storm, the macrogrid might shut down while the microgrid can switch to
island mode to continue providing power to its load centers. This was the case after
Superstorm Sandy, which hit the Atlantic seaboard in 2012. Sandy is estimated to be the
second costliest storm on record in the US, behind only Hurricane Katrina. Over 8.5 million
customers lost power from Delaware all the way up the coast to Massachusetts. It took
weeks to restore power after this storm in some areas.
However, a few microgrid locations were able to keep the lights on during the storm and its
aftermath, including Princeton University, New York University and Co-op City in the Bronx.
This is one example of the benefits of the option for operating in island mode, since these
microgrids did not have to wait for the macrogrid to slowly and gradually bring power back
to resume their own operations.
6 Microgrids l November 2016
CHP39%
Natural Gas26%
Diesel17%
Solar10%
Energy Storage4%
Hydro2%
Wind1%
Fuel Cells1%
2) Customer Loads
Microgrids often are described as mini versions of the macrogrid, since they can mimic, on a
much smaller scale, the grid’s primary function – to produce energy from more than one
source and coordinate its distribution through wires and pipes to one or more customers.
For microgrids, these customer loads tend to hold clearly defined boundaries, such as in
college campuses, hospitals, military bases or data centers. Each of these load centers are
typical of microgrid customers, in that they have many buildings that are close together and
often house facilities where power reliability is crucial. Businesses are also joining the list of
microgrid customers, since power outages can result in serious losses, and microgrid
islanding can prevent this from occurring.
Community microgrids are an emerging application of the microgrid concept, in which there
is a focus on ensuring that the citizenry receives critical services during a grid outage.
Community microgrids could include police and fire stations, hospitals, waste water
treatment plants, schools, emergency shelters, grocery stores, gas stations and
communications facilities.
3) Sources of Power
Generation
Microgrids typically include a
combination of dispatchable and
intermittent generation (Figure 3).
Dispatchable generation is
comprised of conventional
thermal fuels such as natural gas
and diesel. Intermittent
generation includes the
renewable fuels such as solar and
wind. Energy storage is also
incorporated into the microgrid,
through batteries and fuels cells,
helping to balance the
intermittent nature of renewable
fuels.
The solar energy provided in microgrids often comes in the form of distributed energy, in
which customers are hosting the solar panels, using the electricity themselves and delivering
the electricity to the microgrid. This distributed energy helps to turn energy consumers into
energy producers as the center of the system.
Figure 3: Microgrid Generation by Fuel/Technology
Source: GTM Research
7 Microgrids l November 2016
Although renewables are a small portion of the overall pie, the share has nearly doubled since
June 2015, and is expected to continue to expand, as lower emissions and a smaller carbon
footprint continue to be major drivers of microgrid adoption.
To achieve higher efficiencies, microgrids include combined heat and power (CHP), also
known as cogeneration. The difference between a conventional power plant and one with
CHP, is that CHP plants actually utilize the heat energy from generation to heat or cool
buildings, to manufacture products or to run other heat-intensive processes. By contrast,
conventional power plants without CHP simply discard the heat.
As a result of re-using heat by-products in generation, CHP plants can derive up to twice the
energy from the same amount of fuel compared to a conventional power plant. In this
manner, microgrid deployment of CHP drives increases in efficiency.
Some microgrids also incorporate district energy into the network, often coupled with CHP.
District energy systems supply steam or hot water for space heating, and chilled water for air
conditioning, through an underground piping network, enabling customer buildings that are
connected, to avoid the installation of boilers, cooling towers and chillers. In a number of
microgrids, thermal energy storage complements this system, by storing energy during off-
peak hours and providing energy during peak demand.
4) Advanced Intelligence
Microgrids also employ advanced intelligence through sophisticated software and controllers
to optimize grid configurations. For example, advanced microgrid controllers balance the
use of microgrid onsite power and the need to draw on macrogrid offsite power in order to
optimize price and operational value.
In order to make these decisions, the controllers utilize software that analyzes electricity
prices minutes or days ahead, as well as weather and other variables. Some of the most
advanced microgrids utilize controllers that manage the grid autonomously, without any
human intervention.
Advanced intelligence also provides black-start capabilities, which allows microgrid
generators to start up cold, without the need for auxiliary power from other power plants.
This function makes it possible for the microgrid to seamlessly switch between macrogrid
and self-supply without the customer realizing the switch took place. It also proves critical in
crisis situations when the macrogrid shuts down, since it allows the microgrid to start-up
without outside support. By contrast, the lack of extensive black-start capabilities in the
macrogrid is what often causes lengthy downtime in the event of macrogrid blackouts.
8 Microgrids l November 2016
3. Installed Capacity
Installed capacity is expected to grow rapidly off of a small base.
There is currently 1.54 GW of installed microgrid capacity in the US, as of May 2016, the
most recently released data from GTM Research (Figure 4). This is less than 1% of total US
installed electricity capacity of 1,069 GW.
However, rapid growth is expected off of this small base. By 2020, microgrid installed
capacity is expected to expand by a CAGR of 21% to 3.71 GW.
Since there is significant upfront cost to microgrid adoption, this growth will be contingent
on longer-term cost reduction and efficiencies and optimization, as well as continued
availability of government incentives and mandates that help to foster renewables. Without
progress in these areas, the growth rate will likely be lower.
Figure 4: US Microgrid Installed Capacity
Source: GTM Research
III. Financing
Government funding for microgrids is available from federal as well as state sources.
Due to the significant upfront capital investment and risk required to adopt microgrids, the
industry is heavily dependent on government incentives. Without government assistance, it
would be significantly more challenging for microgrids to gain traction.
Since it is still early days for microgrids, the federal government has focused on research.
On the state-level, incentive programs vary significantly, driven by the need to foster
implementation of microgrid concepts.
The Department of Energy (DOE) has allocated $220 million in funding to explore a grid
modernization effort, which includes microgrids, as part of the strategy. Microgrids are the
focus of 5 out of 88 research projects funded in this effort.
2016 – 2020 CAGR = 21%
9 Microgrids l November 2016
Connecticut has allotted $53 million to microgrid projects through a program that began in
2012. Each project can win $3 million to $5 million. Both municipal and private microgrids
can apply. Projects are not being asked to compete against each other, but instead, will be
considered on their own merit, which acknowledges the highly customized nature of
microgrids.
In 2014, Massachussetts granted $18.4 million to cities and towns for energy resiliency
projects, which included microgrids, along with CHP and battery storage. One of the cities
awarded, Northampton, received $3 million for a microgrid for three key emergency facilities,
including a school, hospital and department of public works.
California in 2014 provided funding of $20.5 million for two types of microgrids. The first is
low-carbon-based microgrids for critical facilities, such as hospitals and fire stations. The
California Energy Commission mandates that all projects for this category have 20 percent
lower emissions than a comparatively sized diesel generator.
The second group includes high-penetration renewable-based microgrids, which are projects
that can incorporate high amounts of renewable energy – up to 100% - to meet load while
avoiding adverse grid impacts, through the use of a microgrid controller/energy management
system.
New York has initiated a program called NY Prize, a $40 million grant program to create
model community microgrids, which New York defines as standalone energy systems that
can operate independently in the event of a power outage. As part of the first stage, New
York has begun awarding prizes out of this grant program to cities to conduct engineering
assessments that evaluate the feasibility of installing and operating a community microgrid at
proposed sites throughout New York State. Funding from this program is available for local
governments, community organizations, non-profit entities, for-profit companies and
municipally-owned utilities.
IV. Drivers of Microgrid Adoption
With funding secured, microgrid developers are then incentivized by the primary drivers of
microgrid adoption:
1. Reliability
Microgrid reliability ensures continuous operations during outages.
Critical facilities cannot afford to shut down operations during macrogrid outages. The
islanding capability of microgrids enables customers to continue to be connected throughout
outages.
For regions that are prone to natural disasters, this option proves especially relevant in
improving the resilience of electricity supply. Reliability is one of the most important drivers
across all application types.
10 Microgrids l November 2016
Those applications that value reliability the most – such as critical services, are also amongst
the most likely to venture into microgrid investment first, since the opportunity cost of being
without power is too high.
2. Longer-term Cost Reduction/Efficiencies
Microgrids can, over time, reduce costs by improving efficiencies in the grid.
In the development of a microgrid, at first there are increased costs due to the capital
investment involved to build the microgrid infrastructure, particularly for the construction of
generation and distribution equipment.
However, over time, the microgrid project can in some instances, reduce long-term costs.
Through the use of advanced controllers, microgrids can optimize the use of generation,
switching between macrogrid and microgrid power, depending on which is most efficient at
any given time.
This optionality reduces costs for both grids by employing the lowest cost generation at any
given time. Over the longer-term, it is expected that this optimization will provide a return
on the initial investment to deploy the microgrid.
Opportunity costs of power outage downtime are also avoided through the use of microgrids.
These opportunity costs could be staggering, particularly when it comes to critical services in
government or health care, or the reputational damage that could impact commercial and
industrial firms.
3. Environmental Stewardship
Microgrids enable developers and customers to meet environmental stewardship objectives using renewable energy as a source of generation.
Federal tax credits help to lower the cost of adoption of renewables-driven microgrids
throughout the US. Renewable portfolio standards (RPS) also play a role in microgrid
implementation by mandating the inclusion of renewables in the grid.
1) Wind Tax Credits
For wind, the most relevant tax credit is the production tax credit (PTC). Originally enacted
in 1992, the PTC has been renewed and expanded numerous times, in the American
Recovery and Reinvestment Act of 2009 (ARRA), the American Taxpayer Relief Act of
2012, Tax Increase Prevention Act of 2014 and most recently extended in the Consolidated
Appropriations Act of 2016.
The PTC is $0.023/kWh tax credit for wind electricity facilities commencing construction
before December 31, 2016.
There is a phase-down schedule for wind projects after 2016 as follows:
For 2017, the PTC amount is reduced by 20%
For 2018, the PTC amount is reduced by 40%
For 2019, the PTC amount is reduced by 60%
11 Microgrids l November 2016
The duration of the credit is ten years after the facility is placed in service. The PTC
program will expire December 31, 2019.
2) Solar Tax Credits
The most relevant tax credit for solar currently is the investment tax credit (ITC).
The ITC was established in the Energy Policy Act of 2005. It is a 30% federal tax credit for
solar systems on residential or commercial properties. Originally the tax credit was supposed
to step down in 2017.
However, similarly to wind, this was extended in Consolidated Appropriations Act of 2016
to keep the ITC in effect at 30% through 2019.
There is a phase-down schedule for solar projects after 2019 as follows:
o For 2020, the ITC amount is reduced by 26%
o For 2021, the ITC amount is reduced by 22%
o For 2022, the ITC amount is reduced by 10%
3) State Renewable Portfolio Standard (RPS)
One of the most relevant state initiatives to lower emissions is the Renewable Portfolio
Standard (RPS). RPS is a regulatory mandate requiring that a minimum percentage of a
state’s total electricity generation come from renewable sources, such as wind, solar, biomass
and other alternatives to fossil and nuclear generation.
Microgrids can help states to achieve these mandates, since renewables are usually
incorporated into microgrid systems.
Currently, RPS policies exist in 29 states, as well as Washington DC (Figure 5). These states
represented 63% of total US retail electricity sales for the period January 2016 - August 2016.
Figure 5: Renewable Portfolio Standards
Source: Berkeley Lab
12 Microgrids l November 2016
4. Emissions Reductions
EPA mandates can foster microgrid adoption.
1) MATS
In December 2000, the Environmental Protection Agency (EPA) determined that under the
Clean Air Act, it is appropriate to regulate coal and oil-fired power plants, based on the
determination that air toxic emissions, most notably mercury, pose hazards to public health
and the environment.
In February 2012, pursuant to this determination, the EPA published final air toxics standards,
also known as Mercury Air Toxics Standards (MATS), to limit emissions for power plants.
In response to the MATS rule, about 62 GW of coal generating capacity has already been
retired or converted.
By driving the retirement of these coal power plants, MATS opens the door for alternative
fuel sources in the electric grid. Renewable energy in microgrids is one of these alternative
sources that can benefit from the reduced competition from coal.
2) Clean Power Plan
In August 2015, the EPA released a final version of its Clean Power Plan (CPP) rule,
intended to address carbon dioxide emissions from existing US fossil-fueled electric plants.
These electric plants currently constitute slightly over 30% of total US greenhouse gas
(GHG) emissions and slightly less than 5% of global GHG emissions.
The CPP standards targets reductions from three primary avenues – renewables, shifting
generation from coal to gas and improving coal unit heat rates. Since renewables are eligible
for compliance with the CPP, this should encourage microgrid development going forward.
One obstacle, however, is the fact that the Supreme Court in February 2016 placed a stay on
the CPP, could delay implementation, depending on how long the legal challenges take to
resolve.
V. Types of Microgrids
There are numerous types of microgrids in the market today. While the drivers are similar
throughout, their importance and the likelihood of penetration vary depending on application
type (Figure 6 on p.13).
The likelihood of penetration will be highest areas include critical services,
campus/university and military. Since these groups often operate autonomously from their
surroundings, the island mode features of microgrids provide a good fit. Island mode also
reduces downtime when the grid goes down, proving especially important when lives are at
risk.
Cities/communities will also be important in leading the implementation of microgrids.
Often these groups value reliability as well as view microgrids as a means to improve their
environmental stewardship.
13 Microgrids l November 2016
The slower penetration will occur in the commercial, data center and industrial space. This is
because these entities have a shorter time horizon here for payback, so they might wait for
the economic incentive to be stronger before assuming the risk of implementation.
Figure 6: Microgrid Types and Drivers for Adoption
Source: GTM Research, MUB Strategic Research
Real-world application of each of these microgrid types helps to explain these drivers even
further:
1. Critical Services
East Bronx Healthcare plans to utilize the microgrid to improve reliability for the critical services provided by its hospital network.
East Bronx Healthcare Microgrid
The concept of a microgrid for the East Bronx Healthcare hospital system was driven by the
unique positioning of these four hospitals in the wider New York City network.
During storms and outages, the four East Bronx hospitals remain open not only for their
existing patients, but also to serve those transferred from evacuated hospitals in Manhattan
and other New York City boroughs.
The medical facilities also house $700 million in biological research that run the risk of being
lost during extended power outages. This includes advanced research into cancer treatment,
cardiovascular disease, aging, transplantation surgery and children’s health.
Microgrid Most Important More Important Important Penetration
Type Driver Driver Driver Likelihood
Critical Services Reliability Cost Reduction
Emissions
Reduction High
Campus/University Cost Reduction Reliability
Emissions
Reduction High
Military Reliability Cost Reduction
Environmental
Stewardship High
City/Community Reliability
Environmental
Stewardship Cost Reduction Medium
Commercial Reliability Cost Reduction
Environmental
Stewardship Low
Data Center Reliability Cost Reduction
Environmental
Stewardship Low
Industrial Reliability Cost Reduction
Emissions
Reductions Low
14 Microgrids l November 2016
By exploring the microgrid strategy, this hospital network is trying to avoid the downtime
caused by storms. In 2012, Superstorm Sandy knocked out power lines in the area for 56
hours, during which the only source of electricity for the hospitals was single-purpose
emergency generators.
In order to improve reliability, a $34 million microgrid is being considered as part of New
York Prize to develop a microgrid for East Bronx Healthcare. This microgrid would help to
ensure continued electricity supply for the hospitals, which serve about 10 percent of the
Bronx population – over 137,000 patients annually.
To serve the combined load of 21 MW peak demand from the facilities, the microgrid
proposal integrates several distributed energy resources, including five 4.6 MW natural gas-
fired CHP units, 1 MW CHP microturbine, 1 MW of solar PV, battery systems for energy
storage, steam turbine generators and heat recovery steam generators. In addition, two 2
MW diesel generators would provide black start capability. The design would also
incorporate existing steam generation at the four hospitals.
This microgrid is designed to handle East Bronx Healthcare electrical demands. If one of the
generators fails, another can step in to fill the void. During normal operations, any excess
capacity could be exported to the macrogrid. Heating, cooling and hot water would also be
taken care of, as the CHP components of the system harness thermal byproducts of electricity
production.
To improve redundancy that is necessary for the mission-critical care and research conducted
at the medical facilities, the CHP generators are each limited in size to 20 percent of peak
load, with a higher quantity of smaller CHP engines, rather than a smaller quantity of larger
CHP engines.
In this microgrid, generated power is sent into the distribution system of the local utility
operator, Con Edison, which in turn, redistributes the electricity to microgrid customers. If
the macrogrid fails, then Con Edison will automatically island the microgrid, allowing it to
operate grid-independent for as long as required.
The project developer will build, own, operate and maintain the microgrid. This developer
will plan to enter into power purchase agreements (PPAs) with the hospitals. Similarly as in
the renewables arena, these PPAs could provide the necessary contracted cash flows for
project finance opportunities.
15 Microgrids l November 2016
2. Campus/University
NYU transitions to CHP microgrid, resulting in cost reductions, improved reliability
and a smaller carbon footprint.
New York University
New York University (NYU) is one of the largest universities in the US, producing power
on site since the 1960s. The university installed a large oil-fired cogeneration plant in 1980.
At the end of that plant’s useful life, NYU made a strategic decision to transition way from
oil-fired technology towards a modern natural gas-fired CHP microgrid.
The new CHP system has an output capacity of 13.4 MW – twice as much as the old plant’s
capacity – and has been fully operational since 2011. By making this switch, the university
hoped to gain better control over energy expenditures, as well as improve reliability
The capital cost of the upgrade was substantial, at $126 million. However, one advantage of
deploying microgrids in a university setting, is that these institutions have access to diverse
sources of funding. NYU was able to issue tax-exempt bonds arranged through the
Dormitory Authority of the State of New York, which provided a low cost source of
financing. The consistency of funding from NYU tuition and fees also helps to make these
types of projects feasible.
The NYU microgrid operates in grid-connected mode, accessing power from the Con Edison
distribution grid, when demand is superior to the generating capacity of the micro-grid.
Island mode proved to be a major advantage during Hurricane Sandy, during which the NYU
microgrid disconnected from the local distribution grid and continued providing reliable
power to much of the NYU campus.
NYU has estimated savings to total energy costs to come in at $5 to $8 million per year. The
microgrid has also reduced the university’s greenhouse gas (GHG) emissions by 23% and
brought down EPA criteria pollutants by 68%.
3. Military
Miramar Naval Base goes beyond the typical military microgrid backup power model
to optimize economics while improving environmental stewardship.
Miramar Naval Base, San Diego, California
With $20 million in Congressional funding, Miramar is one of the largest military microgrid
projects in the US. The project is building upon distributed energy assets already on the base,
including 1.6 MW of solar PV and 3.2 MW of landfill methane gas.
A synchronized flow battery is used for energy storage. Two diesel and two natural gas
generators will also be added to the system, bringing total capacity to 7 MW. This microgrid
is expected to be operational by July 2018.
16 Microgrids l November 2016
This military microgrid goes beyond the traditional military microgrid backup power model
by providing support services to the central grid, firming up renewable energy, managing
load and participating in demand response programs. These efforts will help Miramar to
become more actively engaged in limiting its environmental impact while boosting reliability
in the system.
Advanced software will be used to optimize complex relationships between the Miramar
grid and the macrogrid to achieve the best economics for the entire system, helping to reduce
costs for the base. In order to achieve these objectives, Miramar managers are planning to
collaborate with the California Energy Commission, California Public Utilities Commission
and the California ISO.
4. City/Community
The Fort Collins microgrid will help the community to depend less on the macrogrid
and improve reliability.
Fort Collins
The Fort Collins microgrid in Colorado is part of a larger project known as the Fort Collins
Zero Energy District (FortZED), where the plan is for the district to create as much thermal
and electrical energy locally as it uses.
This microgrid also plans to help the city reduce peak loads by 20%-30%, increase the
penetration of renewables and deliver improved reliability and efficiency to the grid and
resource asset owners.
This microgrid project involves multiple customers including the New Belgium Brewery
and InteGrid laboratory, as well as facilities for the City of Fort Collins, Larimer County
and Colorado State main campus.
Technologies in this microgrid include solar, CHP, fuel cells, plug-in hybrid electric vehicles
and thermal storage. This microgrid also employs load shedding, which is the interruption of
electricity supply to avoid failure of the entire system when demand strains the capacity of
the system.
Similarly, demand side management is also used in this microgrid, which involves reducing
electricity use through activities or programs that promote electric energy efficiency or
conservation.
The project has received $6.3 million in funding from the DOE and $4.7 million from the
various industry partners, including Eaton, Advanced Energy and Brendle.
17 Microgrids l November 2016
5. Commercial
Amtrak realizes need for microgrid reliability in wake of a natural disaster.
Commercial microgrids are those employed by enterprises to ensure reliability. Amtrak
realized the need for a commercial microgrid in the aftermath of 2012 Superstorm Sandy,
during which half of its Sunnyside Yard in Queens had to rely on portable backup generators
for a month, due to a damaged transmission line.
As a result, Amtrak is now planning to build a $31.3 million microgrid at Sunnyside Yard as
well as at Penn Station in Manhattan. The project will be comprised of the following
technologies for generation:
o 6 MW CHP unit
o 3 MW and 8 MW natural gas generators
o 200 kW solar PV array
o 1 MW zinc air battery storage unit
The CHP technology will help improve efficiency, while the solar PV and battery storage
contribute to improved environmental stewardship. For commercial entities like Amtrak, it
is often important to their customer base that vendors are constantly demonstrating awareness
of corporate social responsibility (CSR) in this manner.
The generators will be equipped with black start capabilities, enabling the microgrid to
operate in island mode, reducing vulnerability to power outages from the macrogrid.
The microgrid is owned and operated by a special purpose vehicle (SPV) that receives all
revenues associated with the microgrid operation, but in turn will bear the capital and
operating costs. Revenue sources include:
o Electricity sales to Con Edison
o Electricity sales to Amtrak
o Thermal energy sales to Penn Station
o Demand response payments from the battery storage units
This project is one of the projects that one funds for a feasibility study during Phase 1 of the
NY Prize. By obtaining funding from government programs, this helps to reduce the cost of
the project.
Project partners include Amtrak, Booz Allen Hamilton, Con Edison, Viridity Energy,
Verde Advisory and New York City.
18 Microgrids l November 2016
6. Data Center
Niobrara Energy Development data center takes advantage of resource availability to provide reliable, environmentally-friendly operations.
Niobrara Energy Development
Planned as the world’s largest microgrid, the 662 acre Niobrara Energy Development (NED)
has secured permits for 52 data centers, a 200 MW gas-fired plant, a 50 MW solar farm and
50 MW of fuel cells.
Energy storage technologies include compressed air, batteries, fly wheel, thermal and
hydrogen storage, super capacitors and super conductors.
The site is located near existing infrastructure for power, natural gas and long-haul fiber.
National Renewable Energy Laboratory resource assessments indicate strong potential for
solar, while wind is already established locally.
By relying on generation produced onsite, the data center will be able to provide reliability as
well as control costs. The solar farm, fuel cells and energy storage will further objectives of
environmental stewardship by increasing their use of clean energy. This is particularly
important for data centers, since they are viewed as one of the largest consumers of energy
and electricity, placing them under particular scrutiny when it comes to the extent of their
environmental footprint.
The project will be marketed to prospective investors on a domestic and international scale.
It will be particularly targeted to investors focused on data centers, cloud computing, power
companies, telecom centers, green energy and infrastructure.
7. Industrial
Port of Los Angeles solar microgrid helps ensure continuous operations while helping the state to meet its environmental objectives.
Port of Los Angeles Solar Microgrid
The Port of Los Angeles, North America’s largest port, is planning to install a $26.6 million
solar microgrid in 2016, as it moves towards its objective of becoming the first marine
terminal to operate solely on renewable energy.
The solar microgrid will include a 1.03 MW solar PV rooftop array, a 2.6 MWh battery
storage system, bi-directional charging equipment and an energy management control system.
Bi-directional chargers not only charge batteries with energy from the microgrid, but also
draw energy from those batteries, when needed, to supply energy to the microgrid.
During a power outage, the solar microgrid will have the capability to island from the
macrogrid and maintain power at the 40 acre facility. During these outages, the port will also
be able to supply energy and serve as a base of operations to distribute goods and support
military operations.
19 Microgrids l November 2016
This microgrid is slated to include energy efficiency upgrades, zero emission cargo handling
equipment and vehicles, charging infrastructure and a dockside vessel emissions treatment
system. Data collection and analysis will be conducted to track energy efficiency and cost
savings for two years subsequent to the start of operations.
The California Air Resources Board (CARB) is contributing a $14.5 million grant from the
state’s cap-and-trade auctions towards this project, with the remainder funded by Pasha
Stevedoring and Terminals, the port and other partners.
In moving towards its objectives of helping the state to meet its regional air quality and
statewide climate goals, this microgrid is expected to reduce 3,200 tons per year of GHG and
nearly 28 tons of diesel particulate matter, nitrogen oxides and other harmful emissions.
VI. Major Players
Major players have leveraged existing strengths in power infrastructure to dominate
the field.
There are a number of major players in the microgrid arena, with new players coming up
even more frequently in recent years, as the space picks up momentum. In this report, we
have chosen to focus on three of these firms - Siemens, ABB and Hitachi - since they
provide a good representation of the operators in this industry. Some of the qualities that are
important in assessing microgrid players include years of experience, renewables capabilities,
financing capabilities and expertise in controllers.
ABB has the most experience out of the group, having built microgrids for the past 15 years.
Hitachi is a relatively newer entrant, inspired by the needs for infrastructure post-Fukushima,
with Siemens falling somewhere in-between.
Renewables deployment is one of the leading incentives for the buildout of microgrids. That
is why this skill is critical in microgrid companies. Siemens has established leadership in
wind worldwide, placing it in the top ranking for this category amongst the competition.
Hitachi sells equipment packages for wind and solar that includes 2 MW turbines, 1.3 MW
and 2.6 MW solar modules and the accessory equipment for utility-scale renewable
installations. Hitachi is also designing storage solutions that support wind and solar. ABB
provides a substation offering that integrates renewables into the transmission and
distribution network.
20 Microgrids l November 2016
Microgrid projects often require significant capital investment. Those providers with
financing solutions hold a competitive edge. Through Hitachi Capital, Hitachi can provide
financing solutions to its microgrid customers. For Siemens, once feasible microgrid
solutions are analyzed, the company works with clients to detail the financial requirements to
achieve their objectives. ABB has partnered with financial solution providers to increase its
penetration rate in the field.
Since controllers are a key component of the advanced intelligence in microgrid operations,
leadership in this category is helpful for microgrid companies. In Navigant’s rankings of
firms that provide microgrid controllers, Siemens took the lead, with ABB following as a top
10 contender, with both firms exhibiting leadership in strategy and execution in delivering
these solutions to customers. Hitachi has begun to incorporate demand and voltage control
to automate some of its microgrid solutions.
Siemens
Siemens has leveraged existing strengths in generation, transmission and distribution
products, as well as expertise in advanced controllers to enter the microgrid market in North
America.
Siemens is targeting applications that are focused on critical services, community and
commercial and industrial usage of microgrids. In Navigant’s most recent quarterly report on
the industry, Microgrid Deployment Tracker 2Q 16, it placed Siemens in the leading position
for microgrid capacity.
The firm’s Blue Lake Rancheria microgrid is an example of the community microgrid
concept. This microgrid is located at Blue Lake Rancheria, a 100 acre Native American
reservation in northern California.
This project was funded in part through a $5 million grant from the California Energy
Commission’s Electric Program Investment Charge (EPIC). It will be powered by 0.5 MW
solar PV, 950 kWh battery storage system, a biomass fuel cell system and diesel generators.
Using the Siemens software, the microgrid will make predictions regarding power load needs
and dynamically manage and control distributed power generation through integrated
weather and load forecasting. It will allow also the reservation to operate in island mode in
coordination with the local utility Pacific Gas & Electric. This microgrid is expected to
reduce 150 tons of carbon per year.
21 Microgrids l November 2016
Figure 7: Hitachi NY Prize Projects
· Tomkins County
· Syracuse
· Village of Canton
· Town of Warwick
· Town of New Paltz
· Village of Ossining
· Village of Irvington
· City of White Plains
· Village of Croton-on-Hudson
· Town of North Hempstead
· Town of East Hampton
ABB
ABB comes in second position in Navigant’s Microgrid Deployment Tracker 2Q 16, as
microgrids have become a key focus of the company to accelerate revenue generation. The
company built on its expertise in power plants, systems, controls and services, to enter the
microgrid arena very early, installing 11 MW of microgrids in remote areas of the world over
the past 15 years.
Key drivers for ABB’s focus on the microgrid business include: 1) the need to electrify
remote regions 2) the need for facilities like hospitals and data centers to island from the
macrogrid during power failures and 3) the need for utilities to search for ways to improve
reliability by isolating pockets of generation and load so that they can spare users from an
outage.
Kodiak Island is an example of ABB’s expertise in microgrids. Kodiak recently decided to
upgrade its existing port crane to electrically driven instead of a diesel driven one. However,
installation was expected to generate power fluctuations that could be destabilizing for the
island’s existing microgrid.
ABB also implemented flywheel energy storage to maintain stable voltage and frequency, by
accelerating and decelerating a rotor to store kinetic energy and draw down on that energy as
needed. ABB has also extended the life of the two 1.5 MW battery systems and helped to
manage intermittencies from the island’s 9 MW wind farm.
Hitachi
Hitachi has an established presence in the power arena in
products that include nuclear power, transmission and distribution,
solar, wind and information and control systems.
Hitachi’s entry into the microgrid arena was borne largely in
response to recognition that because Japan is so prone to natural
disaster, a rethink of the design of Japan’s energy infrastructure
was necessary. This became particularly apparent after the
Fukushima earthquake in 2011, which paralyzed large sections of
Japan’s energy infrastructure.
Building on its experience in Japan, Hitachi’s microgrid business
has since made its way to North America, where the company is
acting as a project developer that designs, builds, owns and
operates microgrids.
Hitachi is currently working on 11 NY Prize projects (Figure 7),
as well as 13 microgrids in Canada.
Source: Microgrid Knowledge
22 Microgrids l November 2016
VII. Challenges
1. Technical
Balance of energy resources is key to technical design.
Microgrids often incorporate renewables – usually solar or wind – as a means to lower the
cost of the project through access to government incentives for renewable installations. These
renewables are often part of a balanced portfolio, which includes dispatchable generation
(diesel, gas or CHP) and energy storage.
The conventional thermal fuels do not require any extra equipment or software, and can
provide constant power to users 24/7. The intermittent nature of renewables, however, will
require the use of control algorithms and demand response, which will need to operate much
more quickly in microgrids, in order to preserve energy balance and system stability. Energy
storage will also provide some support, but this technology is still in the early stages, and will
take some time to develop to more scalable solutions.
This is why balance in the portfolio is the key to uninterruptible power in a microgrid.
Conventional fuels and energy storage provide power when renewable resource is
unavailable.
2. Ownership
Cooperatively-created microgrids pose ownership challenges.
Ownership of generation equipment and distribution wires poses challenges when it comes to
microgrids. This is less of an issue the generator is providing power only to its own
buildings and facilities, as in the case of some universities and hospitals.
However, if the microgrid is created cooperatively by multiple entities, where the electricity
is generated by some and delivered to others, then the framework of where costs and
ownership rights are allocated can become complex.
In order to solve some of these issues, some developers have entered into public-private
partnerships in which a special purpose vehicle (SPV) takes on all the development costs, as
well as manage construction and long-term operations and maintenance (O&M) contracts for
a monthly fee.
23 Microgrids l November 2016
3. Regulatory Landscape
Regulatory issues pose a challenge, primarily due to the lack of a framework
governing microgrids.
Microgrids are not a defined legal entity under most utility regulatory bodies. This is in stark
contrast to the roles, rights and responsibilities of electric utilities, which are protected by a
long-established set of regulations that has only begun to adapt to a changing power
landscape.
Most legacy utility regulation is designed to provide support for constructing large,
interconnected power networks (macrogrids) rather than pockets of flexible systems
(microgrids). This has largely prevented third-party owned and operated microgrids from
functioning as small-scale utilities.
The most pressing regulatory barriers are as follows:
Utility franchise rights – Designed to govern the use of public space by third parties,
utility franchise rights basically protect the monopoly of utilities in the distribution space.
Since selling power to third parties through new distribution lines infringes on these
utility franchise rights, non-utility microgrid developers may face significant legal battles
that could considerably increase the cost of potential projects.
Threat of being subject to public utility regulation – Entities that sell energy or power
and whose equipment crosses a public street are technically defined as an electric
corporation and therefore legally are subject to the traditional utility regulation and
ratemaking authority of the state’s public utility commission. If microgrid operators are
treated as traditional utilities, where billing, rates and quality of service are all regulated,
then this could add considerable cost and risk, reducing project viability.
Lack of definition of interconnection procedures – Currently, microgrid
interconnection requirements are negotiated on a project-by-project basis and differ in
each state. This hampers microgrids from supporting utility operations without a
significant amount of customization, increasing the amount of time and cost necessary to
develop microgrid projects.
Even though these issues pose challenges, there is also scope for utilities to get directly
involved in the microgrid arena, as part of grid modernization efforts to address issues that
include system reliability, distribution congestion or generation intermittency. Various states
that include California, Illinois, Maryland and New York have been moving in this direction.
As utilities increase their participation in this space, it could lessen the potential for
contentious litigation.
24 Microgrids l November 2016
As microgrids become more prevalent, more established regulatory structures will follow.
Already in the Energy Policy Modernization Act of 2016, the legislation called for RTOs
(regional transmission organizations) to collect data on several characteristics of microgrids.
This data will describe microgrid fuel sources, operational characteristics and costs and
benefits. Although this is a small step, it should help regulators to design a more relevant
framework within which microgrids can more effectively operate.
VIII. Conclusion
Today’s modern electrical grid will continue to face challenges of providing reliability,
limiting environmental impact, all while controlling costs. This is particularly difficult in
crisis situations, such as during natural disasters or when there is excessive load on the grid.
One way to balance these issues effectively is the microgrid.
However, microgrids have significant investment costs. In order to incentivize developers to
assume this risk, state and federal government programs have been implemented. This is
particularly true in the renewables arena, where tax credits and EPA mandates have helped to
foster the growth of wind and solar in recent years. Since the deployment of renewables is
often a key objective of microgrid communities, these incentives should help to foster
microgrid growth going forward.
The likelihood of penetration will be highest in areas that often operate autonomously from
their surroundings. This will be followed by groups that value reliability as well as those that
view microgrids as a means to improve their environmental stewardship.
Growth of microgrids will also depend on how effectively developers and customers navigate
the numerous challenges facing the industry. This is particularly true when it comes to
technical design, ownership and regulation. Although the obstacles will take some time to
resolve, developers have already come up with some innovative solutions, including energy
storage, public-private partnerships and federal legislation mandating data collection on the
industry.
Although these challenges will continue, and new obstacles will arise, the benefits of the
microgrid have already begun to be appreciated, as in recent natural disasters like Hurricane
Sandy, when a huge section of the Northeast lost power, while a few microgrids in the region
operated in island mode without disruption.
As the industry players, regulators and customers gradually come together to reach a lasting
model of implementation, this type of microgrid reliability should become more
commonplace going forward. Longer-term cost benefits will also be realized, through
optimization and efficiencies that balance load more closely with generation, all while
improving the environmental footprint, through the implementation of renewables.
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Microgrids l November 2016
Publisher:The Bank of Tokyo-Mitsubishi UFJ, Strategic Research Division (Corporate Research Office)
2-7-1, Marunouchi, Chiyoda-ku, Tokyo 100-8388, Japan
Contact details for inquiries : Kouichi Akimoto
(TEL:03-3240-5386、e-mail:[email protected])
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