DER-Grid Edge, Executive Insight, Smart Grid

A Tale of Two Futures for Microgrids

Microgrids are increasingly seen as a viable way to disconnect communities from the grid, improving resiliency for the few. Some day they may be needed to reconnect it for the many.

I talked to Mark Feasel, who heads up Schneider Electric’s microgrid sector as vice president for electric utility segment and the smart grid, about the current victories and future challenges on the microgrid front. Feasel and his company both will be key participants in the DistribuTECH conference and exhibition happening February 5-7 in New Orleans.

Schneider Electric has been working on microgrid projects for quite a while but dedicated a specific team to the technology only about three years ago. Since then, it’s worked on joint ventures with partners as diverse as Bowery Farming, Duke Energy, Montgomery County (Maryland) and the investment giant Carlyle Group.

The positives of microgrids are many for those who rely on energy security to deal with natural disasters or endure despite them—such as public safety entities, hospitals, etc. It’s also a cool way to island oneself from the grid and bask in your renewables if you can afford it.

Public utility commissions are getting pretty good at understanding that part of the financial equation in how microgrids are funded, Feasal pointed out. They’ll likely need to reverse engineer that kind of reasoning and rulemaking some day if those who can least afford it are left to hold the bag when something goes wrong.

“The grid itself is a vital resource. It serves populations out there with no option to get off the grid” Feasel told me. “We need to make some provisions for assists out there (such as microgrids) which can assist in emergencies” to keep the macrogrid going.

One key limitation to the microgrid revolution is cost. Many people cannot even afford to own their home, much less have the option to partner in a grid islanding project.

“We’re not going to disenfranchise those folks,” Feasel said. “We have to figure out who solve for those vulnerable populations. If the affluent exit the grid, it’s falls to those who have to pay higher prices or else break the utility regulated model. . .

“To me it’s an imperative of society to think about solving that issue,” he added. “There’s a real role for utilities and municipalities to go and do that.”

Microgrids may have financial roadblocks due to the prohibitive costs upfront, but Schneider and other companies are looking at partner models and long-term power purchase agreements to smooth out the expense.

Two years ago, Schneider teamed up with Duke Energy Renewables to deploy two advanced microgrids at the Montgomery County (Maryland) public safety and correctional facilities. Schneider is also partnering with the Carlyle Group on the startup Dynamic Energy Network to invest in microgrids and receive payback in long-term PPAs.

“If you’re only going to buy something with a three-year ROI (return on interest), they’re not going to put much solar in,” he pointed out. “But other people are more than happy to hold assets for 20 years. Who are these people? The electric utility, and in the case of Montgomery County it’s Duke Energy.”

Some private investors, too. The Carlyle deal include investors who are patient and, like any businesses, see value in long-term fixed-price contracts with no energy cost volatility.

“These things are going into pension funds,” Feasel said. “Yes, it takes 5 to 10 to 15 years to pay off solar, but solar works by the laws of physics: As long as the sun is shining it’s going to create kWh. And if it creates kWh, they’re going to buy it.”

At DistribuTECH, Schneider Electric will be exhibiting in Booth 5014 at the Ernest N. Morial Convention Center in New Orleans. Click here for more information on the nation’s biggest annual T&D and smart grid show.