Microgrid's Advantages For Utility Company

--Cuiping Deng, Spring 2015

Microgrids are small-scale distribution systems that link distributed energy resources (DER) together with multiple local energy users and share supply resources by separate distribution facilities. Implementing microgrid systems can reduce energy costs, raise overall energy efficiency and improve environmental performance and local electric system reliability. The following is a list of the value streams of microgrids which are the features and benefits of microgrid system in different aspects, including economic, reliability and power quality, environmental, and security and safety.

Direct Economic Benefits:

  • Reduced Energy Cost, able to sell excess power to the macro-grid
  • Reduced purchases of electric generation, transmission and distribution (T&D) services
  • Reduced fuel purchases for on-site thermal energy demand
  • Reduced purchases of ancillary services, able to provide ancillary services to the macro-grid
  • Participation in demand response programs

Indirect Economic Benefits:

  • Reduced losses and deferred capacity investments of electric T&D 
  • Utility option value for long-term planning purposes
  • Enhanced electricity price elasticity
  • Support for deployment of renewable generation

Other Benefits:

  • More Reliable: Reduced power interruptions
  • Enhanced power quality
  • Environmental friendly: Reduced emission of greenhouse gases and criteria pollutants
  • Security and Safety: Provided safe havens during power outages

Microgrids can be classified by physical and virtual microgrid. Physical microgrids are small, local energy systems with integrated loads and are connected to the traditional centralized electric grid. Most physical microgrids are likely to be connected at low voltage to the local utility. Some may also get connected at high voltage and participate in energy wholesale, or they may be operated independently from the macro-grid. For virtual microgrids, distributed generated (DG), enregy storage and demand response get integrated separately and connected to the macro-grid. Existing electricity grid is essential for virtual microgrids to operate.

Physical microgrids can be categorized as either utility owned models or non-utility owned models. Table 1 below shows the applications, objectives, and benefits of the utility microgrid. In Table 2, it presents two different types of utility models which are vertically integrated utility model and unbundled utility model. The major determinant of such a classification is whether the energy is solely generated and controlled by the utility. If it is, then it will be recognized as a vertically integrated utility model. If a third party contributes to the generation or the control of either electric or thermal energy, for instance, adding energy generated by renewable devices into the microgrid system will form an unbundled utility model. San Diego Gas and Electric’s Beach Cities Microgrid is an example of an unbundled utility microgrid model.

Table 3 below shows the specific benefits the participating customers, the utility companies and the society can get from the microgrid system. As shown, for the utility, the major benefits of implementing microgrid systems are as the followings:
1. Reduce system congestion costs 
    -  Implementing Microgrid systems are able to utilize a third-party power source which is either a storage system or renewable generation to supply the critical loads, and able to shift the non-critical loads to be non-peak-hour energy demands. It then avoids congestion of the whole power system, which further avoids the occurrence of a blackout.
2. Higher transmission and distribution capacity use
    - Microgrid system provides a better management between load and supply, which reduces the electric T&D losses. As a result, higher T&D capacity can be used by the utility company.
3. Reduce operating reserves
    - Microgrid systems raise the overall energy efficiency as well as support the deployment of renewable generation. Implementing a microgrid system requires less electric generation from the utility for the same amount of energy demands. In other words, the utility company does not have to reserve as much operating energy.


Microgrids: An Assessment of the value, Opportunities and Barriers to Deployment in New York State

San Diego Gas and Electric’s Beach Cities Microgrid