Building Your Own Grid Micro energy management and Macro benefits.

Jim Sinopoli PE, RCDD, LEED AP Managing Principal, Smart Buildings LLC Contributing Editor

Centralized power plants have been around since the 1880s. A hundred and thirty years later we’re starting to see some growth in decentralized or distributed generation of power at individual buildings, primarily through renewable sources such as solar panels or wind turbines.  Between the distinct approaches of centralized power plants and energy generation at individual buildings is emerging something called microgrids. With microgrids the real estate developers, building owners or the local community builds the power grid for their large development, industrial park, campus or even an entire neighborhood. Microgrids are not new and no longer just a “concept”. They are out of the pilot or experimental phase and commercialized with roughly around 300 microgrids now operational worldwide.

Overview
Within a microgrid are small or modest sized power generators which may include traditional fossil fuel generators, photovoltaic, wind, fuel cells, etc. Increased diversity of power generation improves the microgrid’s reliability. The microgrid may be able to operate independently (such as in remote villages or military bases), or it could be connected to a larger utility power grid, in which case the microgrid then appears as one customer to the larger grid. The organization and management of the microgrid could be a cooperative arrangement for a community, coordinated by developers or may just be a large campus with one owner.

Microgrids improve the reliability of the “old” grid and the overall power system as well. Locally generated power lessens the burden on centralized generation and related transmission and distribution system. Energy losses in the transmission process, which are significant in the larger grid, are negligible with a microgrid.

Potential Benefits
Microgrids in due course will impact each of us involved with designing, constructing, operating and managing buildings. The key question is “Why would a developer or building owner be interested in a microgrid?” The rationale is persuasive:

• The microgrid improves power reliability. A microgrid with multiple generation sources provides diversity and therefore greater reliability. Connecting a microgrid to the larger grid simply means increased power dependability.
  

• The microgrid has better potential to lower energy costs. While it’s true that centralized power plants produce cheap power there are opportunities to lower costs with a microgrid. For example, if a microgrid is connected to the larger grid the operator can use power from the larger grid when prices are cheaper than the microgrid; or conversely maximize the use of the microgrid when prices from the larger grid are high. Given variables such as time-of-day rates, demand charges, weather, potential demand response events, load shedding scenarios, etc.; some analytics can be used in order to optimize when to use the larger grid or the microgrid. This will eventually minimize the cost of energy, or could even facilitate making money by selling power into the larger grid. Owning a microgrid offers more flexibility for the owners in managing their energy costs.
  

• The microgrid is energy efficient. A typical coal-fired power plant might be only around 38% efficient; meaning 62% of the original energy is not converted to electricity. Add to that another 7% loss in transmission and distribution. A microgrid with multiple generation sources is more likely to be more efficient through renewable sources, eliminating the transmission and distribution energy losses, and having the capability to recover and use heat locally. The result is higher energy efficiency and lower carbon production.

Research by Lawrence Berkeley National Laboratory sheds additional light on representing and calculating microgrid costs and benefits.  Their case study (“A Framework for the Evaluation of the Cost and Benefits of Microgrids) was a Canadian microgrid with 10MW peak load and a 6.2 MW average load. They looked at four metrics: the reduction of electricity purchased, investment deferral, the reduction of GHG emissions and increases in reliability. They compared the microgrid to power from the larger utility and to just the use of simple distributed generation.

For “reduction of electricity purchase”, they found the average cost of electricity for customers via the microgrid to be $5 less per MWh.  Additional benefits related to profits for the owners of the distributed generation in the microgrid (who are possibly the customers themselves) including sales of excess power to the grid. The load reduction provided benefits to the grid operator related to investment deferral, which the utility company can defer or doesn’t need to make a capital investment in generation, infrastructure and land. There were also substantial benefits to society related to reduction of GHGs. Finally, the study monetizes benefits related to increased power reliability that accrued primarily to customers, but also the microgrid operator and the larger grid. The take-away from this study is that while most benefits from microgrids are related to the customer, everyone benefits.

[an error occurred while processing this directive] Developers and Building Owners
A property served by a microgrid that provides more reliable power service at a lower cost adds value to the property. Studies have shown that tenants will pay slightly more for space that is LEED certified; the same may eventually be true for microgrids, maybe even more so because of the explicit benefits.

Building owners may also gain by deploying a basic microgrid and providing or charging for space in a microgrid “co-location” area for tenants to install their own generation equipment. This approach is similar to data center companies that sell space within their locations to multiple users.

There is now an international standard for microgrids reflecting the viability, credibility, interest and momentum of the approach. The IEEE standard developed in 2011 (IEEE 1547.4) provides best practices for designing, operating, and integrating microgrid electric power systems. This includes the ability to separate from and reconnect to part of the larger utility grid while providing power to the microgrid. This standard addresses engineering concerns for microgrids specifically targeting reliability, contingencies and interconnection requirements.

Pike Research anticipates the institutional/campus single owner microgrids will be the largest segment of growth with 53% of deployments by 2015, followed by commercial/industrial with multiple owners at 39% of deployments.

Macro vs. Micro
One of the “unsettled areas” regarding microgrids is the role of the larger grid utilities, the “legacy” providers. It’s generally assumed that microgrids will be deployed by non-utility developers, probably working for the real estate developer, building owner or the neighborhood. These microgrid entrepreneurs and developers may offer improved power quality and reliability and tailor their services to specific customers.

Some utilities have opposed microgrids because of “safety” concerns; others support microgrids as long as the larger utility owns, operates and bills customers, an approach that doesn’t necessarily resonant with microgrid providers and building owners. Some utilities, such as the Sacramento Municipal Utility District have embraced the concept; SMUD is deploying microgrid architecture in their own corporate headquarters.

The potential utility grid vs. microgrid differences could play out much as the telecommunications industry did in the 1980’s and 1990’s. That is when the telecom utilities were reorganized and decentralized, and then everything radically changed due to technological advancements. The result being that their “bread and butter” offering and largest revenue producer - telephone landlines for residences - evaporated with the onset of cellular and smartphones.

There is a significant trend to decentralize some energy generation. You see it in individual building uses of renewables and massive efforts to move towards net zero buildings. Yet the microgrids appear to have a more substantial effect on energy, are much easier to deploy than net-zero buildings, have sound benefits and financial metrics, and are the most credible entry in this accelerating trend.

For more information, write us at info@smart-buildings.com

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