Market Research

Published on August 10th, 2014 | by Roy L Hales


What Do Utilities Think About Microgrids?

August 10th, 2014 by  

Originally published in the ECOreport.

All images Courtesy Utility Dive

Courtesy Utility Dive

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?”

All Images Courtesy Utility Dive

Courtesy Utility Dive

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.”

All images Courtesy Utility Dive

Courtesy Utility Dive

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.

All images courtesy Utility Dive

Courtesy Utility Dive

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.

Courtesy Utility Dive

Courtesy Utility Dive

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)

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About the Author

is the President of Cortes Community Radio , CKTZ 89.5 FM, where he has hosted a half hour program since 2014, and editor of the the ECOreport, a website dedicated to exploring how our lifestyle choices and technologies affect the West Coast of North America. He writes for both writes for both Clean Technica and PlanetSave on Important Media. He is a research junkie who has written over 1,600 since he was first published in 1982. Roy lives on Cortes Island, BC, Canada.

  • The term “ratepayer dollars” is great. If PG&E spent no money on lobbying and policy steering, Californians’ electricity would be too cheap to meter.

  • Who ever made those graphics didn’t know what they were doing. 5 similar shades of orange to represent 5 distinct opinions? And I have no idea what’s going on in the “Should utilities charge premium rates” chart.

  • Peter F. Varadi

    Your paper “What Do Utilities Think About Microgrids?” is excellent.

    My paper (published in EnergyPost and Renewable Energy News) describe the
    present and the foreseeable future of the German utility situation, but as
    the crystal ball was clear it was easy to review.

    To look the crystal ball what will happen to the utilities in the USA is cloudy.
    Your paper is a very important one, to try to shine some light how it will
    shape up in the foreseeable future.

  • There is a great saying in the Saharan desert: “The dogs bark, but the caravan marches onwards, regardless”

    I interviewed Ed Kjaer at Southern California Edison (SCE) back in 2009 asking him his view on the then full-blown electric vehicle explosion and alternative energy. He said something that impressed me a lot. He said utilities, and I believe SCE, had to become energy manager, not energy producers. That’s what it boils down to.

    The writing is on the wall. People are so financially squeezed they look for solutions to save money. Installing solar panels on rooftops was the first part. Now some homes are banding together and redistributing their energy. There are groups that bring these community homes together to form a micro-grid. If utilities are intelligent, they will do what most of us have had to do these past years, change your business plan. Adapt to modern times. It’s not the first time there is a change and shift in society, and it won’t be the last. If not, they face an even scarier specter, that of governments taking over. They will have to modernize themselves, one way or another.

  • actofcourage

    WLYB…….Corrupt political lobbies that control our Government…..
    How Florida’s energy policy is made today

    Utility companies invest millions per year in lobbyists and
    political contributions, and they get the best policy (for
    themselves) that money can buy. Governor Rick Scott and the cabinet
    just approved Florida Power & Light’s plan to build two new
    nuclear plants to provide 2.2 gigaWatts to South Florida, and 88
    miles of new transmission lines. The projected cost of the two plants
    is $24 billion, all of which will be paid by FPL’s customers, who
    will also pay for the power they get from them.

    Approval of the new plants was no surprise. FPL gave $3 million in
    campaign donations to Scott, the cabinet members and the Republican
    Party since 2010. In the past 18 months FPL gave $500,000 to Scott’s
    campaign and over $700,000 more to the Republican Party of Florida.

    The governor appoints the five-member Public Service Commission,
    which rubber-stamps rate increases for the utilities. You can
    see that who the governor can make a huge difference.

    FPL says the two new plants will handle about 750,000 homes.
    Ignoring the fact that nuclear plants are notorious for going over
    budget, at $24 billion this is $32,000 per home, more than enough for
    solar photovoltaic panels to power the homes and even sell some power
    back to FPL. The solar option would have even more economic
    benefits, however.

    After FPL’s customers pay for the new plants, they will pay
    forever for the electricity. An average $200 per month electric
    bill today, if electricity rises only 3% per year, will cost $102,000
    over 30 years. With the solar system, once it is paid for, the
    power is free. So, in this case 750,000 homes would save some
    $75 billion over 30 years—money that stays in people’s pockets
    and drives Florida’s economy. Over time the savings alone,
    re-circulating in Florida’s economy, will create at least 1,000,000
    jobs—starting with over 50,000 just to install those solar systems.

    • djr417

      The only thing scarier than how obvious politicians are ‘influenced’, is how bad the math favours solar vs nuclear (atleast in this case). If offered the choice via vote, would the Florida voters really chose the nuclear option? versus solar which would pay for itself far before the nuclear plant is paid for (possibly before its even up and running!)

      • Bob_Wallace

        Is it the case that Florida utilities will be allowed to overcharge customers in order to collect money to build reactors?

        And even if they never build the reactors they will be allowed to keep the overcharge?

        (I’m not sure how things have played out recently.)

        • Matt

          In Ohio you can charge full construction cost as long as the plant produces electric in some form. Even if that means you convert it to burn trash.

      • Calamity_Jean

        Former Governor Charlie Crist is running against Scott for the office. He should campaign on this issue. “If elected, I will cancel the wastefully expensive nuclear power plants, and help all Floridians put solar panels on their roofs.”

        • Bob_Wallace

          “If elected, I will cancel the wastefully expensive nuclear power plants, and help all Floridians put solar panels on their roofs.”

          “After all, we are the Sunshine State, not the Let’s Make Your Children Glow in the Dark State.”

          • Calamity_Jean

            Good one!

    • Bob_Wallace

      Solar in the sunny parts of the US is now under 7 cents/kWh – without subsidies. And it should be well under 5 cents long before a new reactor could be built.

      Wind is now under 4 cents/kWh – without subsidies. And Florida has good wind resources, just need to move from 80 meter towers to ones in the 96 to 100 meter range. (Check the wind map below.)

      Citigroup calculated the LCOE for the new Vogtle reactors at 11 cents/kWh – that’s a price lowered by taxpayer subsidies. And they stated that it is unlikely plants can be built that cheaply in the future due to rising interest rates.

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