Microgrids key to the Smart Grid’s evolution


In a recent report by SBI Energy, a US-based market analyst, that looks at how the world’s T&D systems will ‘smarten up’ over the next five years, the important role that microgrids can play in achieving this is highlighted.


The development of the Smart Grid will involve numerous technologies, devices, and systems that will be deployed throughout the electric system to make the grid ‘smart’. The automation of the transmission and distribution (T&D) system will be critical for full smart grid deployment. Figure 1 depicts the various components that comprise the Smart Grid as envisioned by the US Department of Energy (US DOE).

Figure 1: Schematic outlining the components of a Smart Grid Source: US DOE, SBI Energy


T&D Automation


In its simplest form, the T&D system delivers electricity from generating plants to end users, but the global infrastructure comprising the T&D system is vast. In the United States, for example, there are over 482 800 km of high-voltage transmission lines and more than 8 million km of distribution lines. However, this enormous system is rapidly aging and in need of significant repair. Over 60 per cent of the components of the T&D system ” the transformers, substations, switches, etc ” are over 50 years old and well beyond their expected lifetimes.

Regardless of smart grid deployment efforts, a large part of the electric grid needs to be replaced or refurbished. Coupled with the fact that T&D components are now more prone to fail, the design of the electric system is old and not especially well suited to the power needs of many of the products and devices in use today. For example, the electric system was designed over a hundred years ago, long before microprocessors and their need for high quality power that is continuously available was ever envisioned.

Estimates for the amount of revenue commercial and industrial firms lose each year as a result of power outages, brownouts, power surges, and other power problems exceed $100 billion. This is exactly what the Smart Grid is expected to rectify. With more control and awareness of the operational state of the electric system, it would provide high quality, reliable power at affordable prices.

However, before the Smart Grid can fulfill its promises, the T&D system needs to be upgraded and provided with intelligent components and devices that can act autonomously when required, and collect and transmit grid operational data in real-time to allow operators to react to potential problems before they occur or isolate those that do.

Because electric utilities, as a general rule, have been slow to provide the necessary maintenance and upgrades to the T&D system that would support the Smart Grid and future power demands, a significant amount of money will now be required for this purpose. The US DOE estimates that about $800 billion will be required to fix the T&D system in the US over the next ten years. Other estimates range from $1.5 trillion needed between 2010 and 2030 for electric infrastructure improvements and construction to $13.6 trillion for global power improvements through 2030.


Factors influencing T&D automation


Cost incentives, a need to replace aging components, transmission capacity shortages, and smart grid development are factors that will help drive the growth of T&D automation.

However, while the benefits of T&D automation are widely recognized, growth could be slowed by several factors. A competition for resources within utilities and transmission systems will occur since vast amounts of money will be needed just to maintain the T&D system in its current state.

While replacing components with ones that incorporate smart technology would seem sensible, if cost becomes a factor between using a smart device and not fixing some other part of the system, a ‘dumb’ electrometrical device might be used instead. Thus, repair and maintenance could divert substantial resources from automation efforts.

Another problem facing the automation of the T&D system is the transmission lines themselves. Regardless of capacity improvements that can be obtained through the use of smart technologies, the simple fact is that growth in transmission lines has not kept pace with growing demand. This has gone on for over 30 years and efforts to build new high-voltage transmission lines always draw opposition. Hence, progress in building new lines is slow and costly.

However, one alternative that holds promise for T&D automation and the development of a Smart Grid is the humble microgrid.


What is a Microgrid?


While definitions vary, microgrids are essentially smaller versions of the larger electric grid and are designed to serve localized electric loads. Microgrids are developed around distributed energy resources (DER) which provide power and make the microgrid self-sufficient.

Microgrids are typically connected to a utility grid, but they have the ability to isolate themselves from the grid when power problems occur and operate as a self-contained entity in an ‘islanding’ mode. They are small and can vary in size from single buildings up to small communities.

Microgrids have been developed for a number of reasons. Most importantly, they are designed specifically to serve designated electric loads and configured to ensure these loads can be served more reliably with high quality power. Connecting to a utility grid provides back-up resources but safeguards are employed to keep problems from the larger grid from affecting the electric service within the microgrid. As electric loads become more specialized it becomes more difficult for utilities to provide power for specific needs since they must serve a wide variety of customers and loads.

Microgrids can also be more cost effective than buying electricity from a utility. Since most microgrids are locally-owned and controlled, they can make decisions faster than would be possible for a utility and can experiment with new technologies that have the potential to better serve their needs. In a large sense, microgrids are freer to operate than regulated utilities and can take risks that utilities cannot.

Microgrids also offer the opportunity to bring electricity to areas where electric service is unavailable. Over 1.6 billion people in the world do not have access to electricity mainly because they are in poorer and more remote areas of the world. Countries with developing electric infrastructure could use microgrids to provide electricity to many of these individuals.


Making Microgrids Smart


The Smart Grid holds the promise of improving power quality and reliability, reducing costs, incorporating alternative energy sources, reducing carbon emissions and generally ensuring that future energy demand can be met effectively and efficiently. The manner in which smart grids will develop remains to be seen but this much is clear ” smart grid development rests almost exclusively with electric utilities.

If the past is any guide, the new technologies that will be needed for smart grid development will be deployed slowly because electric utilities have historically been reluctant to use new and unproven equipment. Grants and incentives such as the $3.4 billion in stimulus funds targeted at the smart grid from last year’s American Recovery and Reinvestment Act (ARRA) will help spur smart grid development but overall growth will remain slow.

Regulatory requirements, smart grid specifications and unproven new technologies have been several key factors in restraining Smart Grid growth. Another factor is the sheer size and complexity of the grid and the daunting task of developing it into a smart grid. Many utilities have decided to take a phased approach by concentrating efforts on smart meters, communications, information processing, or other areas. This one-step-at-a-time approach will require years before any semblance of a smart grid develops.

Microgrids however offer an alternative path for smart grid development. They comprise almost all of the components of a larger grid ” power generation, power storage and distribution to user loads ” but are much smaller and usually locally-owned and operated.

With a microgrid, it is significantly less difficult and costly to deploy smart technologies. In addition, there are no regulatory restrictions to hinder technology deployment if it is not owned by a utility. Since microgrids are typically designed to meet specific load requirements, new technologies can be selected to meet the specific needs of a much smaller grid.

Microgrids could, in essence, become the incubator and operational test bed for innovative smart grid solutions and vendors. They are therefore a means to help transform the current electric grid into a system that can meet future electric demand efficiently and reliably.

The Smart Grid, by definition, will intelligently monitor and control the electric system to provide reliable and cost-effective electricity. Since microgrids are also part of this system, they provide a means to develop smart, albeit small, distribution systems that can be interconnected to one another to form a much larger distribution entity, which is the heart of the Smart Grid since this is where the most value will be realized in terms of efficiency and reliability. It is also the part of the electric system where customers will interact with the Smart Grid.

It is conceivable that microgrids could become the ‘killer app’ that makes the Smart Grid a must have technology for individual consumers and business entities. The Smart Grid concept uses consumer participation in electric decision making as a key component. However, consumers will probably not change their electric usage habits until electric prices become unbearable. Participating in a community-wide microgrid or creating a microgrid in a single home would advance the cause of consumer participation in electric decisions and create the demand that becomes the driving force behind full-scale Smart Grid development.


Trends in microgrid development


Microgrids have been developed throughout the world for many different purposes. Most are still in a prototype-demonstration mode but some are fully developed. However, a microgrid to one may not be considered a microgrid to another because there is no universal definition of what constitutes a microgrid.

T&D automation market size and growth, 2009-2014 ($ billion) Source: US DOE, US Department of Commerce, SBI Energy

Still, an aging infrastructure, increasing power problems and rising energy costs are recognized by many and present problems for economic growth and development. Across the US, for example, local government officials have started to consider mini-power districts as an alternative to provide their cities with more reliable power and encourage new business development. Although no city has actually established an independent energy district, several cities such as Sacramento, California, and Austin, Texas, have created special districts to help develop innovative energy systems. Community-owned microgrids are also becoming increasingly popular in Europe.


Driving Microgrid Growth


Microgrids consist of many of the same types of components that will be used to develop the Smart Grid, so stimulus funding such as that provided by the ARRA could also benefit microgrids. Some of this funding includes $400 million to make the T&D system more efficient, $2 billion for advanced battery manufacturing and $156 million for combined heat and power and other efficient industrial equipment. Although these funds are directed at specific technologies, many of these technologies can be used as components of a microgrid.

Microgrid market size and growth, 2009-2014 ($ billions) Source: US DOE, SBI Energy

DER can also help the development of microgrids. The intermittent nature of many renewable DER technologies and the ability of DER systems to be located anywhere pose significant challenges for effective integration into the electric grid. Microgrids on the other hand can readily incorporate these technologies and bundle them into a system that could appear to the grid as a single load. The grid may not be able to ‘see’ such DER systems but these systems would nevertheless be present and fully functional.

The complexity and size of the electric grid will make development of the Smart Grid a phased, one-step-at-a-time effort. Creating much smaller ‘smart’ microgrids would be a less costly and less daunting task that could occur much more rapidly. Interconnecting numerous smart microgrids would, in effect, become a larger ‘Smart Grid’.

In addition, increasingly advanced technologies require very high quality power that cannot always be provided on a wide scale because of differing load requirements throughout the grid. Microgrids are a potential solution since they can be designed for specific load requirements on a localized scale.

Less developed countries with burgeoning electric grids and people that have no access to electricity would benefit significantly from microgrids. Demand in these areas should be strong, particularly if funding from the World Bank and other sources is provided to assist in these efforts. Rudimentary ‘microgrids’ have already been developed by individuals and small communities using pico-hydro systems, diesel generators, photovoltaic panels, and other electricity generating sources with such funding.


Microgrid Growth constraints


Communities and individuals are virtually powerless to significantly change the way electricity is produced and delivered because of the way the current electric system operates.

In the US, for example, federal and state regulatory agencies were formed to protect customers from monopolistic pricing practices but the regulatory process has stifled innovation and consumer participation in the process.

Regulatory policies are utility-centric and allow them to recoup costs and earn ‘reasonable’ profits from building new infrastructure and selling more electricity. As such, utilities can make more money by building more infrastructure and selling more electricity ” there is no economic advantage for energy conservation.

To provide incentives for reducing costs and energy use, regulatory policies need to become more consumer focused. The development of the Smart Grid in general, and microgrids in particular, would benefit from such a change. In most US states utilities have exclusive rights to build and operate power lines across public streets. This policy, in effect, prohibits communities and neighbourhoods from making infrastructure improvements that would be essential for developing a microgrid.

Similarly at the household level, outdated city statutes could hinder microgrid development. Many statutes and ordinances are old and do not support new electric technologies. For example, putting a small wind turbine in one’s back yard could violate city laws, upset neighbours, and generally become a not-in-my-backyard (NIMBY) issue. Until ordinances are updated, technologies such as home wind turbines are likely to have difficulty being approved, with a direct negative effect on development of microgrids.

Electric utilities have a vested interest to grow their customer base to gain more revenue and profit. Microgrids are a disruptive technology in this regard. If households, neighbourhoods, and small communities develop microgrids then the ability of utilities to grow their customer base is jeopardized. Hence, electric utilities can be expected to argue extensively against changing regulations and policies that would allow their customers to provide their own electric service. If microgrids are to be developed, utilities will argue that it would be in everyone’s best interest to let the utility own and control them.

Without a universally accepted definition and set of standards microgrid development could be slowed. Disjointed development would likely cause problems interconnecting microgrids to the grid and to one another. Microgrids must be able to deliver high quality, reliable electric power at reasonable costs. If they are built and cannot perform these functions, continued microgrid growth would be substantially hindered.

Costs must also be contained. If electric rates remain reasonable and microgrid construction costs are high, there will be little demand other than for niche markets. Customers must be able to ‘see’ the economic opportunities afforded by microgrids or there will be little support for building them.


Smartening up our grid systems


The Smart Grid has gained much notoriety across the globe as the solution to the world’s future electric power needs, and is without doubt one of the hotest topics under discussion, from utility boardrooms to the inner sanctum of governments. Efforts across the globe to develop smart grids are underway and have accelerated as a result of various stimulus funding.

New technologies to support the different facets of smart grids ” communication systems, sensors, control software, and smart meters to name a few ” are being developed not only by small venture firms but also more recently by large, well-established companies. Coupled with worldwide electric infrastructure costs that are estimated to top $1.5 trillion over the next 20 years, there will be much activity in the electricity production and delivery area for many years to come.

Microgrids could potentially overtake smart grid development efforts since they are, in effect, small electric grids that can be made ‘smart’. With local control and less regulation, microgrid owners can test and deploy new technologies as needed to meet the specific needs of their various loads.

In a sense, microgrids can become the incubators of smart grid technologies at a much faster pace and for much less cost than can be done on the larger electric grid. Using distributed energy resources of all types ” including renewables and energy storage ” microgrids could be interconnected to form a large Smart Grid.

For more information on the SBI Energy report visit www.sbireports.com.



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