The electric grid and related utility business models are undergoing dramatic transformation and facing new challenges and market pressures: severe weather events have increased the number and duration of outages; the energy needs of a digital economy require higher reliability and power quality; market forces and aggressive greenhouse gas reduction targets have led to a proliferation of distributed energy resources, including clean energy generation assets, and elected leaders – particularly in urban areas, are asserting new energy leadership and demanding cleaner, more resilient, locally generated power for their constituents. In addition, in many states, including Massachusetts, energy regulators are exploring a wide array of grid modernization or “smart grid” technologies and related regulatory models to address these still emerging challenges and in particular, to accelerate the integration of distributed energy resources (DERs).
Microgrids provide one opportunity to capture the benefits of DERs primarily by leveraging the efficiency benefits of combined heat and power (CHP). Microgrids are often defined as a group of interconnected buildings or energy loads and DERs within a clearly defined boundary that interconnects with the broader electric grid, and can operate independently, or island from the grid.
An untapped “community” microgrid market opportunity lies in interconnected commercial and residential buildings, where well-engineered systems anchored by efficient CHP systems, augmented with considerable clean distributed energy resources, can help meet a range of public policy and private investment objectives, including greenhouse gas emission reductions, business continuity, macrogrid support, community resilience, energy cost reductions and clean energy integration.
Historically, single owner or campus microgrids have flourished in the so called “MUSH” market (municipalities, universities, schools and health care). On the other hand, community microgrids – serving a range of building owners and stretching across property boundaries - have not taken hold, due to a range of challenges including concerns over utility franchise rights, restrictions on distribution utilities owning or operating generation assets, challenges in integrating microgrid controls with distribution system controls, technical challenges in islanding a portion of the distribution system, and uncertainty about revenue opportunities and new business models.
Microgrids and Massachusetts: Regulatory Context
In June 2014, the Department of Public Utilities (DPU) issued an order requiring each Massachusetts utility to develop and implement a 10-year grid modernization plan. Grid modernization will provide several benefits to the Commonwealth, including:
- Empowering customers to better manage and reduce electricity costs;
- Enhancing the reliability and resiliency of electricity service in the face of increasingly extreme weather;
- Encouraging innovation and investment in new technology and infrastructure, strengthening the competitive electricity market;
- Addressing climate change and meeting clean energy requirements by integrating more clean and renewable power, demand response, electricity storage, microgrids and electric vehicles, and providing for increased amounts of energy efficiency.
The development of properly-designed and -sited community microgrids in Massachusetts communities can lower customer energy costs, reduce greenhouse gas emissions and provide increased resiliency. As such the MA Department of Public Utilities cites microgrids as one strategy among several to meet multiple broadly shared objectives in the Grid Modernization Process Final Report.
MassCEC Microgrid Programming
MassCEC seeks to catalyze the development of community microgrids where such infrastructure can provide a range of benefits to ratepayers, utilities, and society. To support those endeavors, MassCEC has taken a number of steps to catalyze a community microgrid market in the Commonwealth.
MassCEC commissioned a study, published in 2014 to identify the benefits, barriers, and suggested policy initiatives to grow a microgrid market in Massachusetts;
MassCEC co-developed and participated in a series of microgrid business model workshops together with the City of Boston and the Pace Energy and Climate Center to explore business and finance models for community microgrids.
MassCEC provided funding to support the Boston Community Energy Study to help raise awareness about the opportunities for district scale energy infrastructure development in Boston;
MassCEC released a request for information to help surface relevant market actors interested in developing microgrids in Massachusetts, in advance of an anticipated funding opportunity that will provide grants on a competitive basis to applicants seeking to explore the technical and commercial feasibility of community microgrids.