JULY 2015 [MICRO]GRIDS TODAY Themes and Outcomes ONTARIO SMART GRID FORUM
Foreword of the Ontario Smart Grid Forum The Ontario Smart Grid Forum ( the Forum ) includes member organizations from Ontario s utility sector, industry associations, non-profit organizations, public agencies and universities working together to propose a vision for a smart grid in Ontario and examine the many components that comprise it. It is supported by the Corporate Partners Committee, which represents more than 45 private sector organizations active in the smart grid space including, electric vehicles, energy retailers, energy management companies, systems integrators and equipment manufacturers. The Forum has been calling for greater dialogue on and research into microgrids since 2009. More recently, the Forum added a sense of urgency to those recommendations because several utilities in the province are already moving ahead with microgrid pilot projects and new service offerings. In some cases, customers and third parties are actually proposing microgrids. In March 2015 the Forum amended its microgrid recommendation to reflect this new urgency as follows: Immediate action should be undertaken to address the technical, legal, regulatory, commercial and institutional issues associated with developing a framework for micro-grid investment and the integration of micro-grids with Ontario s electricity system starting with a requirement gathering exercise by the utilities sector, consumers and private companies and aided by the regulator. At the time the microgrid recommendation was amended it was proposed that an informal workshop be held in order to gauge current perceptions and priorities from Ontario s electricity industry with respect to this topic. The Forum has been pleased to co-host the June 2nd workshop, (Micro)grids Today with the Independent Electricity System Operator and the MaRS Advanced Energy Centre. The report-out from this conference contains a snapshot of participants individual and collective views on the potential opportunities that microgrids present to Ontario, as well as the challenges to realizing them. In many cases potential solutions to these issues were proposed during the workshop sessions, which are also documented in this report. As a result, these workshop proceedings can and should serve as an invaluable resource to the Smart Grid Forum and the broader electricity sector as they address the issues at hand and contemplate a path forward. We thank our cohosts for the assistance that this workshop has provided. 2
Microgrids: An Emerging Global Trend Microgrids can provide multiple benefits depending on use case and customer application. These benefits include: Resiliency this is the primary motivation behind state funding in eastern U.S. given increased power outages due to extreme weather Reliability support for overall power grid reliability 365/24/7 and maximum customer up-time Environmental increased ability to connect intermittent renewable generation resources The microgrid market is heating up quickly, with deployments occurring around the world in a variety of application segments. The industry is moving into the next phase of project development, focusing on how to develop projects on fully commercial terms. As the microgrid market is evolving, innovative solutions are coming to the fore. The key to future growth now rests with greater creativity in both the public policy and business model arenas. WHAT IS A MICROGRID? A microgrid is a group of interconnected loads and distributed energy resources (DER) within clearly defined electrical boundaries that act as a single controllable entity with respect to the grid, with the ability to connect and disconnect from the grid to enable it to operate in both gridconnected and island mode. US Department of Energy (MW) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Economic ability to leverage on site distributed generation reduces customer costs and boosts overall system efficiency Grid Support provision of system ancillary services if controlled, owned or operated by utility or system operator Asset Optimization ability to connect and optimize diverse DER as an integrated system It s also important to note that microgrids are not just about electricity; some industry experts estimate that satisfying thermal demand could represent up to 70% of the potential value of microgrids. The economic attractiveness of a microgrid, whether in Ontario, Massachusetts or India, will depend on which of the above benefits it provides and the specific value of each benefit stream. NORTH AMERICA EUROPE ASIA PACIFIC LATIN AMERICA MIDDLE EAST & AFRICA 2013 2014 2015 2016 2017 2018 2019 2020 North America is expected to see the most significant growth in microgrids in the medium term with more than 2,000 MW connected or under development by 2020. The Asia Pacific region is expected to be the next largest market, with almost 1,500 MW by 2020. 3
Convening Microgrid Stakeholders In Ontario In June 2015, the Advanced Energy Centre, the Independent Electricity System Operator (IESO), and the Ontario Smart Grid Forum hosted a summit focused on profiling domestic and international experiences with microgrids and facilitating collaborative thinking around barriers and opportunities. Through a series of interactive sessions, participants discussed current issues and barriers facing microgrid project developers in Ontario, and brainstorming opportunities to advance commercial development. [MICRO]GRIDS TODAY AT A GLANCE How Do We Create Systems Change In The Energy Sector? In highly regulated sectors, such as healthcare or electricity, there is a need for collaborative problem solving and a strategic approach to transformation of business models and adoption of disruptive technology. It s important to coordinate efforts between policymakers, entrepreneurs, regulators, and industry incumbents to enable the transition to an emerging new energy system. Technology often progresses faster than policy or regulation, which is challenging for regulated entities, such as Ontario s local distribution companies (LDCs) and suggests that a more holistic model is required for facilitating the adoption of innovative technologies. This event sought to establish a common understanding of the issues and opportunities presented by grid-connected microgrids systems in Ontario s electricity system, and enables the creation of partnerships focused on bringing new solutions to market. It is crucial that we examine current case studies underway, such as the advanced microgrid system at PowerStream s head office in Vaughan, or with Woodstock Hydro. Hosted at the MaRS Discovery District, this premier event featured 150 attendees from Ontario s utilities, government, industry, and innovation community. The AEC designed the conference to be highly collaborative, with ideation workshops and an innovation zone showcasing Ontario entrepreneurs and industry leaders. The objective was to profile microgrids initiatives in Ontario and globally and to explore opportunities for innovation and deployment of microgrids in the grid of the future. Attendee Feedback Prior to the event, the Advanced Energy Centre polled the representatives from government, utilities, innovators regulators, industry groups and associations to get a sense of barriers and opportunities in Ontario for microgrid development and deployment. When asked, what are the greatest barriers to microgrid deployment in Ontario? participants cited provincial legislative and regulatory framework, rules and policies of LDCs and lack of customer understanding as the top three. Notably, these identified barriers are non-technical. In fact, lack of technological maturity ranked low on the list of barriers. The majority of the barriers identified were regulatory and cost-oriented. In terms of opportunities, participants consistently noted environmental impact, energy efficiency, resiliency and reliability as sources of value to be realized from microgrid development. 4
What is the largest barrier to deployment of microgrid systems in Ontario? 70% 60% 50% PERCENTAGE OF RESPONDENTS 40% 30% 20% 10% 0 PROVINCIAL LEGISLATIVE AND REGULATORY FRAMEWORK RULES AND POLICIES OF LOCAL UTILITY COMPANIES LACK OF CUSTOMER UNDERSTANDING COST OF MICROGRID TECHNOLOGY AND FINANCIAL CONSTRAINTS LACK OF OPPORTUNITIES TO REALIZE REVENUES FOR SERVICES PROVIED BY THE UTLITY GRID FRAGMENTED STRUCTURE OF THE DISTRIBUTION LACK OF TECHNOLOGICAL MATURITY AND RISK OF OBSOLESCENCE LACK OF CUSTOMER INTEREST INTEROPERABILITY ISSUES WORKFORCE CONSTRAINTS ATTENDEE FEEDBACK What is the largest source of value to be realized from microgrid development in Ontario? PERCENTAGE OF RESPONDENTS 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0 ENVIRONMENTAL IMPACT AND ACCOMMODATION OF RENEWABLES OVERALL ENERGY EFFICIENCY GAINS RESILIENCE OF STRATEGIC LOADS AGAINST EXTREME WEATHER EVENTS AND OTHER THREATS RELAIBILITY FOR THE CUSTOMER COST SAVINGS FOR THE CUSTOMER RELIABILITY FOR THE BROADER ELECTICITY SYSTEM NEW SOURCES OF ANCILLARY SERVICES AND POWER QUALITY IMPROVEMENT 5
BUSINESS CASE AND ECONOMICS Current Challenges Quantifying Benefits Quantifying upfront cost vs. long-term benefits Need for new business models for behind-the-meter distribution networks (microgrids) Different Definitions Of Microgrids Diverse range of applications and value for microgrids Delineation between use-cases and crafting a common definition Diverse range of applications and value for microgrids Delineation between use-cases and crafting a common definition Structure of Pricing Models Structure of pricing signals Need for balanced cost-sharing models that limits disproportionate burden on ratepayers High cost of customer acquisition (in absence of LDC) Ownership of operations Limits of Current Business Models Emerging business models with potential regulatory limitations Poorly defined roles and responsibilities (for utilities, industry, system operator) Lack of Well-Defined Revenue Stream Low cost of energy limits applications in Ontario Requirement for a steady revenue stream for private or public project developers Current Challenges Riskier Than Status Quo Technology is viewed as risky and not seen as mainstream High-Cost Price of generation technology, especially when operating without an integrated system Complex and unfamiliar technologies Rapidly advancing technical complexity Cybersecurity Highly interconnected networks providing critical public service creates risk MICROGRID TECHNOLOGY Opportunities and Potential Actions Plan for long-term cost reductions in solar and renewable technologies vs. boilers or other building technologies Mitigate high cost of grid infrastructure renewal with distributed microgrid systems Evolve business models in alignment with new regulatory framework Incorporate microgrid solutions to other utility problems (e.g. renewal of aging infrastructure) to augment benefits and limit risk Empower utilities to share outcomes on cost-effective business models and create social benefits for their customers Explore cost reduction through vendor integration and turnkey solutions Segment microgrid applications based on customer types, technologies, value Define new roles for microgrid market participation Integrate technologies to reduce cost of diesel for remote communities (applicable to emerging global markets) Opportunities and Potential Actions Support system restart following blackout or disruption Improve reliability for customers by providing storage for backup along with intelligent control technologies Provide a linkage between electricity and other forms of energy (e.g. natural gas) at a small-scale that can arbitrage on price for a consumer Communication between microgrids for a powerful network of controllable loads and generation (and an opportunity for them to be controlled at a higher level) 6
Current Challenges Measurement of Impacts Measurement of smart grid (microgrid) impacts Evaluating true lifecycle cost of microgrid systems Lack of Standardization and Codes POLICY / REGULATORY FRAMEWORK Ambiguity of safety standards whose responsibility to certify (e.g. customer, systems integrator, utility) Standardizing communications protocols between microgrid components Regulatory Regimes Out Of Date Regulatory regimes were designed for a centralized grid, and have not been updated Slow domestic adoption inhibits export opportunities for Canadian vendors Demographic Variances in Adoption Risk that affluent build microgrid systems and low-income communities will bear the brunt of the aging grid infrastructure system (similar to the car vs. public transit) Opportunities and Potential Actions Create dialogue between policymakers, large industry, and innovators Policy leadership to define objectives that attempt to understand the true cost and subsequent value Establish consensus in industry or create incentive with a landmark project to encourage standard development Enable conversation with industry groups on different use-cases and opportunities Allow for frequent updates to regulation, such that Ontario can keep pace with other jurisdictions Requirement that regulation support innovation and simplicity, make the market easier for start-ups to navigate New investment models for electricity customers (residential, commercial, industrial) alongside public utilities Encourage regulator to work with unique customers to test-out new markets and services in the system Diversified LDCs introduce new technologies and applications, enabling a broader and better understand of innovative energy technologies Encourage new business models that create system efficiencies rather than LDC competition in providing same microgrid service From Ontario To The World: Microgrid Export Opportunities According to Navigant Research, global vendor revenue from microgrids is anticipated to reach $20 billion annually by 2020, representing over 4,100 MW capacity worldwide. This rapid expansion (over 350% growth) represents a massive opportunity for Canadian industry and entrepreneurs, and the Advanced Energy Centre is committed to enabling market access alongside our colleagues at Export Development Canada and Sustainable Development Technology Canada. Domestic validation of innovative technology is a primary driver of successful export market growth. Establishing linkages with other jurisdictions will also support bi-directional revenue opportunities and create best-in-class solutions for deployment in emerging economies. Furthermore, Ontario has an opportunity to develop skills and talent focused on development of microgrid technology and project deployment. It is clear that establishing local industry and utility expertise will position the province to play a significant role globally, and retain more of the economic benefits of major energy sector transformation. Global vendor revenue from microgrid systems is anticipated to reach $20 billion annually by 2020, representing over 4,100 MW of capacity worldwide. 7
Microgrids have emerged as a significant trend in energy networks. As such, Ontario stakeholders must re-examine business models and objectives to accommodate and support deployment of microgrid systems to harness the benefits while empowering consumers to adopt new technologies. Furthermore, policy and regulatory frameworks should be updated to reflect global trends and ensure that innovators can deploy innovative microgrid technology with Ontario LDCs to validate and accelerate access to global markets. The Advanced Energy Centre and Ontario Smart Grid Forum can be tasked with enabling meaningful ongoing dialogue focused on breaking down the barriers and quantifying the opportunities presented by deployment of microgrids in Ontario. Utilities must prepare for the impact of disruptive technologies, and there should be a renewed focused on capturing the diffused benefits of localized systems. marsdd.com The Advanced Energy Centre, Independent Electricity System Operator, and the Ontario Smart Grid Forum would like to acknowledge the support of Navigant Consulting in assembling this report, as well as the generous time and effort of all attendees during the workshops. We d also like to thank Energizing Co. and Capgemini for their generous support at [Micro]grids Today. Your contributions have enabled meaningful dialogue on deployment of microgrids in Ontario and provided a platform for collaboration amongst industry, policymakers, and Canada s energy innovators. For more information, please contact: Aaron Barter Senior Associate Projects Advanced Energy Centre abarter@marsdd.com Kathleen Gnocato Associate Advanced Energy Centre kgnocato@marsdd.com 8