Benefits of Microgrid
Business and Legal
Next Steps and Contact
Benefits of a Microgrid
Q: Why invest in a microgrid?
A: Microgrids have been proven to eliminate waste, increase power efficiency, provide power to critical facilities in the event of a blackout, provide service and support to the bulk power grid, offer price response to lower wholesale power prices for customers, lower emissions, and serve as a catalyst for economic development.
Not all benefits of a microgrid system are financial. Facilities that depend on uninterrupted power typically rely on emergency back-up generators that may or may not perform consistently due to infrequent use. A microgrid system could be of great benefit to such facilities.
Q: What can users expect from a microgrid?
A: That will depend on the primary objective of the microgrid. In general, a microgrid should be optimized with the following objectives:
- Energy Cost Reduction – to meet base load or peaking energy needs or demand charge cost savings
- Sustainability – focusing on integration of renewables and reduction of transmission losses to realize carbon and other emission reduction benefits
- Resiliency – emergency power sources to address grid failure and storm outages, particularly for critical infrastructure
- Transmission and Distribution network optimization – to enhance the use of existing infrastructure, defer future grid upgrades, and improve reliability.
The operation and resources that make up the microgrid will likely vary depending on the priority given to each of these objectives--and users may realize some or all of these benefits.
Q: How does a microgrid system save money on energy costs?
A: Microgrids help save users money in various ways. For example, designing a public-purpose microgrid to support the local distribution utility, as well as critical loads for places with high reliability needs, can be a cost-effective way to provide community disaster resistance services in a sustainable, environmentally responsible manner.
Loss of power in critical care facilities that impact basic, life-sustaining, and public health services are often undervalued—until the power goes out and they become unavailable. These facilities include medical service facilities, public water providers, wastewater treatment facilities, etc.
Additional financial benefits in the form of services to the bulk power grid can include avoided or deferred costs required for making the grid less vulnerable to storms, or avoidance of replacement utility equipment arising from grid interruptions and restoration, and being able to incorporate more renewable energy.
Gaining flexibility over when energy is consumed from the grid can be valuable where demand charges and time-of-use pricing are high.
Incorporating sensors and communication links into microgrid energy management systems that provide real-time information will drive optimization of the grid components, including intermittent resources like solar and wind, allowing them to fluctuate based on demand and cost to the extent they have available capacity.
Selling excess capacity to the grid when prices are high can help to offset the capital costs of microgrid resources. Participants should be able to manage energy consumption more efficiently and balance supply and demand to be more self-sufficient.
NYSERDA's Critical Infrastructure Resiliency Report provides a more extensive assessment of benefits and costs of a microgrid, as does the Rocky Mountain Institute’s New Business Models for the Distribution Edge.
Business and Legal
Q: What are the legal issues involved with creating or joining a community microgrid?
A: Creating a community microgrid will require commercial agreements that will govern the rights and obligations of the microgrid beneficiaries and resource providers. Such a system requires a wide range of ownership, maintenance, and performance obligations. The feasibility studies will inform interested parties about many microgrid project details, including legal issues.
Partnerships with local governments and local distribution utilities are mandatory for NY Prize applications. However, in every area of the State, customer-owned grids and local government-owned grids are possible and encouraged.
Taking part in a feasibility study for a community microgrid in New York through NY Prize creates no legal or financial risk. The results of the feasibility study will provide guidance on the most appropriate type of legal structure, such as third-party-owned, customer-owned, local government-owned, or utility-owned "microgrid as a service." “Microgrid as a service” means that the installing entity owns and finances the microgrid on behalf of the subscribing customers or power purchasers.
Q: How do billing, maintenance costs, and other financial issues work for microgrid customers?
A: A feasibility study is the best way for communities to learn how to handle finances and the potential cost savings of a microgrid. The study would also determine which member(s) of the microgrid system (or the whole community) would cover the costs of maintenance on a combined heat and power system or other system components.
Utility pricing and billing structures may vary based on a set of defined parameters and circumstances under which microgrid resources are called upon and could reflect incentive-based performance mechanisms based on the quality of the services provided. The cost of power can be structured in various ways for microgrid customers, such as the three following examples:
- Example 1: Pricing and billing could follow demand-response models, offering added-value to customers who are willing to take an active role in conserving power. The responsibility for operations and maintenance could rest with the utility, the microgrid owner, a third party operator, or with the local government itself depending upon the ownership structure.
- Example 2: Operations and maintenance (O&M) responsibilities may rest with the purveyor of the microgrid equipment; e.g. a combined heat and power system located on the property of a private university that is linked to offsite municipal critical facilities (and perhaps being compensated through tax abatement programs) or O&M may become a municipal responsibility in the case of a community-owned microgrid that benefits all private citizens within the municipality.
- Example 3: Pricing and billing could follow models for demand response (DR) programs and other reliability-based solutions that recognize the enhanced value of the microgrid resources. Microgrid participants may also be able to avoid peak demand charges, outage costs, and electricity and fuel costs, depending on the individual system configuration.
Q: What are the potential liabilities or challenges associated with owning a microgrid?
A: The liabilities will depend on obligations and commitments made by beneficiaries and resource providers. A multitude of liabilities must be addressed (such as power quality issues, financing, and safety issues) as well as a wide range of ownership, maintenance, and performance obligations that should be well-defined after the feasibility study.
According to the Microgrid Institute, microgrids face challenges and uncertainties across a range of issues, including:
- Government policy
- Utility tariffs
- Risk management
- Resource planning
- System operations
- Fuel supply trends
Q: What role will the Reforming the Energy Vision (REV) regulatory proceeding have in terms of resolving microgrid issues such as utility ownership, ownership of distributed energy resources (DER) assets?
NY Prize will inform the REV process, ultimately serving as a demonstration of the benefits of microgrids across New York State. As these microgrids are designed and built under the NY Prize program, many of these open questions will be addressed as part of that process.
A fundamental recognition of the REV initiative is that New York State’s electricity grid contains a diverse set of value streams related to data, customer satisfaction, reliability and resilience, convenience, and ancillary services, among others. Some of these societal benefits are not valued by the market today, but may be in the future. That is why it’s vital that NY Prize projects show how new technologies and business models can capitalize on these various value streams and how benefits can be distributed between the utility, third parties, and customers.
Will NYSERDA provide guidance to local municipalities regarding franchise issues, lesser consent (such as rights of way permits and revocable licenses) and the limits of crossing streets to distribute power?
NYSERDA cannot provide legal guidance regarding regulatory or policy issues, but can refer these questions to appropriate staff at the New York State Public Service Commission. The December 12, 2014 ruling on REV Demonstration projects noted that the Commission may provide regulatory leeway to projects that help achieve REV goals.
Q: Many diesel backup generator systems are limited by the New York State Department of Environmental Conservation. Will NY Prize awards cover emission controls or fuel conversions so these generators can be used for base load generation as well as standby use?
A: NY Prize will not fund standby diesel generators for a single, behind-the-meter load. Awards will cover the costs of the study at Stage 1, but not equipment. There are no restrictions on technologies. The choice of and cost for various technologies, including environmental compliance, will be a function of the microgrid configuration being assessed and potentially designed through the competition.
Has NYSERDA identified technologies or technology providers that can facilitate microgrid development on urban grid networks and address issues such as synchronization, over-current protection, monitoring, and control?
NYSERDA fully expects awardees under Stage 1 to contract with technical experts and conduct assessments of technologies and processes necessary to gauge the technical, regulatory/legal and financial/business viability/feasibility of the proposed community microgrid project. Specific requirements are provided in Attachment C.
Q: How specifically should load-shedding be detailed in a proposal?
A: Load-shedding is defined as "the deliberate shutdown of electric power in a part or parts of a power-distribution system," generally to prevent the failure of the entire system when the demand strains capacity. Load-shedding is an important aspect of microgrids. Detailed and specific plans for load shedding should be included in the feasibility assessment.
Q: Do the microgrid technologies selected for a NY Prize project need to be fully commercialized already, or can early-stage technologies also qualify?
A: There is no restriction on technology type. Project sponsors can conduct assessments of various technologies and decide on the right type/quantities to meet the requirements for a resilient microgrid configuration. Naturally, immature technologies can create greater risk of forced outage, so the associated costs/risks to resiliency would become part of any cost- benefit analysis.
Q: Will NY Prize support projects that include hydroelectric generation?
A: RFP 3044 has no technology restrictions. Some clean energy technologies will be viewed more favorably -- for instance, projects making less use of diesel generation. Refer to RFP 3044 evaluation criteria and Attachment C.
Q: Do the NY Prize opportunity zones apply to power generation that can connect directly to the ISO or utility substation?
A: The NY Prize map of opportunity zones is meant to highlight areas where the local utility expects a greater likelihood that the local utility system could benefit from a microgrid. There is no requirement for a proposed microgrid to be located in these zones.
Prospective proposers are required to have the support and participation of the local utility to which the microgrid would be interconnected. The economic viability of a microgrid will depend on more than its location relative to these opportunity zones; much will depend on the mix of customers/load patterns, type of distributed energy resources.
Q: Can completed projects be submitted for funding?
A: NYSERDA will not pay for work already completed.
Q: How will NY Prize winners be chosen?
A: Refer to the most current version of RFP 3044 for a listing of criteria that will be used in the selection process.
Q: Is there a minimum capacity or microgrid size that NYSERDA would like to see?
A: There is no minimum or maximum required microgrid capacity.
Q: Are Long Island communities eligible?
A: Yes, communities across the entire state are eligible.
Q: Does a data center now meet the definition of “critical facility” under NY Prize?
A: NYSERDA does not believe a data center meets the standard of being critical to public safety and security. According to NY Prize, “'Critical infrastructure' means systems, assets, places or things, whether physical or virtual, so vital to the State that the disruption, incapacitation or destruction of such systems, assets, places or things could jeopardize the health, safety, welfare or security of the state, its residents or its economy.”
Prospective applicants should consult with the RFP for the listing of critical public service facilities NYSERDA considers to meet the definition of critical facilities. Communities/project leads should consult with their local/county emergency management offices and the State Department of Homeland Security and Emergency Services to ensure they have at least one facility classified as providing a critical public service in the mix of customers participating in the microgrid project.
Q: For the feasibility study, is it advisable to supplement the benefit-cost analysis spreadsheet tool provided by NYSERDA with similar tools, such as the Berkeley Lab DER-CAM tool?
A: NYSERDA will use its benefit-cost analysis spreadsheet tool to consistently evaluate community microgrid proposals. NYSERDA expects all awardees will complete the worksheets in this model. The Berkeley Lab DER-CAM tool and other similar tools are no substitute for the benefit-cost model, but will be useful in analyzing DER options and generating data necessary to complete the benefit-cost model worksheets.
Q: Is a half-mile considered a good rule of thumb for distance between potential microgrid customers or facilities?
A: This reference is mentioned in NYSERDA's Critical Facilities microgrid report[PDF]. Generally, the further one goes to connect customers, the greater the costs. In the end, the benefit/cost framework will determine the viability of a microgrid configuration. There are no limitations or restrictions on scale or distances. A completed feasibility assessment will reveal natural boundaries for any microgrid configuration under consideration.
Q: What is the percent of cost sharing in Phase 3 of the competition?
A: NYSERDA has not yet developed competition specifications for Stage 3. Cost sharing should be anticipated. NYSERDA will seek to leverage program funding with that available from the private sector to the maximum extent possible.
Q: Will proposals be considered confidential, or will copies be available to third parties?
A: NYSERDA is subject to Freedom of Information Law (FOIL). Material that is considered business sensitive or proprietary must be clearly marked "confidential." However, proposers may be asked to prove the need for confidentiality under FOIL. NYSERDA is seeking to use the NY Prize competition as a learning platform. Projects that are awarded funding to conduct studies, develop design, and build/operate will be expected to conduct monitoring and evaluation and to share lessons learned with NYSERDA, regulators, and the markets in general. The ability to replicate or get to scale is a key project evaluation metric.
Q: Can the microgrid be based on specific projects, like a specific hospital, if it can be replicated across the board?
A: The microgrid configuration must include a critical facility (such as a hospital) and other non-affiliated customers. Those customers can include residential, commercial or industrial customers. Refer to RFP 3044 for definitions and specific requirements.
Q: Is a full study needed for a Stage 2 application, or is an idea or white paper an acceptable submission?
A: An idea or white paper will not likely meet the requirements for a proposal. Prospective applicants will be referred to RFP 3044 where minimum requirements for a submission/application under Stage 2 are defined.
Next Steps and Contact
Q: What is the next step I should take if I’m interested in building a microgrid in my community?
A: The first step in microgrid development is site selection. Interested respondents to the NY Prize competition need to identify multiple customers, including at least one critical infrastructure facility that can work together keeping in mind that the greater the distance between participating customers/facilities in the microgrid footprint, the greater the expected project costs.
The next step is to meet with the local distribution utility to discuss the proposed site, and determine such details as, but not limited to, the following:
- Are all the community members served from the same feeder circuit?
- What the primary service voltage?
- How difficult it is to isolate these facilities from the rest of the grid?
- What is the utility’s role, if any, in operating and owning the proposed microgrid?
- How other customers in the network might be affected?
- What are the historical electrical demand loads for the facilities in the proposed site? (This information would be determined by matching metering information from the utilities with customer billing records to properly size generation and distribution assets.)
Pace Energy and Climate Center has put together a roadmap for communities considering microgrids from setting goals and identifying the vision for a project to choosing sites, completing analyses, acquiring financing, and getting approval to build.
Q: What can proposers expect if their project is awarded under NY Prize?
A: Stage 1 winners will work with NYSERDA to enter into an agreement to assess the feasibility of their proposed microgrid, including engineering design, cost estimates, schedule and details of how the system will handle ownership, compensation, and operation. Such an agreement will include funding associated with achieving specific work/task milestones. NYSERDA-certified FlexTech consultants with microgrid experience can help provide measures for such technical details as design and configuration, commercial and financial feasibility, and benefit-cost.
Q: Will NYSERDA create a place where communities and solution providers can connect to create the most robust microgrid solution offering?
A: No central clearinghouse is currently available, although the NY Prize Opportunity Zone Map may eventually serve a similar function. The NY Prize Web page provides some resources for prospective applicants. The identity of proposers selected to conduct feasibility studies will become public. Communities will actively seek to contract with firms to assist in conducting feasibility studies, which is expected to promote further engagement between communities, their incumbent utility, and third parties.
Q: Who at NYSERDA can I contact for questions about NY Prize?
A: Questions related to NY Prize can be directed to Michael Razanousky, NYSERDA Project Manager: firstname.lastname@example.org or 518-862-1090 ext. 3245