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February 05, 2016
Microgrids: why small could be beautiful for electric utilities
By: Dr. Rafael Ochoa

Many electric utilities view the emergence of microgrids as a development taking place beyond their core systems and addressable market. Some even see microgrids as a competitive threat to their existing core business. But should they? With traditional revenue streams under pressure and demand for traditional supply set to decrease owing to greater energy efficiency and the adoption of renewables, microgrids could offer utilities new business opportunities.

Those opportunities could come in a number of different areas as microgrids demonstrate their suitability for use in a wide range of commercial contexts. Candidates include industrial and commercial businesses that require highly reliable power. Large server farms or data centers—some in remote locations—need constant access to reliable power, and military bases that must have security and isolation from threats also offer considerable potential. Added to these are the growing communities pursuing the use of renewables, but still require or desire a connection to the main utility grid as a back-up supply.

So how might this work in practice? Take the example of industrial businesses that need consistent, reliable power. Being able to offer access to a higher level of service by deploying a dedicated microgrid in an industrial or commercial zone could, along with more traditional incentives, be a powerfully persuasive factor in location decisions. Some businesses may even be prepared to pay a premium for an assurance of near-total reliability; such is their dependence on having a constantly available source of power guaranteed against outages.

Another significant opportunity is the growth of data centers required to service increasingly power-hungry digital businesses that process huge—and growing—volumes of data. Google’s annual power requirements, for example, are equivalent to about 0.01% of total global energy. The company’s strategy to use renewable power as much as possible makes them a perfect candidate for microgrids, and that presents utilities with the opportunity to harness their established expertise to develop, monitor and control the microgrid installations that data centers require. What’s more, advances in communications and controls technology mean that remote locations are no longer a barrier. Facebook, for example, has a data center on the edge of the Arctic Circle that can be monitored and managed remotely.

Military installations also present a unique opportunity. In the United States, the armed forces today have more than 120 microgrids in operation, and are pursuing a security-driven strategy that maximizes their energy independence. Here again, utilities could play a key role in helping the military to expand their use of microgrids as well as working to integrate new installations where practical with a secure interconnection to the main grid that offers both back-up and possibilities for broader grid management.

However, as more opportunities for microgrid design, deployment, control and management arise, they are beginning to attract the attention of other players in the market. Utilities need to act quickly to establish themselves as key participants in this emerging space. To do that they will need to identify and target the specific niches in which their expertise and experience can bring the most value. That may mean developing new partnerships with other players; for example, start-ups in the renewables sector, to offer new propositions and develop innovative business models that can capture this growing market and provide a new source of growth.

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