Microgrids save businesses money and battery storage is the key

Whether connected to a main electricity grid or not, commercial and industrial (C&I) microgrids are increasingly able to offer resilient and independent power supply and — perhaps more importantly — electricity cost reductions.

A recent report from analysis firm Guidehouse Insights has found that C&I is the fastest-growing microgrid market segment worldwide. This is despite the fact that historically, it has been the opposite, lagging behind the likes of military or institutional microgrids, for the past 11 years that Guidehouse has been tracking the microgrid sector. 

In the past, it was difficult to prove a return on investment for C&I microgrids. Conversely, the value proposition for a microgrid at a military facility or hospital, school or other institution was based on being able to offer scalable and reliable power supply, perhaps in a remote location away from the grid or somewhere that a natural disaster could have devastating consequences if it damaged electricity infrastructure. 

Although backup power and resilience can be a priority, for C&I entities the emphasis for investing in a microgrid is more often tied to whether or not it can save the customer money. Well, with the global transition away from fossil fuels and onto more renewables, and the resultant lowering of the cost of adding onsite renewable energy, it more frequently is the case that it can. 

Of course, regular readers of this site will know the same is true of batteries, which can provide a varying number of applications to an on-grid or off-grid microgrid solution. 

“The cost of solar PV continues to decline over time, which in turn, makes microgrids more attractive for C&I customers, as their primary focus is on cost reductions,” Guidehouse Insights research director Peter Asmus said of the report’s finding.

“Furthermore, cost-competitive energy storage, which most commonly comes in the form of batteries, is the key hardware technology advancement that is expected to enable a more attractive microgrid value proposition for C&I microgrids.”

Below we take a quick look at three different microgrid projects that Energy-Storage.news has heard about in the past week or so that might help us understand where the market is going, as well as the role played by battery storage:

US Coast Guard’s first-ever battery storage project 

Clean energy technology integrator Ameresco said this week that it has been awarded a contract to deploy a microgrid solution for a US Coast Guard (USCG) training centre in Petaluma, California.

Ameresco works with many different types of customers, including projects for public and federal agencies. In common with some of the company’s projects with the US Army and Navy, the new USCG project has been awarded to Ameresco on the basis that it has a provable path to saving the customer energy.

An Energy Savings Performance Contract (ESPC) worth US$43 million has been awarded for the Petaluma project. So yes, this is a military microgrid, but there is clear financial and sustainability benefit as well as the resiliency and backup it will provide. 

Ameresco was selected for the project in February by the USCG. The microgrid will integrate a 5MW solar PV array — the Department of Homeland Security’s largest solar array to date — will 11.6MWh of battery energy storage system (BESS) technology, integrated with existing backup diesel generators. 

Also installed will be new power distribution transformers as well as energy efficiency equipment like LED lighting and smart thermostats, along with electric vehicle (EV) chargers and other equipment. 

With construction set to begin during this month, the project is set for completion by late 2023 and Ameresco believes it will realise cost savings of more than US$1.2 million in its first year of operations as well as drastically reducing electricity and propane consumption.

California cannabis company gets ESG and economic benefits 

Let’s not forget that saving money can go hand-in-hand with going green. 

Guidehouse Insights notes that C&I customers arguably pioneered the use of microgrids, creating self-sufficient energy networks to support critical loads. 

Although we are talking most typically about fossil fuels-based and manually islanded microgrids — “primitive by today’s standards,” the analysis firm says, one quirk of solar and storage history is that remote cannabis growers in the US and elsewhere are known to be something of a pioneering force in solar microgrids of the past. 

That’s perhaps a story for another day, but the need to power their growing infrastructure and use electricity that couldn’t be traced by authorities meant that the illicit industry almost accidentally became full of solar and microgrid expertise.  

Well, licensed growing of the herb is legal in California now, and that widens the industry’s power supply options. Harborside, a vertically-integrated cannabis company, is signing a power purchase agreement (PPA) with solutions provider Scale Microgrids, which is expected to complete early next year. 

Harborside’s 47-acre production campus in Salinas, California, will have a renewable microgrid that includes 4.9MW of solar PV and 6MWh of battery storage with advanced system and load management controls. Sufficient to offset the campus’ entire power consumption, it will offer the producer over US$12.5 million of net energy cost savings over 20 years and allow Harborside to avoid needing to purchase the carbon offset credits that would otherwise be required by state regulations from 2023. 

Guidehouse Insights notes that energy-as-a-service offerings are helping to drive the business case for C&I microgrids, reducing the customer’s need to deploy serious amounts of capex upfront. In this instance, Scale Microgrids funds and installs the entire project, meaning Harborside doesn’t have to. 

Solar-plus-storage microgrids that can withstand hurricanes 

So, renewable energy-based C&I microgrids can clearly have an emissions reduction benefit and lower electricity or fuel costs. But going briefly back to Square One, the need for resilience and backup power remains a compelling draw for customers too. 

Guidehouse Insights says that climate change has amplified the need for resilience, amid increasing power outages and even cybersecurity threats. The C&I microgrid segment is evolving into one of the most innovative of the microgrid markets in this and other respects.

A partnership between power management group Eaton and Enel X — Enel group’s smart and digital distributed energy tech subsidiary — is planning its second solar-plus-storage microgrid project in Puerto Rico which will be designed to withstand hurricanes up to Category 5 in intensity. 

The project is being planned at Eaton’s circuit breaker factory in Las Piedras, Puerto Rico, which will integrate solar and battery storage into existing onsite power generation systems. The same size as another project announced in the region at an Eaton manufacturing facility by the pair in December last year (5MW PV and 1.1MW / 2.2MWh BESS), both will be complete by 2022. 

The backup power the microgrids will enable are perhaps the main reason for their installation, but by no means the only reason. During normal use, they will allow solar-generated energy to be stored, consumed or delivered back to the local grid. In this way they can help reduce strain on local grid infrastructure. This will be especially during peak demand periods, reducing the amount of fossil fuels that need to be burned during those times. 

Enel X will build, own and operate the new microgrid and is financing the project under an energy-as-a-service model, once again meaning Eaton’s investment is into its operating expenditure (Opex), not its Capex. It will run on Enel X’s distributed energy resources (DER) optimisation software. 

“As extreme weather caused by the climate crisis becomes the new normal, commercial and industrial businesses need to adopt an integrated energy strategy and solutions that are both resilient and sustainable,” Enel X head of North America Surya Panditi said.

The energy-as-a-service model Eaton and Enel X is rolling out can be replicable around the world, Eaton’s Americas region president for electrical sector Brian Brickhouse said.

Read last week’s exclusive Energy-Storage.news interview with Enel X storage head David Post for more on the subject of C&I energy storage, and microgrids. 

Other opportunities — and challenges

Guidehouse Insights notes that some market challenges remain for C&I microgrids. Large industrial end users of electricity often pay the lowest rates among customer classes, while there aren’t many federal or state funding support programmes for the benefits of microgrids — although in some places there are specific equipment purchase incentives for things like solar and storage.

In other cases, it can be difficult for corporate energy managers to convince their CFO that the outlay on a project represents a risk that can be swallowed, while this risk averseness can also be a technological one: data centres for example might prioritise using equipment they’re already familiar with to keep the servers running, like backup diesel generators. 

However, with creative financing structures like energy-as-a-service models, the growing recognition of the importance of resiliency and renewables integration / emissions reduction, there are some advantages to C&I microgrids. 

The mining and commodity extraction sector is a great example of a promising market, Guidehouse says, combining the need for resilient power in often remote or off-grid locations with growing policy pressure to phase out fossil fuels. 

Guidehouse forecasts an increase in deployed capacity and money spent on C&I microgrids in every major global market between now and 2030, with close to US$12 billion spending and around 7GW of deployments forecasted. As is expected to be the case with the wider battery storage space, North America and Asia-Pacific will be the biggest regions. 

Working for large commercial entities’ single-client portfolios successfully will lead to replicability for projects and shorter development cycles, which is why one of the reasons why Guidehouse believes the C&I microgrid segment can move faster than military, community and utility distribution microgrids.