What Do Utilities Think About Microgrids?

Originally published in the ECOreport.

We’ve been reading nasty stories about utilities for years. In 2010, PG&E appears to have spent $46 million of ratepayer dollars to promote anti-community choice legislation in California. The Arizona Public Service Co. reputedly spent at least $9 million in anti-rooftop solar ads in Arizona. These are probably extreme episodes, but often seem to colour public perception of the ongoing reports of skirmishes across the US. Only, as there are actually 3,269 utilities in the United States, we are actually reading about a small number of companies. The next skirmishes are likely to involve microgrids. Before the stories start, Utility Dive polled 209 utility executives and 56 executives from independent producers to find out, “What do utilities think about microgrids?”

The question is highly relevant:

• 45% said microgrids said microgrids are already operating in their territory.
• 85% either have non-utility owned microgrids in their territory or expect to see them in the future.
• Though only 14% were presently involved in a microgrid project, 59% expected their company to have a microgrid.
• 97% of the participants believe microgrids will present them with a viable business opportunity within the next decade.

“… Conventional grid equipment is aging and microgrids are seen as a part of modernization — part of a new distributed green network that employs smart grid technologies. And finally, microgrids are a green choice, since they often incorporate renewable energy or highly efficient technologies.”

Only 24% of the respondents believe microgrids pose a significant threat to grid stability. The vast majority either anticipate little (44%) or no (32%) increases to the chances of disruption.

There was a similar division of opinion as to the impact microgrids will have on retail prices. 42% believe they will cause rates to go up, 33% say they will lower rates and 25% do not envision a change.

A slight majority (53%) believe they should not charge customers who choose to be on a microgrid premium rates.

Though most utilities believe microgrids will reduce their business, there was a split as to whether this will be significant (47%) or not (45%).

The authors suggested the latter result may be because utilities see themselves as microgrid owners.

Another potentially controversial question is who should be the dominant owner/operator? Surprisingly, 43% of the respondents believed this should be a partnership. Slightly less than a third (31%) said the utility should have control and 16% thought it should be a private company.

One thing the majority did agree on: they have the most expertise and should be the grid co-ordinator.

One of biggest obstacles to microgrid development is utility franchise rights. Under the current rules, microgrids often need to get special permission from utilities before running wires across public rights of way. Surprisingly, 85% of utilities support the idea of changing those franchise rights so that microgrids have freer access.

Another point where there was strong agreement was that 85% of the respondents said there are not enough incentives to spur them into action.

“They believe regulations should be changed to better incentivize microgrid installation,” the author explained. “Regulators and policymakers who want to see more microgrids might heed this concern. Incentives have played a major role in developing other new electricity markets in the US such as renewable energy and smart grids.”

Related Story: Utility Insiders See Major Changes Coming (Charts)