A New Era for Microgrids

Microgrids are playing an increasingly important role in our energy systems today. Beyond resilience and remote power, they’re able to offer onsite green energy solutions, value-added services, and the integration of a variety of generation assets. It’s an exciting era for microgrid development as technology advancements, shifting policies and economics, and a myriad of successful deployments are supporting the market’s expansion. 

We reached out to Dr. Peter Lilienthal, CEO of HOMER Energy, in anticipation of the 7th Annual HOMER International Microgrid Conference (October 69)for his perspectives on microgrid trends and emerging technologies.  

Since 1993, Dr. Lilienthal has been the developer of the National Renewable Energy Laboratory’s HOMER hybrid power optimization software, which has been used by over 200,000 energy practitioners in 193 countries. NREL has licensed HOMER Energy to be the sole licensee to distribute and enhance the HOMER model. 

Dr. Lilienthal was the senior economist with International Programs at NREL from 1990–2007. He was the lead analyst and one of the creators of NREL’s Village Power Programs. He has a Ph.D. in Management Science and Engineering from Stanford University. He has been active in the field of renewable energy and energy efficiency since 1978. His expertise is in the economic and financial analysis of renewable and microgrid projects. 

We’re grateful for the opportunity to share his perspectives. 

Distributed Energy (DE):  What policy initiatives are supportive of microgrid projects today?

Peter Lilienthal (PL):  The policy initiatives that are helping the most are those that focus on lowering the cost of energy storage. Right now, it is hard for developers to procure lithium batteries because demand from the auto industry is exceeding supply. Initiatives that expand the supply of lithium batteries would help a lot.   

Grid-connected microgrids are still at an early stage where demonstration projects are useful. These tend to be overdesigned but are still good for generating awareness and working out wrinkles. In the off-grid market, the situation is different because that market is farther along. There, it is important that policies move away from demonstration projects and start attracting commercial capital that really cares about not overdesigning and overbuilding. In the off-grid market, one of the biggest obstacles is the lack of trained technicians. 


DE: What policies do you consider to be holding microgrids back?  

PL: There are a number of obstacle regulations in various states that regulate whether wires you install can cross a right-of-way or who you can sell excess energy to.  Every state is different, so that is another problem. Also, many utilities make interconnections very difficult and expensive by requiring expensive engineering studies and being very slow to give approvals.   

Also, many utility tariffs are unnecessarily complicated, which results in consumers who don’t understand what they are paying for and therefore can’t understand how to analyze a savings proposal. At HOMER, we find that facility managers are incredibly frustrated by this complexity and it requires our tariff module to be more complicated than we would like. The more complicated that is, the easier it is for a user to make a mistake.  Most of our customers think the utilities do this on purpose to discourage distributed generation (DG). 

DE: What up-and-coming technologies do you see as key to the advancement of microgrids?  

PL: The single technology area that needs the most work at the moment are controls that make development and operation easier and more foolproof. There are no standards for communication protocols and interoperability between devices, so there is a lot of expensive custom engineering for integration, which is basically a control problem. 

In the off-grid world, modularity is very promising, but feels a bit like the holy grail. Everyone knows how valuable it would be, but we aren’t there yet. With modularity, developers wouldn’t need to overbuild in the beginning in expectation of load growth.   

Flow batteries are a better technical fit for microgrids with very high penetrations of solar because they are more durable and can hold more hours of storage. Flow batteries are completely impractical for vehicles, so lithium is taking off and flow batteries may never catch up, which would be a pity. PV is already good enough, but lower cost is always better, so Perovskites are promising. Building-integrated PV, like roof tiles, are a very cool idea. PV is getting inexpensive enough that optimal siting and orientation is less important, so perhaps we will start to see PV all over the vertical surfaces of buildings, as well. 


DE: Many microgrid deployments have been in remote or off-grid areas. Do you think that in the next five years we will see an increasing number of microgrids in urban environments? 

PL: Yes. We see that as a very promising up and coming market, driven by a combination of 1) resilience and reliability concerns, 2) sustainability/climate concerns driving PV adoption, and 3) the fact that batteries are now cheap enough that they can be used for demand charge reduction. These three value propositions overlap with each other, increasing the value of a hybrid system but also making the controls more complex.   


DE: What is the future of microgrids? What are the next steps in the technology’s evolution?  

PL: There is a very interesting question of whether the regulatory system can evolve fast enough to prevent consumers from defecting from the grid. I believe that would be a financial disaster for the utility and a big enough disaster to cause real macroeconomic problems. It would also cause equity problems because not everyone can defect.    

Electric vehicles are a real game-changer, both because they might save the utilities from losing too much load, but also because they are an easily controllable load. Demand response, controllable loads, and real-time pricing will really help renewable energy adoption. Net metering has been a big boost as well, but it is getting to the point where net metering is so costly to the utilities that we are starting to see them push back harder and harder. Some kind of compromise will be necessary. 


DE: What role do you see energy storage playing in the future of microgrids?  

PL: Storage is absolutely key, and it has much more value when it is distributed in microgrids than when it is deployed as a centralized resource. When distributed, energy storage contributes to resilience, reliability, voltage support, reactive power supply, and demand charge reduction. The only advantage that centralized projects have is when existing interconnection and transmission assets are underutilized. That could be from either a large RE project or an older plant that is being decommissioned. Because of the current supply/demand imbalance, the battery manufacturers are focusing on large projects rather than making it easy to buy batteries in the smaller quantities appropriate for microgrids. 

Please join us in Cambridge, MA, October 69, 2019, for the 7th Annual HOMER International Microgrid Conference, where industry professionals and policymakers will gather to share successes, technologies, and financial models, and to develop goals and policy objectives to catalyze market growth. 

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