When a traditional infrastructure asset investor like Stonepeak Partners is ready to bankroll microgrids with a $250 million finance facility, it's a sign of the mainstreaming of grid modernization. Energizing Co. will be the sole project developer for the $250 million Stonepeak fund focused on microgrids and grid modernization.
But these microgrids are not so micro.
Once the domain of military bases and remote communities, nowadays microgrids conjure up relatively small projects rooted in the public sector -- cities, communities, and campuses maintaining critical services during outages or natural disasters. (GTM Research has defined a microgrid as an independently operable part of the distribution network, including distributed energy sources, loads and network assets, that is controlled within clearly defined geographical boundaries and can operate in grid-connected or islanded mode.)
Really big microgrids
But Energizing Co. is focused on microgrids at community scale -- what the firm calls utility distribution microgrids (UDMs). Instead of hundreds of kilowatts or a few megawatts, one of the UDMs in development in Energizing Co.'s portfolio has a peak load of 145 megawatts and encompasses 32,000 utility meters. In addition to fossil-fuel and hydro baseload, these projects involve integration of distributed generation, electric vehicles (EV) and energy storage assets.
In fact, Glen Martin, CEO of Energizing Co., told GTM, "The challenge here is not technology, it's integration -- and that's our focus."
But UDMs broaden the scope and role of the traditional concept of the microgrid. A microgrid at this scale, along with its numerous interconnect points, is less a microgrid and more like a building block of a more segmented smart macrogrid.
Until now, markets for microgrids for critical infrastructure have been driven by combined-heat-and-power subsidies, PACE programs, and state resiliency funding, particularly in the Northeast. According to a recent report from NYSERDA, Microgrids for Critical Facility Resiliency in New York State (PDF), "Economic constraints (e.g., limited budgets) for municipal facilities are likely to impede implementation of microgrids without funding support from the state, federal government, or other entities."
But Energizing Co. develops these larger microgrids, performing the EPC and O&M work and delivering a turnkey project with a long-term financing option. According to the firm, "We offer a risk-transferred private-public investment model, with an emphasis on revenue-neutral project architectures and direct-to-customer engagement strategies."
It's tempting to call Energizing Co. the SolarCity of microgrids, since it's financing microgrids, but SolarCity is already fulfilling that role. SolarCity, the largest solar installer and financier in the U.S., already offers "microgrids as a service" and looks to integrate its expertise in distributed renewables, inverters, energy storage, and control software. SolarCity suggests that "any community anywhere in the world vulnerable to power outages and high energy costs" is a potential customer that can be financed with "little to no upfront costs." SolarCity has already built a microgrid "at an undisclosed island location."
Energizing Co. is going after a bigger beast. The CEO said, "The projects are in communities that have overbuilt distributed energy resources. He added that each project has unique drivers. The large microgrid project in Ontario is driven by a need to reduce peak loads and improve climate resilience, as well as Ontario's mandates. Martin added that the grid modernization underway is a natural product of the aging out of a 1960s growth in utility infrastructure.
Omar Saadeh, senior analyst at GTM Research, notes that the firm looks to be "engaged in large-scale community and utility developments starting at around 100 megawatts in capacity and over $50 million in costs." It is emphasizing this type of investment at a time when utilities in states like California and Illinois are talking about very similar developments. ComEd is looking to deploy six large-scale community microgrids at a price tag of up to $300 million.
GTM's Julia Pyper profiled one of the more advanced microgrids in North America from S&C Electric Company, Schneider Electric and Oncor. The grid-tied system consists of four interconnected microgrids and nine different distributed generation resources: two solar PV arrays, a microturbine, two energy storage units, and four generators. The microgrid can operate at its peak capacity of 900 kilowatts for two hours, and eventually drops to a baseload of 550 kilowatts as solar generation falls off at night and the battery assets drain.
As GTM's Katie Tweed has reported, Massachusetts awarded more than $18 million to 13 projects across the state to enhance energy resiliency. The money will go to critical facilities for CHP, battery storage, and microgrids. Connecticut has invested more than $30 million in its microgrid program. New York opened a $40 million microgrid competition early last year, while New Jersey put up $200 million for its Energy Resilience bank, which will support distributed energy resources at critical facilities. Maryland has called for utility-run community microgrids with a focus on resiliency. States hit by Superstorm Sandy aren’t the only ones putting money into microgrid projects. California announced $26.5 million in grants last summer for microgrid projects that put renewable integration at the fore.
The U.S. currently has an operational microgrid capacity of 1,050 megawatts, more than 90 percent of which is based on fossil fuels. GTM Research forecasts U.S. cumulative U.S. installed microgrid capacity will exceed 1.8 gigawatts by 2018, with a total value over $3 billion. In addition to generation providers, the microgrid market creates large opportunities for controller and switching suppliers.
Other finance shops have already taken notice
Energizing Co.'s CEO said, "Philosophically, we are aligned with the decarbonizing of North America’s energy infrastructure. Our projects will allow larger penetration of solar, wind and biomass." According to the company's website, the developer recently completed the first phase of a grid modernization project for a city in northern Ontario, Canada. Recently, the firm started a study for a community-scale microgrid in the South Boston Seaport.
GTM Research's Saadeh points out, "Utility microgrid financing gets a bit trickier in regulated markets where rules on distributed generation ownership are more stringent, leading to multiple stakeholder-structured projects and creating additional complexity, risk and costs."
Saadeh also notes that Connecticut’s Green Bank "has been very progressive in stimulating private capital participation," adding, "Its C-PACE program offers 100 percent financing for energy upgrades, including microgrids, and as of October this year, it will allow third-party capital-backed loans to be provided directly to property owners. Big project finance shops such as Hannon Armstrong, Bank of America Merrill Lynch, and Advanced Energy Capital have already taken notice."
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This year's Grid Edge Live pre-conference seminar will focus specifically on microgrids, taking a deep dive on the policy, economic and technical models required to achieve more widespread deployment.
Grid Edge Live will bring together an emerging ecosystem of power industry thought leaders, including utilities, innovators, regulators and policymakers in San Diego, California from June 23-25. Attendees will discuss and debate the latest issues and opportunities impacting tomorrow’s distributed energy system, and examine the latest trends and innovations happening at the grid edge. Register here.