Top 10 lessons learned from microgrid builders, owners, and operators

This was the week for Microgrid California, a one-day conference produced by Microgrid Knowledge that was jam-packed with educational sessions designed for microgrid owners, developers and technology/equipment suppliers. Speakers offered lessons learned building microgrids.

As a refresher, a microgrid is mostly designed to deliver resiliency for its owners – be they utilities, large C&I companies, municipalities, universities, and communities. What defines a microgrid is its ability to island from the main grid to provide energy during an outage. As a California-based conference, public safety power shutoffs (PSPS events) figured prominently as drivers for microgrid adoption in the state.

In addition to resiliency, microgrids can also provide grid services during normal grid operation. These services include peak shaving, demand response and, once DERs are fully unlocked, other ancillary services like volt/var regulation, reactive power and frequency regulation, can also be provided by a microgrid. This potential additional economic adder is another driver of microgrid adoption.

The Projects

The conference was organized around projects with project developers and owners sitting on the panels and answering questions about their challenges and lessons learned building, owning and operating microgrids. Four sessions highlighted microgrids for businesses and utilities; microgrids for agriculture/food Industry; microgrids for education and campuses; and microgrids for government, communities and CCAs.

Among the many microgrids that attendees learned about were the following projects:

Domaine Carneros Winery microgrid, developed by PowerFlex, an EDF Renewables company
Liberty Utilities Sagehen Creek Field Station microgrid, developed by BoxPower
A fully-islanded microgrid in Santa Cruz owned by Sandbar Solar

A fully-islanded microgrid designed for Bluehouse Greenhouse

City of San Diego’s eight microgrids, financed by Shell Energies
City of Berkley’s microgrid upgrade project

You can read about the specifics of each one by clicking their links. All include renewable energy (mostly solar PV but some wind), energy storage (mostly lithium-ion batteries but some lithium ferro phosphate), and a diesel or natural gas genset. But the key is the microgrid controller which makes all of the pieces work together. After projects were presented, moderator Ken Horne turned to the audience for questions. Below are the top ten lessons learned from the owners, developers and technology suppliers to the projects.    

Top 10 Lessons Learned from Building Microgrids

1. Don’t have a pandemic (watch your supply chain). Unfortunately for Stacy Ellis, Capital Projects Manager at Domaine Carneros, Covid-19 struck at just the wrong time with their project beginning as stay-at-home orders were implemented, impacting restaurants and wineries first. Once the dust settled and the project was able to move forward again, supply chain disruptions meant that getting the needed components for the microgrid was another issue.

2. Understand it is a jigsaw puzzle and decide who you want to put it together. Microgrid developers say projects are like jigsaw puzzles that require careful consideration of how all of the parts and pieces go together. Savvy facilities managers may wish to assemble the puzzle themselves, as was the case for Sandbar Solar. The solar installation company decided to go with a fully-islanded microgrid because the PG&E interconnect for its new warehouse was going to take up to two years and cost $75,000. As a solar developer already, Sandbar CEO Scott Laskey knew he was up to the challenge of specifying equipment and microgrid controllers.

On the other hand, many microgrid owners aren’t interested in specifying their own equipment and should look for a full-service microgrid developer instead and pursue either the Energy-as-a-service (EaaS) model where they sign a PPA to offtake the energy or they finance the system via bonds, their own capital or through bank financing. All options are readily available but customers need to decide early on if they want to do that work themselves or let a developer put the jigsaw puzzle together for them.

3. Make sure your technology vendors can stand up to their warranties. It’s a hot industry and there are a lot of players providing energy storage, solar PV, controllers and other technologies. With equipment manufacturers offering 10-, 20-, even 25-year warranties, it’s important to make sure your provider actually plans to be around that long. That message is from Laskey who was stuck with technology from a company no longer in business. In addition, experts point out that financing a project is more difficult with young companies who don’t have much of a balance sheet to back them up.

4. Put your customers’ needs first. For Liberty Utilities, the decision was between hardening a transmission line that delivered energy to UC Berkeley’s Sagehen Creek Field Station at a cost of $3.5M or developing a microgrid around the station so it could island during the summer months. Either way, the work was needed for wildfire mitigation. When the price of the microgrid coming in near $800,000, the non-wires alternative microgrid was the way to go, said Lindsay Maruncic, Liberty’s Sr. Manager Renewable Energy Assets. The insurance that the utility is going to need to purchase to protect it against wildfire damage will already be increasing customer rates so anything Liberty could do to keep those rates lower for customers was important. Maruncic said the regulators were fully in favor of the microgrid once the costs were compared.

5. Weigh the costs and benefits of being grid-tied or not. While Sandbar Solar’s Laskey went with the microgrid because the utility interconnection was going to take too long, he says in terms of the environmental benefits of the system, he sometimes wishes he was grid-tied so he could turn some of the solar energy he produces over to the greater grid instead of having to curtail it. “By 10 AM in the summer, our batteries are full and our solar is being curtailed,” he said, adding that his company has considered adding excess mobile storage and becoming “the milkman of energy.”

6. Get your interconnection application started as early as possible! Laskey’s microgrid was one of two at the conference that are fully islanded only because the utility interconnection was going to take too long. The other project is for Bluehouse Greenhouse, an ag-tech company that will yield 30X more per acre than traditional farming methods, according to CEO Ari Kashani. The greenhouse is energy intensive and will require around 9 MW of energy capacity and the utility infrastructure required to deliver that energy isn’t in place yet and will take more than 2 years to interconnect, said Kashani. While Kashani said he fully intends to be grid-connected eventually, he plans to start islanded in order to get up and running more quickly. So the advice is whether or not you plan to do the work yourself, get your interconnection application filed with your local utility as soon as you can.

7. Understand how much resiliency is worth for you. John Larrea, director of government affairs for the California League of Food Producers, explains that for agricultural producers, the cost of resiliency is pretty simple to pin down. Once produce is picked, he said, the process requires about 6 hours of continuous production to get the food ready for market. The produce cannot sit and wait out a PSPS event, he explained, or it begins to transform and could become a health hazard, costing the growers hundreds of thousands of dollars. While it might be more difficult for a school or municipality to quantify the cost of an outage, it’s a good idea to try to put a number on it. Once an entity knows how much resiliency is worth, it’s pretty easy to compare the cost of building a microgrid to the cost of an outage.

8. Don’t be afraid of Big Oil. When Lindsey Hawes, Municipal Energy Program Manager for the City of San Diego brought a proposal from Shell New Energies to fund the city’s eight planned microgrids before the city council, the reaction she received was lukewarm at best. But the city, which relies on a bustling tourism industry, was in a tough financial spot. Tourism was down from Covid and there was no option to use capital funding, said Hawes. Shell’s EaaS 25-year contract would allow the city to achieve its sustainability goals, bring energy resiliency to its inhabitants and the per kWh cost of energy was going to be lower than what it is from the utility. The city had been awarded a grant for the project, but it would only cover a portion of the cost and Shell New Energies was willing to finance the remainder. It took a bit of convincing, but Hawes managed to get the project approved. According to Candice Yu, Shell New Energies Business Development Advisor, the project was exactly the profile that it is looking to invest in.

9. Get help identifying and applying financial solutions. When the University of California, Berkley campus decided to upgrade its microgrid, Sally McGarrahan, Associate Vice Chancellor, Facilities Capital Renewal Program, knew there were a lot of incentives, grants, tax credits, and other financial opportunities available for projects like hers but she didn’t think she could identify and synthesize them all herself. That’s why the University issued an RFP this summer for a financial consultant to help find the right financial solution to fund the $70M project. McGarrahan said the financial advisor should be able to help her pin down the best way to finance the project.

10. Make the regulatory model match the state goals and Support the Microgrid Act. While the conference didn’t specifically cover the regulatory woes experienced by microgrid developers, their frustration with the long and costly interconnection process came across loud and clear via audience questions, comments, and many of the project examples. Utilities are simply taking too long and charging too much money for microgrid interconnects. Elisa Wood, editor-in-chief of Microgrid Knowledge, producer of the conference surmised that an increasing number of projects deciding to go completely islanded to circumvent the utility might be the wake-up call utilities need to reform their processes. Others complained that a state like California with aggressive renewable targets ought to be doing more to make sure these renewable energy-powered microgrids can easily, quickly, and cheaply connect to the grid.

Erik Svanholm, VP, Non-wires alternatives with S&C offered sage advice on this topic.

“Regulators are people, too,” he said, adding “they do in fact have the community’s best interest at heart.” He suggested microgrid stakeholders attend the NARUC conferences to share their ideas about best practices. “They tend to be open to new ways of thinking about things,” he said.

In Hawaii, for example, utilities are no longer allowed to profit off of infrastructure upgrades but must instead meet performance requirements that are aligned with state decarbonization and energy reliability goals.  This is a model that should be examined for other jurisdictions, many speakers said.

Lastly, Congressman Jimmy Panetta of California presented on the bill he authored and introduced called “Making Imperiled Communities Resistant to Outages with Generation that is Resilient, Islandable, and Distributed” otherwise known as the Microgrid Act. The act, which was included in the human infrastructure bill currently making its way through Congress, would give a 30 percent tax credit to microgrid owners. The tax credit is fully refundable, which means that municipalities, universities, churches and schools, who may not have a tax burden, can still take advantage of the credit and receive it in the form of a direct payment.

Microgrid Knowledge’s annual conference will take place June 1-2, 2022 in Philadelphia