Statement of Goals

Statement of Goals

The Microgrid Resources Coalition seeks to advance microgrids as energy resources.  Microgrids provide efficient, low-cost, clean energy, enhance local resiliency, and improve the operation and stability of the regional electric grid.  Microgrids provide dynamic responsiveness unprecedented for an energy resource.  Despite these many benefits, development of microgrids faces practical and regulatory hurdles.  The Coalition promotes widespread implementation of microgrids through laws, regulations and tariffs that compensate them for their services, support their deployment and operations, and do not discriminate among industry participants in the implementation of microgrids.  

Benefits of Microgrids

A microgrid is a local electric system or combined electric and thermal system (i) that includes retail load and the ability to provide energy and energy management services needed to meet a significant proportion of the included load on a non-emergency basis, (ii) that is capable of operating either in parallel or in isolation from the electrical grid, and (iii) that, when operating in parallel, may be capable of providing energy, capacity, ancillary or related services to the grid.  A system meeting this definition can create efficiencies in many ways.  For instance, using cogeneration to serve balanced electric and thermal loads, microgrids can achieve generation efficiencies above 80 percent compared to around 30 to 50 percent for conventional generation.  In addition, including renewable energy allows microgrids to undertake efficient and flexible hybrid generation operations.  By using thermal and electrical storage to manage time of use of imported electricity and fuel, microgrids help moderate power prices by efficiently shifting load to times of lower demand and pricing.  Building temperatures generally move slowly, and by “smart” management of thermal loads, microgrids can effectively use buildings themselves as thermal storage to manage load shape.  These and similar efficiency and energy management strategies not only save money but also significantly reduce the environmental impact of providing energy services.  

Microgrids provide a wide range of other benefits to their hosts, the larger grid, and to the surrounding community.  By “islanding” from the grid in emergencies, a microgrid can both continue serving its included load when the grid is down and serve its surrounding community by providing a platform to support critical services from hosting first responders and governmental functions to providing key services and emergency shelter.  Microgrids can make it feasible to place generating capacity in congested areas of the grid and, from a planning perspective, can reduce contingencies that threaten grid stability.  Using electric and thermal storage capabilities, a microgrid can provide local management of variable renewable generation, particularly on-site solar.  Through fine tuning its own generation and load, a microgrid can provide load following and other ancillary services to the grid in response to real time signals.  Moreover, they are capable of providing energy and multiple ancillary services at the same time.  Local microgrid service providers make the operation of the grid more competitive.

Barriers to Implementation

Despite their many advantages, microgrids face significant barriers to widespread implementation.  As a fundamental complication, microgrids face often-conflicting regulation at the federal, state and sometime local levels.  As the Federal Energy Regulatory Commission (FERC) has recognized, even though they are generally located behind the meter on the distribution system, microgrids provide services that substitute for and compete with the services of wholesale generation.  They generally purchase power at retail rates, either from utilities or, where allowed, competitive load serving entities that are regulated by state public utility commissions (PUCs), and they sell power at wholesale rates subject to FERC jurisdiction.  At the federal level, FERC has been making pioneering efforts to level the playing field for resources such as microgrids.  Orders 745, 755, and 784 open the doors within Regional Transmission Operator-managed control areas to compensation for demand resources and storage facilities that provide demand response and frequency regulation services.  However, adoption by Independent System Operators (ISOs) and RTOs is following slowly; there is still much room for improvement.  The regulations are designed for resources that are generators or that provide load curtailment, not resources that are both.  Microgrids employing multiple energy management technologies can simultaneously provide multiple services with multiple set points, but market rules generally do not permit them to do so.  Traditional baseline load calculations for demand resources do not capture the optionality of microgrids.  In addition, microgrids are generally not recognized as capacity resources.

At the level of federally mandated transmission planning, matters are even more confused.  The compensation systems for transmission and generation are fundamentally different, even though both can serve to improve the adequacy and reliability of supply.  “Congestion pricing” in RTO markets allocates the use of the system but does not provide an incentive to site generation to meet grid planning goals.  Microgrids are neither transmission nor pure generation and are really not contemplated by the planning system at all, even though they can provide reliability and economic benefits to the grid.  

State energy regulation imposes more fundamental barriers to microgrids.  In some states it is impossible for an independent developer to provide energy generation services to a single customer on the customer’s own site, and in most states it is impossible to aggregate retail load from multiple customers into a microgrid.  Some states and municipalities also restrict retail distribution of thermal energy.  Even in states with retail deregulation, load serving entities generally must provide energy on an all or nothing basis.  Community choice aggregation legislation, virtual net metering, and, in a few states, specific microgrid support legislation, are the exceptions.  As a result, most sophisticated microgrid development has occurred on campuses, such as universities or private research facilities, where a single end user is the microgrid host.  Even interconnecting multiple facilities of a single user across roads or intervening properties can contravene state law in some states.

Finally, utility rate regulation in most states discourages distribution companies and integrated utilities from encouraging microgrid development.  For the most part, these utility companies are compensated on the basis of the total number of megawatt-hours (MWh) delivered, and a reduction in retail demand through energy efficiency or distributed generation threatens their business model.  Distribution networks play a critical role in supporting customer microgrids and eventually can contribute to integration of multiple microgrids into more self-healing, resilient regional electric systems.  The Coalition supports non-discriminatory compensation for all services provided to and by microgrids, and supports investment incentives for linking microgrids into the grid of the future.  Without new business models that reward distributed energy resources while also maintaining the financial viability of the distribution system, the promise of microgrids will not be achieved.

Microgrid Resources Coalition Priorities

The Coalition supports implementation of microgrids through educational efforts aimed at policymakers and the public, and through advocacy for laws, regulations and tariffs that support microgrid deployment.  Through member working groups and with the help of an advisory committee of leading industry stakeholders the coalition will:
  • Define the microgrid resource in the context of each regulatory scheme to seek parity for resources with similar capabilities and non-discriminatory treatment where microgrids can provide exceptional performance.
  • Identify all of the layers of services being provided to and provided by microgrids including energy market and ancillary services, locational capacity, transmission distribution and related reliability services, and local and regional resiliency services.
  • Seek to insure compensation for all levels of services through competitive markets.
  • Establish the basis for reasonable tariffs than do not discriminate between wires and generation and among end users, distribution companies and independent developers to the extent that they provide equivalent reliability and adequacy services.
  • Seek ways to implement and incentivize integrated reliability planning that accommodates the interests of private sector and regulated infrastructure investors, state and federal regulators, and stakeholders.
  • Support local governments in their efforts to achieve more resilient and cost–effective energy infrastructure.
  • Join the conversation to define the utility business model of the future.

The Coalition will focus its initial efforts on FERC, as FERC continues to expand access to energy and ancillary services markets and review the regulatory treatment of capacity.  It will leverage its resources by intervening where issues of importance arise.  In that context, it will move to discussions with RTOs, NERC and state PUCs as appropriate, and will consider advocating for federal or model state legislation.  Where one RTO has adopted or improved an ancillary service market, the Coalition will encourage the spread of best practices to additional RTO market areas.  The Coalition will seek to promote industry growth through fair and broad-based regulation.