Andrew Marino, Co-Head of Carlyle Global Infrastructure at The Carlyle Group, defines infrastructure as the foundation that includes all the basic systems and facilities our country, state, and towns need to support our economy, which has been lacking due to the current regulatory regime. Mr. Marino discuss on Bloomberg how Public-Private Partnerships can be the key framework to improving infrastructure. Watch here: https://lnkd.in/eH2Bxq6
The Carlyle Group will put hundreds of millions of dollars toward owning and operating microgrids, tackling the industry’s financing challenges.
Most companies have a hard time coming up with the upfront cash to build a microgrid, and financing one can be a major headache.
Theoretically, that headache would go away if an entity with functionally unlimited capital bought the project and operated it on behalf of the customer in exchange for service payments.
The Carlyle Group, the Washington, D.C.-based private equity behemoth, set up a business unit last fall to do just that. Dynamic Energy Networks (DEN) will deploy Carlyle capital to create microgrids, then operate them in an energy-as-a-service model for long-term contracts.
This model has been deployed in a few instances already; it eliminates upfront capital requirements and caters to customers that want cleaner or more reliable power but don’t want to be in the energy asset management business.
But up until now, nobody has funded the model at this scale. Carlyle has set aside an initial pot of $500 million, but DEN President and CEO Karen Morgan said at DistribuTech Wednesday, “There is no cap on that.”
This entrance is a big deal in the hardscrabble world of microgrid development. Large corporate and municipal customers want the resilience and environmental benefits that microgrids can provide, but nobody’s cracked the code on how to make it cost-effective at scale.
No one with this much money has given it a serious try. Carlyle’s interest may prompt other private equity firms to consider microgrids as an investment vehicle.
DEN approaches its work more like an equity investor than an energy services company. That gives it a high degree of flexibility in shaping its deals compared to, say, a utility. DEN plans to focus on new builds, primarily behind the meter, but it can buy existing assets or renovate them if a good opportunity arises.
A key hurdle to the fledgling microgrid industry has been lack of repeatability, which drives up costs. The scale of funding here opens up the possibility of enterprise-wide microgrid contracts and other forms of big thinking. Indeed, the leadership won’t be interested in small one-offs, a category that describes nearly every microgrid built so far.
“A lot of assets have been sold at the facility level; this is really a C-suite solution,” said Morgan, who previously led Renewable Energy Trust Capital, which owned utility-scale wind and solar.
C-suites might be easier to access when the firms involved share the same parent company. Carlyle owns some 270 portfolio companies and manages $40 billion of real assets including energy, infrastructure and real estate. DEN could easily keep itself busy catering to that market.
“It is a clear differentiated advantage, and it’s something that we’re leveraging significantly,” Morgan said of the relationship with Carlyle.
The group hasn’t announced any projects yet, but several are in the works.
Once they get finalized, DEN won’t be the developer, but it will have input, Morgan said. DEN will work with a handful of best-in-class EPCs to build projects, and has a partnership with Schneider Electric for microgrid controls. That firm was an early pioneer of the microgrid-as-service model in its work with Duke Energy.
If all goes according to plan, DEN would resemble an independent power producer, getting paid for electrons flowing from its fleet of generators, which happen to be located inside microgrids.
That platform will be worth $3 billion to $5 billion in the next three to five years, Morgan said.
“The complexity around microgrids and energy infrastructure, particularly behind the meter, is what is very compelling to us, because there’s a lot of value that’s created in delivering those integrated solutions,” she said. “That’s where we can capture more value: We’re efficient in how we execute, from a capital perspective as well as technology and partnering perspective.”
Extracting profit from microgrids has proven notoriously difficult so far. Perhaps the early entrants just weren’t thinking big enough. It’s a lot easier to play the long game when you have a few hundred million dollars to spend.
Originally Published on Greentech Media
Steve Pullins, Vice President of Development (Dynamic Energy Networks)
Maybe it’s me getting old, or maybe it’s going through the discussions with my Mom about Assisted Living, or maybe it’s the loss of life in a Florida healthcare facility during a hurricane, that my attention has turned to resilience in healthcare.
Whatever the reason, my exploration of resilience in healthcare has led to a few discoveries.
· The senior population is doubling in the US
· New medical technologies are bringing transformation (70% of hospitals are adding wings, buildings, and satellite facilities in the next 3 years)
· Hospital energy use is 2.5 times a commercial building of the same square feet area.
· Energy costs are a top concern of healthcare CEO’s (expected to double over the next 20 years)
· Some hospitals in Ontario Canada have cut medical staff to enable paying the rising utility bills.
· Hospitals must be at “full strength” during major storms, not limited to the portion of the hospital served by emergency generation.
Healthcare CEO’s have a dilemma. Do I spend our precious capital dollars on new technology and the life-saving measures it brings, or do I spend it on improving our energy situation?
For my personal reasons above, I hope the CEO decides to continually improve healthcare’s core mission.
Energy is not a core mission of healthcare. But, it brings to healthcare an energy dilemma. The growth of hospitals in footprint (often incremental in nature), digital technologies (requiring better power quality), and mission in the community (especially during storms) means more aggressive energy planning. The necessary energy planning must recognize the “new normal” in healthcare – growing senior population, rapidly emerging digital technologies, rising energy costs, increasing number and severity of major storms. Flexibility and resilience must become core to the energy objectives.
Healthcare (hospitals + the associated network of facilities) performance must be at its highest when the utility grid is most challenged – major storms. Major storms stress the community in public safety – the result is more accidents and injuries. Plus, the major storms make all other healthcare functions more difficult. Hence the need for healthcare to be in full performance mode.
However, most hospitals are set up to have only a portion of the hospital powered by emergency generation when the utility grid is lost. Most hospitals have critical circuits (operating rooms, intensive care units, etc.) powered by emergency generators on limited fuel supply. While there is not good data that tells us how much, most of the feedback suggests that a vast majority of hospitals are powered at a 50% level or less.
The healthcare “new normal” requires a more flexible approach to energy supply and improvements in the resilience of that supply. Flexibility recognizing that healthcare is in a digital transformation, and resilience recognizing that the community leans more heavily on healthcare during major storms and utility grid outages.
After exploring the intersection of healthcare and energy over the last 3 years, it is clear that Microgrids (in its many forms) offers the flexibility and resilience needed in healthcare to drive more self-determination and mission support from energy.
Microgrids, being an on-site energy resource, can add greatly to the flexibility of energy services as healthcare facilities expand with new digital technology-filled wings (70% of hospitals over the next three years).
Microgrids, being an on-site energy resource, can become the hospital-wide energy supply when a major storm hits and/or the utility grid is lost. This does not reduce the emergency generation, but adds to it. In fact, with seamless transitioning to an island mode when the utility grid is lost, the emergency generation may not be required to start, keeping it as that life safety backup needed – a defense in depth approach. Plus, instead of the hospital functioning at partial mission, the Microgrid enables a fully functioning hospital throughout the storm and aftermath.
While hospitals are at the center of the discussion, the rest of the healthcare system – urgent care clinics, assisted living centers, nursing homes, and doctor’s offices – can benefit from the same flexibility and resilience thinking. After all, if the rest of the healthcare system collapses when the utility grid is lost, the hospital will be expected to pick up all the slack.
There is a very good report on “Healthcare Microgrids,” Microgrid Knowledge, 2017 that delves into several important aspects of how Microgrids are perfectly aligned to provide the flexibility and resilience the healthcare industry needs for the new normal.
There are a few very good examples of where the Microgrid has transformed the hospital into a fully-functioning, islanded operation, when major storms hit:
· Dell Children’s Medical Center (Austin, TX)
· Utica College / Faxton-St. Luke’s Healthcare (Utica, NY)
· Shands Cancer Hospital at the University of Florida (Gainesville, FL)
This needs to be the norm rather than the exception.
Originally Published on LinkedIn
Energy As A Service: An interview with Karen Morgan from Dynamic Energy Networks
Dynamic Energy Networks (DEN) launched in order to provide customers and investors with an opportunity to tap into the hyper growth “Energy-as- a-Service” market. It is an energy infrastructure platform that owns and operates microgrids to provide energy to the commercial and industrial, municipality, healthcare, university campuses and the military sectors.
The company formed a strategic alliance with Schneider Electric and The Carlyle Group and has a top executive team which formerly worked with Hitachi and RET Capital. It develops holistic and flexible solutions to deliver predictable, reliable, secure and resilient energy solutions which can run in parallel or completely independent of the utility grid.
REM spoke to Karen Morgan, DEN President & CEO to find out more about the company and its plans for transformation of the energy market.
Can you tell me about DEN and what it does?
Dynamic Energy Networks is a global energy infrastructure platform. We own, operate and manage energy infrastructure in key market sectors, such as the commercial and industrial, municipality, healthcare, university campus and military sectors.
What is the Energy as a Service market?
Energy as a Service redefines the relationship between users and sources of energy. It shifts the cost and the risk to DEN, as a third-party owner, and enables optionality or choice of energy source.
For example, let’s say a hospital has a combined heat and power (CHP) plant and would benefit from adding solar and storage. DEN could acquire the existing CHP plant and integrate solar and storage to create a microgrid solution at no cost and no risk to the hospital. This allows the hospital to redirect their capital and resources internally, and shifts a capital expenditure to an operational expenditure. These bespoke solutions could be in the form of a long-term power purchase or concession agreement.
Can you tell me more about the microgrids you intend to provide?
We provide something much broader than microgrids; we provide energy infrastructure. Energy infrastructure is the integration of critical technology components and, in the case of microgrids, it might include a base load, such as combined heat and power (CHP) plus solar and storage. It could also include other energy resources, such as energy efficiency and smart technology solutions that interact with the microgrid. We design and optimize our microgrids and infrastructure using best-in-class partners and solutions that are most appropriate for the facility, geography and needs of the customer.
Our microgrid designs ensure resilience of a facility in cases where the traditional utility grid fails. For example, we design solutions to ensure business continuity and lifesaving critical infrastructure for hospitals and disaster relief centers. DEN’s infrastructure can operate completely independent of the utility, that is, in ‘island mode’ or in parallel with the grid.
I notice that you quite often work with the military, what extent is the military trying to decarbonise now?
Both Carlyle and Schneider Electric have a long history with the military. We see a very strong commitment from the military to decarbonize and be good citizens in their own geography. One of the major offerings to the military, though, is resilience. Microgrids and distributed energy resources enable independent power on site to the military base and to the local community in the event of a utility outage. Resilience, secure and reliable energy is paramount to military operations and microgrids are the solution.
What advantages does your solutions have over what other companies are doing?
I think what we’re really trying to do is play a major role in the transformation of the energy market. Our Energy-as- a-Service model is a differentiated value proposition today, where we take the risk out of the equation and deliver predictable, efficient, secure and resilient energy to our customers. We’re moving from a static utility market to a very dynamic and interoperable marketplace where this integration of flexible capital and critical infrastructure will drive the transformation of the electricity markets. We refer to it as ‘Utility 2.0’.essential, for this market to mature, that we get these cornerstone players investing in the transformation.
How do you expect to grow over the next few years or so?
Our growth will be based on our ability to deliver bespoke and modular solutions to the markets we identified in a programmatic and repeatable fashion. The ability to scale will be predicated on working with best-in-class engineering firms, developers and others, in addition to our anchor partners, Carlyle and Schneider Electric.
Originally Published on Renewable Energy Magazine
November 6, 2017
DEN bolsters leadership team with
former Hitachi and RET Capital executives
SAN FRANCISCO — As the energy sector increasingly shifts from one-way, static power grids to two-way, dynamic power infrastructure, Dynamic Energy Networks (DEN) today announced strategic alliances with established energy and industrial sector powerhouses Schneider Electric and The Carlyle Group. DEN also announced that it has rounded out its leadership ranks by acquiring an executive team from Hitachi and RET Capital with decades of experience in development, technology and innovative financial structures.
“We established a platform to own and operate microgrids and distributed energy resources (DER) to serve organizations and institutions – from campuses to hospitals and the military – that demand predictable pricing and efficient, reliable energy,” said DEN CEO Karen Morgan. “Working together with Schneider Electric and The Carlyle Group, we aim to transform the market to deliver holistic Energy-as-a-Service with innovative financial and technology solutions.”
Energy-as-a-Service – such as discrete energy infrastructure systems that can operate either in connection with or independent of the utility grid for a customer – could grow to a $221 billion global business by 2020, a Navigant Research report estimated.
With the rise of the Energy-as-a-Service market, DEN is well-positioned to become a trusted and reliable provider of energy to commercial and industrial operations, municipalities, healthcare facilities, institutions, campuses and the military.
DEN’s business model represents the next phase in the grid’s evolution: highly connected, smart microgrid and DER infrastructure with bespoke and flexible financial and alternative ownership structures. Customers benefit from long-term power contracts that provide cost-effective, resilient and secure supply of clean energy; investors gain access to a diversified set of dynamic energy infrastructure across different market sectors and geographies.
“We’ve long been leaders in helping companies meet ambitious energy goals,” said Mark Feasel, vice president of Schneider Electric’s electric utility segment and smart grid business in the U.S. “Through our partnership with DEN and Carlyle, we can deploy solutions that leverage both world-class technology and new business models to transform the edge of the grid and optimize the energy value chain.”
“The energy industry has experienced a tremendous growth in awareness and usage of microgrids in just the last year alone,” said Andrew Marino, a Carlyle Managing Director and Co-Head of Carlyle Global Infrastructure, the firm’s infrastructure investing team. “We’re thrilled to leverage the expertise of Dynamic Energy Networks and to partner with Schneider Electric to deliver microgrid solutions that enable Energy-as-a-Service.” Equity for future investments by this strategic alliance will come from sources including Carlyle Global Infrastructure Opportunity Fund, a Carlyle fund that makes infrastructure investments.
Schneider Electric is a world leader in microgrid technology and solutions that designed, built and maintains more than 300 advanced microgrids. The Carlyle Group is a global alternative asset manager. Together, the firms will deliver the flexible financing and technology that restructures the market by providing Energy-as-a-Service.
DEN’s entry into the microgrid and DER field is a natural evolution for the company’s leadership team, which has decades of experience investing in the clean energy sector. Morgan’s 25 years of experience in energy and industrial finance includes leading RET Capital, a $750 million enterprise that backed utility-scale solar and wind generation assets across North America.
Also, DEN has rounded out its leadership ranks by acquiring a top-notch executive team from Hitachi and RET Capital with decades of experience in development, technology, and innovative financial structures. The new team members include:
- Steve Pullins, Vice President of Development, has 40 years of utility industry experience in operations, maintenance, engineering, microgrids and renewables, including serving as vice president for energy solutions at Hitachi America and leading the U.S. Modern Grid Strategy for the Department of Energy’s National Energy Technology Laboratory.
- John Westerman, Vice President of Technical Solutions, brings 30 years of experience in emerging energy technologies to the table, most recently as a vice president for Hitachi America working on microgrids and other advanced technologies.
- Scott Rosebrook, Vice President of Corporate Development & Finance, has more than 25 years of corporate finance experience at renewable energy companies and leading financial institutions. Most recently, he was Vice President, Renewable Energy Specialist at KeyBank and, prior to that, Vice President of Corporate Finance & Treasurer for RET Capital.
“This team has the experience needed to develop innovative solutions in a rapidly evolving energy market,” Steve Pullins said. “Our team’s track record proves the strength of our value to customers and investors alike. We look forward to forging partnerships as reliable as our microgrid and DER infrastructure.”
About Dynamic Energy Networks
Dynamic Energy Networks (DEN) owns and operates of microgrid and distributed energy resources, connecting customers with cost-effective, resilient and secure clean energy and investors with access to the burgeoning Energy-as-a-Service market. Its infrastructure is ideally suited to serve commercial and industrial (C&I) sector, as well as the municipality, healthcare, institutional campus and military sectors.
About Schneider Electric
Schneider Electric is leading the Digital Transformation of Energy Management and Automation in Homes, Buildings, Data Centers, Infrastructure and Industries. With global presence in over 100 countries, Schneider is the undisputable leader in Power Management – Medium Voltage, Low Voltage and Secure Power, and in Automation Systems. We provide integrated efficiency solutions, combining energy, automation and software. In our global Ecosystem, we collaborate with the largest Partner, Integrator and Developer Community on our Open Platform to deliver real-time control and operational efficiency. We believe that great people and partners make Schneider a great company and that our commitment to Innovation, Diversity and Sustainability ensures that Life Is On everywhere, for everyone and at every moment. www.schneider-electric.com
About The Carlyle Group
The Carlyle Group (NASDAQ: CG) is a global alternative asset manager with $174 billion of assets under management across 306 investment vehicles as of September 30, 2017. Carlyle’s purpose is to invest wisely and create value on behalf of its investors, many of whom are public pensions. Carlyle invests across four segments – Corporate Private Equity, Real Assets, Global Market Strategies and Investment Solutions – in Africa, Asia, Australia, Europe, the Middle East, North America and South America. Carlyle has expertise in various industries, including: aerospace, defense & government services, consumer & retail, energy & power, financial services, healthcare, industrial, infrastructure, real estate, technology & business services, telecommunications & media and transportation. The Carlyle Group employs more than 1,550 people in 31 offices across six continents. www.carlyle.com
By Lisa Cohn
When the islanded microgrid at Stone Edge Farm near Sonoma, Calif., kept operating for 10 days in spite of the fires that caused outages nearby, the operators seized the opportunity to learn as much as possible from the surprises they encountered.
The first surprise, of course, were the fires that struck suddenly, stoked by high winds and dry conditions. While the fires didn’t burn the farm’s property, they came within about five miles.
“At 5 am I got a phone call from an employee who couldn’t get into work because everything was burning,” said Craig Wooster, general contractor for the microgrid project. “I reached for the light and there was no light at my place, which instantly told me we needed to get the microgrid into island mode.”
His son and an intern working at Stone Edge Farm put the microgrid in island mode to ensure the farm’s irrigation system continued operating in case the power at the farm went out. The microgrid powers pumps that run water from wells, explained Wooster.
The microgrid, which includes a mix of solar, eight different types of batteries, 10 different kinds of inverters, and a natural gas microturbine, operated even though the power went out and officials called for evacuations. In fact, after being evacuated, Wooster and his associates operated the islanded microgrid remotely—for the first time.
Islanded microgrid faced tests in fire — and succeeded
Operating in island mode put to the test a “distributed optimizer” called Heila, created by the team and others specifically for the microgrid.
“When I say we operated the microgrid remotely, what we basically did was push an ‘on’ or ‘off’ button and the system is designed to operate itself autonomously, switching between different resources,” said Wooster.
It does this thanks in part to the Heila controller, provided by a startup company, Heila Technologies, that the microgrid team helped create. Wooster had helped form the startup by approaching major manufacturers such as Schneider Electric and asking them to help produce a local controller that could operate if individual components of the microgrid failed.
The microgrid itself is distributed across the 16-acre farm, with 16 buildings and seven utility service meters.
“When we go into island mode, we disconnect all seven service meters from the grid,” Wooster explained.
To manage this, the microgrid has numerous levels of control, including a central controller and, at the local level, Heila.
“Our system will still operate at the local level with Heila if we lose other levels of control,” he said.
A “distributed optimizer for microgrids,” Heila aims to simplify the design and operation of microgrids, according to the Heila website.
With Heila, every asset in a microgrid gets its own Heila IQ optimizer, which forms a distributed network that can be used by central controllers.
“Our system will still operate with Heila if we lose the other levels. The assets are all automonous. They will maintain their portion of the microgrid respective to what the microgrid needs,” Wooster explained.
The biggest problem with microgrids today…
“The biggest problem with microgrids today is they are all custom,” said Wooster. “Heila overcomes that and works with components at a local level. The central controller looks out and sees five Heilas.”
The lessons learned from the fire fit nicely with the mission of the microgrid team — made up of industry members, interns, the farm’s owners and staff who often partner with the Electric Power Research Institute and other organizations. That mission is to move microgrids forward, Wooster said.
One lesson from the experience was that the microgrid, intended to be a community resource after an earthquake, should also provide shelter during fires. However, to do that, the farm needs face masks and high efficiency particulate air (HEPA) filters to ensure people are breathing air that’s relatively free of pollution, Wooster said. The farm wasn’t prepared for that.
Protections to prevent battery fires
The team also learned that in case of major fires, it’s a good idea to provide protections to prevent fires from the batteries — as the team did.
For example, a Tesla Powerwall is located 25 feet from anything that would burn. Additional batteries in the microgrid include lithium ion phosphate batteries from SimpliPhi Power that are “totally safe,” said Wooster.
“If we did have a battery explode, we could send energy everywhere else. That point of failure would not take us off line,” Wooster said.
By quickly putting the microgrid in island mode in response to the fires — a “knee-jerk reaction” — the team learned a lot of lessons it wouldn’t have learned otherwise. Top among them, Wooster said: “The microgrid did what it was supposed to do.”
For the long-term social good
To continue the learning process and expand the role of microgrids, the Stone Edge team applied for and received a $1.8 million grant from the California Energy Commission for the Sonoma Valley School District to install solar-plus-storage at a bus barn that also is a food warehouse. The idea is to create an emergency refuge at the site.
And the team is also applying for California Energy Commission grants to build two microgrids on school campuses so they can serve as emergency shelters.
This work makes Stone Edge Farm owner Mac McQuown happy, said Wooster. “We move microgrids forward and do it around the school district, and the long-term social and political good,” he said.
By RICHARD BRANSON and AMORY B. LOVINS
More than a month after Hurricane Maria devastated Puerto Rico, nearly 80 percent of the island remains without power, and food and water can be tough to find. As we rally to help the survivors and look to rebuild, we owe it to the victims there and in hurricane-ravaged Texas, Florida and elsewhere in the Caribbean to build more resilient infrastructure and prevent and reduce such destruction.
Rebuilding the electric grid in Puerto Rico will take months. But blackouts requiring weeks or months to fix are not caused by hurricanes alone. Many of the affected areas are powered by obsolete grids using fossil fuels. These fragile systems are easily knocked out by storms. We can’t eliminate hurricanes. But if we modernize the electric grid, we can stop blackouts caused by monster storms while also saving fossil fuel and reducing emissions of the greenhouse gases that warm the planet and make these storms more likely and destructive.
When one of us (Richard Branson) emerged from his cellar after riding out Hurricane Irma’s assault on Necker Island, the house and everything surrounding it was destroyed — except for the solar power array, which laid flat on ground and remained materially intact. Solar power systems survived Irma and kept working in Florida and Haiti. While Hurricane Harvey cut some Texas power lines, no wind farms were destroyed.
But that does not mean people with their own solar panels or other renewable energy systems managed to keep on their electricity. Though most of those systems were operable immediately after and often even during the storm, they couldn’t produce a watt of power. Outdated utility rules disabled them, not high winds.
After Superstorm Sandy hit New Jersey in 2012, more than 90 percent of the solar panels survived, but utility rules required that solar systems tied to the grid be shut down to guard against voltage surges that could endanger repairmen fixing the power lines. Homes that should never have lost power, or should have recovered it immediately, waited weeks for grid repairs they didn’t need. But modern power electronics have resolved the utilities’ legitimate safety concerns.
Inverters can be installed that can separate solar systems from the main grid, automatically or manually, and allow the solar systems to continue operating even though the grid is down. Unfortunately, nearly all utilities forbid this. In fact, Florida Power and Light lobbied the Legislature hard this year to restrict their customers from access to home-based solar systems when the grid goes down.
We should use this opportunity in Puerto Rico and other places hit hard by recent storms to do two things: Rebuild damaged or destroyed homes and businesses to be as energy efficient as possible, and rebuild the grid so that alternative energy systems like solar and wind, whether on a home or in a microgrid, can operate independently when the larger grid is damaged or shut down. (Microgrids are small networks of electricity users who rely on a local generating source like solar that is usually attached to the larger grid but can operate independently.)
The need for affordable, clean, reliable, resilient power is most acute for the majority of people of Caribbean island nations who pay high prices for electricity generated by burning imported oil and often paid for by imported capital. A nation like the Bahamas can spend a substantial part of its tourist industry’s earnings just to run its electricity system, and other islands are even worse off.
Our organization, the Rocky Mountain Institute, works with the Clinton Foundation, international and regional partners, governments and utilities to help Caribbean island nations switch to modern and regionally abundant solar and wind power. Those efforts were going well before the latest hurricanes. Solar arrays in the Turks and Caicos Islands and on Cooper Island in the British Virgin Islands, among others, survived the hurricanes without damage and were able to provide electricity to nearby communities.
With those storms behind us, we must work to rebuild stronger, fuel-free, stormproof power systems based on decentralized and resilient renewables like solar. We need to use 21st century innovation, not 20th century technology. Importing fossil fuels costs these island nations enormous sums. Yet the sun shines and the wind blows on these islands for free. We’re optimistic we can do this. But we’ll have to resist our own impulses to carry on with business as usual.
We can learn from the experience of another Caribbean nation — Cuba. Most electricity in the country was restored within a week after Irma struck in early September; in Havana, took just three days. More than a decade ago, Cubamodernized its Soviet-era power plants and centralized grid. In 2005 serious blackouts occurred on 224 days. In 2007 the island’s move to decentralized energy cut that to zero. Now, when hurricanes like Irma hit, many parts of Cuba can sustain vital services.
What was Cuba’s resilient formula? First, the efficient use of power, which helped renewables do more at lower cost. Millions of efficient light bulbs, fans, rice cookers, pressure cookers, refrigerators, air-conditioners and pumps were sold nationwide, reducing power usage.
Microgrids are becoming proven and popular around the world from India (where record floods couldn’t stop solar power) to the University of California at San Diego, whose microgrid (powering 92 percent of the campus and saving $8 million a year) reversed flow and sent power back to the utility in less than a half-hour (until wildfires ate a power line).
Some traditional utilities oppose microgrids as a threat to their beleaguered monopoly. But giant electrical equipment firms like Siemens, Schneider and General Electric now offer microgrids, and nearly 2,000 projects were underway worldwide at the end of 2016.
Simple, sensible improvements like these can make our families, communities and nations more secure and durable; save money and create important new value in the electricity, fuel and real-estate industries.
When storms, earthquakes, wildfires or cyberattacks take down our brittle power grid, we should all be able to start rebuilding our homes and lives immediately, with our smartphones and water pumps, filling stations and traffic lights, computers and refrigerators, continuously powered by the world’s greatest uninterruptible power supply — the sun.
Mark Feasel, VP of Schneider Electric’s Electric Utility segment and Smart Grid business for Schneider Electric in the U.S.
This year’s hurricane season has been unprecedented. Hurricanes Harvey, Irma, Jose and Maria have had a major impact on human lives—families and communities are suffering greatly from the consequences of displacement and damages stemming from natural disasters.
When these situations occur, electricity availability is a critical step in restoring a sense of normalcy to the affected people and communities.
However, disaster recovery efforts become strained when operating within the framework of an aging electrical system. The American Society of Civil Engineers’ (ASCE) 2017 Report Card for America’s Infrastructuregrades our country’s energy delivery system a “D+”.
Our power system is further strained by the demands of a new energy landscape, with the forces of digitization, decentralization and decarbonization creating a new reality of power generation and distribution, one for which our current system is not optimized.
While an overnight overhaul of America’s aging electrical infrastructure is neither practical nor realistic, we do have an opportunity to re-build smarter when major chunks of the grid fail, and microgrids have an outsized role to play. Historically, resiliency has been achieved through redundancy, diversity, and efficiency. Microgrids refine and enhance that approach through modularity and digitized solutions. Microgrid technology supports a next-generation grid that can still incorporate the positive aspects of our existing electrical infrastructure while increasing the grid’s efficiency, resiliency, safety, security and sustainability.
When large-scale outages occur, microgrids can minimize the impact on consumers by serving critical load with local generation, and allowing energy providers to anticipate outages through advanced analytics and configure the system for a minimized impact and quicker recovery.
When large-scale outages occur, microgrids can minimize the impact on consumers by serving critical load with local generation, and allowing energy providers to anticipate outages through advanced analytics and configure the system for a minimized impact and quicker recovery. For example, they offer operators the autonomy to island the grid, shed non-critical load, and prepare generation sources for dispatch ensuring that their facility or consumers do not experience an outage or poor power quality conditions. At the same time, in our new reality of power generation and distribution, grid management software enables the integration of renewable energy, harmonizes distributed zones of control to further protect against outages, and extends the life of existing electrical assets. Following a superstorm, microgrids can also initiate a smart rebuilding process that speeds the grid’s recovery time and restores power with as minimal downtime as possible.
Times of catastrophe highlight the importance of efficiency and resiliency within our electrical infrastructure, but it should always be a priority. Increased stress on the electrical grid due to extreme weather and urbanization will continue to take place, so with that in mind, there must be collaboration from technology providers, utilities and regulators, as well as businesses and communities, to create meaningful change. By adopting microgrids and other electrical infrastructure upgrades, we can leverage technology for system transformation—introducing new levels of resiliency, speeding up recovery time after an outage and even preventing catastrophic failures. This a call to action for our entire community. This new digital world of energy—with more decentralized generation, a two-way flow of decarbonized energy and more digitization for flexible, dynamic energy management—gives us an opportunity to co-create the future of the electric system.
Steve Pullins, Vice President, Energy Solutions
This not a short read because real problems are not understood and fixed in an elevator speech or executive summary. So, if you want some reality, please read on. If you’re looking for the elevator speech, no need to read beyond the first two sentences.
Solving the Right Problem
Engineers learn early to first understand what the problem is before setting out to solve it. In the grid industry, the majority of effort spent on reliability is focused on the wrong problem.
A Spring 2016 EnergyBiz article, “Spare Transformers: The Answer to Extreme Weather Risks?,” quoting a 2015 study by Lawrence Berkeley National Laboratory and Stanford University, said there is a 260% increase in storm outage duration to 370 minutes per customer over the last decade. The report provided several examples of greatly extended outages in distribution, as well as efforts in states for grid modernization. But, the industry is still focused on transmission lines, reserve capacity at the central generation level, and spare power transformers through FERC rules.
Okay – the wrong problem. The transmission and generation (bulk power) system only contributes 10% of the events that lead to customer outages, so massive investment in improving reliability at the bulk power system can only have minimal effect on the reliability felt by customers. It would seem more helpful to attack the 90% problem – distribution system reliability.
There is a difference between how reliability is viewed, and how metrics are structured, at the bulk power system level and the distribution level.
The bulk power system uses grid architecture-based metrics to judge reliability, such as redundancy, reserve margins, N-1 contingencies. However, these architectural metrics do not demonstrate reliable performance, from the customer’s perspective.
At the distribution level, reliability is measured as a performance-based metric. Okay, better. However, the industry uses a reliability metric standard (IEEE 1366) that specifically excludes the largest (and most rapidly growing) cause of customer outages; storms and other Acts of God. Figure 1 suggests the industry pay more attention to the impact of major storms on customers.
For more than 15 years, the industry has said that storms are not the utility’s fault, and that is true. However, the source of the cause of the grid outage is far less important to the customer than the fact that the customer is without power, losing business, damaging product, or failing to deliver important life functions.
The point is, that from the customer perspective, at the time the grid is most needed, in the face of storms, it is not required to operate. This is not reliability, nor is it resilience. The industry metrics do not even measure this most critical element of reliability and resilience.
Storms are nasty. Just ask Mississippi Power about Hurricane Katrina, which damaged all but 3 of their transmission lines and 65% of their distribution infrastructure. All of this damage greatly affected the customers of Mississippi Power, but none of this damage counted as a reliability performance metric.
That same LBNL and Stanford study mentioned above puts the business loss price tag of storm outages in the US at $18B to $33B/year felt by commercial and industrial businesses. Studies at LBNL and EPRI for the last 17 years show the business loss price tag for commercial and industrial businesses for grid reliability (non-storm) at $79B+.
This says that storm-related grid outage impacts on business is significant enough, and growing, to become part of the grid reliability discussion. So, would changing the basis of how reliability is measured help the customer see improved reliability? Yes, but is the cost too great for customers to shoulder the burden?
What Performance We Track Today
The following Figures 2 and 3 from a Heidemarie C. Caswell article in T&D World Magazine, November 2012, show trends in distribution system reliability from the IEEE Distribution Reliability Working Group. The trend in non-storm outage durations is up slightly, and this would suggest that customers are being delivered a reliable grid service at 99.97% uptime.
A 99.97% uptime means grid services available for 99.97% of the hours in a year.) A SAIDI of 170 min/yr/customer is an uptime of 99.97%.
This is an A+ in school. This is fine for most residential applications, but today’s commercial and industrial customers have a growing digital footprint in their processes, point of sales, and overall operations. They require more reliability for business continuity.
However, reviewing where the Quartiles reside in the nation (Figure 3), shows that the Northeast and Mid-Atlantic states constitute nearly all of the 4th Quartile performance on reliability, and this does not include storms, which also affect the Northeast and Mid-Atlantic states heavily.
As utilities and regulators move to decouple the relationship between how much energy a utility produces and delivers, from the rates and fees it charges to customers, the belief is that utility distribution system investments can be maintained or increased in the face of flat or declining customer energy consumption. On the surface this sounds prudent. But the reality does not seem to bare this out.
It seems that the unintended consequence is (1) deterring innovative solutions, and (2) higher rates for customers, even those who conserve more energy. Left unchecked, the results can be unfathomable. One industrial customer in Connecticut, with flat consumption, saw their energy bill increase over the last 14 years from $450,000/month to $1,100,000/month, but their energy consumption portion of that bill only grew from $300,000/month to $350,000/month over the same 14-year period. The non-consumption portion of their bill grew from $150,000/month to $750,000/month, unchecked. At the same time, this customer saw a decrease in reliability and resilience of their electric service.
The industry needs to change two assumptions; (1) the only solution is more of the same, and (2) the customer will pay for all of it.
To reinforce the point about customer impact from storms, one utility in the Northeast reported to their regulator that their 2012 non-storm SAIDI was typical for the Northeast. They also stated that it represented 26% percent of the total (storm related and non-storm related) outage numbers. This means that 74% of all outages were storm-related outages, three times the non-storm outage numbers. Granted this included Superstorm Sandy; but it makes the point that storm-related outages are important for the industry to incorporate into its thinking and metrics about reliability and resilience. More of the same will not change this. Neither will making the customer pay for it (all).
A Proper Solution Will Take Time
Even if you believe that utilities and regulators are starting to understand the problem and taking actions to address it, which many are; based on historical evidence of significant change in the electric industry, it will take 10 to 15 years to see a broad measurable improvement.
Commercial and industrial customers then must determine if they can wait for this improvement, or seek another course. All too often, one of the options chosen is to move the business to lower energy cost regions or countries.
Is there another way to achieve significantly better reliability performance for the customer?
There is an answer. Not in all cases, but in many communities and campuses (commercial, industrial, university, hospital, etc.) a Microgrid solution can deliver concurrent reliability, resilience, and cost savings (and/or containment) improvements.
There are more options today for the energy service for customers. It would seem prudent that distribution utilities see Microgrids and distributed energy resource (DER) solutions as additional tools in its toolbox to better serve customers.
Steve Pullins, Vice President, Energy Solutions
With the waning performance of the electric grid from a reliability and economics perspective, many consumers have become prosumers, taking more control of their own energy environment. This trend will continue, and possibly accelerate, as the millennials take more and more leadership in companies and agencies in the coming years. As we consider the robust trends in the energy industry, microgrids show promise as an effective tool for consumers and utilities to address many of the reliability, resiliency, environmental, and economic needs on campuses and in communities.
Like many industries, electric and gas industries will become more and more dis-intermediated by distributed solutions and market forces. The shift from landlines to mobile phones, the democratization of travel, and growth of required social options all suggest similar long-term trends will persist in energy. New rules, driven by consumers, are chipping away at the 75-year history of major utility monopolies, and recent efforts in New York, Connecticut, California, Hawaii, and Massachusetts are putting the power of choice in the hands of energy consumers. These drivers are changing the energy market.
The expansive enablement of new technologies are opening doors to these changes in the industry, but it is clear that we have only a glimpse of how technology will enable future changes in the energy industry. Change begets change.
Thus, with waning performance, changes in rules growing out of consumer influence, and new technology enablement, the industry trends are demonstrating a radically different future in energy. The trends suggest that the average distance between generation of electricity and consumption of electricity is moving from tens of miles to tens of feet. The trends are showing the consumers will no longer rely on utilities for reliability and resiliency of service. The trends are showing that younger consumers, as they take on more leadership in society, will drive a much greater emphasis on sustainability and clean energy, even at greater cost. The trends are showing the importance of local energy markets at the city / community level (transactive distribution networks). These trends are suggesting that by 2050 90% of the energy will be produced at the consumer and distribution level and consumed within a mile. The remaining 10% role of the bulk power system will return to its original role (1930’s) of getting geographically constrained renewables to urban / suburban areas.
Microgrids present a new breed of complex solution in this changing space. They offer an optimized portfolio of resources (self-determination) that support cleaner energy supply. They offer a data-rich environment (local big data) where trend and signature analysis are important attributes in driving economics, reliability, and emissions reduction. They offer the flexibility to share energy across neighborhoods (markets) opening the door to shared savings. Microgrids also offer local solutions that “close the loops” on clean water, improved healthcare, retention of local culture, and fostering small businesses in developing nations, who are all challenged by access to affordable, reliable energy.
So, to meet the needs of consumers as the industry progresses to a vastly distributed 2050, much technical, policy, market, and educational change is required to facilitate, even follow, the change driven by new consumer realities. Microgrids are changing the vision of what is possible.