Grid Energy Flow Overview
A ‘microgrid’ is a miniature version of a utility-sized distribution grid with elements of electricity generation, storage and distribution. It is capable of either delivering or receiving energy from the distribution grid and autonomous operation when the supply grid is not available.
There are variations of the definition from many different jurisdictions and the industry has yet to standardize what a microgrid is, and what it is capable of doing.
The Ontario Energy Board has defined the term in their policy EB-2012-0410 as
“A micro-grid is a modern, small-scale version of the centralized electricity system that can continue to run as an independent network in case of an emergency on the larger grid.”
Other organizations have more specific definitions such as this one from the US Department of Energy:
‘‘A group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.’’
Something old and something new
The concept of a microgrid has existed for decades in various forms such as co-generation, co-ops and remote communities. It is not new. Think of medical facilities, airports, malls, data centres, military bases, isolated communities and manufacturers with critical process controls. What is new is the technology and the ability to optimize operations of these facilities.
The term ‘microgrid’ is a cleverly chosen marketing term used to distinguish between past implementations and more recent innovations that have renewable generation and enhanced operating capabilities.
Cost and Value
Customers and distribution companies have the potential to benefit from microgrids.
The cost of installing and operating a microgrid is incremental to a typical grid connection as provided by your local distribution company.
The cost of microgrid implementation is not well-known at this time due to the evolving nature and infancy of the new technology available. Pilot projects currently underway in Ontario, Canada and around the world should help determine the cost according to scale.
A microgrid can offset it’s cost by leveraging time of use energy rates. It can pull energy from the grid during off peak times for storage. Stored energy can then be used within the microgrid during peak times to reduce the higher priced consumption from the utility.
The value of the microgrid comes from the increased reliability of supply and reduction of grid-energy use during peak pricing by the utility. In some situations it may be possible to avoid infrastructure capacity upgrades by using the microgrid to reduce peak demand on parts of the distribution system.
Technical challenges
While the microgrid has much to offer, there are a great many technical challenges to overcome if it is to live up to its hype. I will point out just a few without getting overly detailed:
- Operating generators connected to the distribution grid
- Managing the flow of energy to and from the distribution grid
- Disconnecting from the distribution grid to avoid power interruption during disturbances
- Maintaining power quality of the isolated microgrid
- Connecting to the distribution grid without creating disturbances
- Implementing a protection and control system to ensure the safety of customers
- Integrating microgrid resources in real-time to maintain dynamic customer-specific criteria
Each of the technical challenges have complex solutions and performance limitations that must be understood by customers and regulators if there is going to be widespread implementation.
Regulatory challenges
In Ontario (and most jurisdictions) there are strict requirements in place for generators, transmitters and distributors of electricity. These requirements cascade from regulations established by our government and are enforced by various organizations including the Ontario Energy Board (OEB), the Independent Electricity System Operator (IESO) and Electrical Safety Authority. Ontario must also comply with national (CSA) and international standards agencies (FERC, NERC, NPCC) in the United States.
All of the requirements have evolved over decades of experience to ensure that we justify our costs and deliver electricity with the quality and reliability that consumers need.
That covers the motherhood statements.
Since the breakup of Ontario Hydro in 1998 by the Ontario government there have been some inconsistent patterns created in the regulatory landscape. In 1998 the OEB was given authority over the Ontario Hydro successor companies and all of the municipal electricity companies. New investor-owned generation was developed through contractual agreements outside of the OEB regulatory process.
The emergence of the Smart Grid and concepts like microgrids have posed challenges within a regulatory framework that has never needed to consider the implications of technological innovation such as this. The OEB is working on changes, however it is likely going to take many years to optimize requirements.
To summarize, microgrids perform generating and distribution functions that may not fit the existing licensed requirements of a generator or distributor. This has important implications for cost recovery and power quality.
Microgrid cost may or may not be recoverable through electricity rates. It will partly depend on whether the microgrid is installed in front of, or behind the demarcation point where a revenue meter is installed. Infrastructure installed behind the meter will need to be paid for by the customer unless there are extenuating circumstances where ratepayer cost benefits can be proven.
Microgrids will not have the same power quality capability as the much larger distribution system. It is not at all obvious what obligations apply and who assumes liability when things go wrong.
Opportunity
There is a tremendous business opportunity with microgrids. It is a blossoming industry with substantial profit-making potential. At this time, most microgrid implementations are not regulated so they are not limited to the typical single digit return on investment that licensed electricity distributors are tied to. Microgrids target a market segment that recognizes the value of a high reliability electricity supply and is willing or able to pay for it.
The industry will benefit through equipment supply, installation, operation and maintenance services. The operating aspects of microgrids will provide Information Technology (IT) opportunities for developers to create applications that optimize resource utilization based on client-specific priorities. Customers may wish to optimize their operating costs based on generating fuel type, electricity cost and intermittent availability of renewable energy sources.
Funding for microgrid development is available at both provincial and federal levels in Canada.
Microgrid Projects in Ontario
The city of Toronto installed one of Ontario’s first microgrids to support the 2015 Pan American Games Athlete’s Village. It was a federally subsidized $12.6 million project titled “Integrated Urban Community Energy Project”.
Alectra Utilities implemented a microgrid in the Town of Penetanguishene for one of their feeders. It reportedly has the capability of providing up to 11 hours of electricity for up to 400 homes and businesses. The project is a result of a collaborative effort between the utility and Korea Electric Power Corporation (KEPCO). The design is based on previous implementations by KEPCO.
The city of Vaughan has a microgrid demonstration project implemented by Alectra Utilities (formerly Power Stream) at their head office.
The takeaway
The microgrid offers increased reliability by locating energy resources closer to the customer. This eliminates outage risk due to extreme weather, equipment failure and animal contact which is common for distribution infrastructure.
Increased reliability comes with an increased cost. Only customers that acknowledge the value of the increased reliability will be interested in what the microgrid has to offer.
A utility may benefit from microgrids if it avoids capacity upgrades due to increased peak loads.
The microgrid technology is still being developed in Ontario although there is widespread implementation internationally. Government funding is being utilized to showcase several implementations.
The cost/benefit of microgrids has yet to be established in Ontario.
The regulatory requirements associated with microgrids in Ontario is continuing to evolve.
Ontario is still suffering from the third degree burns of overpriced renewable generation. We need to proceed with caution.
Derek
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