Summary: Electricity distribution companies could build, own, and operate microgrids to meet customer demands for enhanced reliability and supply critical loads during service disruptions.
Rather than view microgrids as new competitors to traditional electricity distribution utilities, perhaps these local networks of distributed generators, smart electricity loads, and energy storage devices should be seen as a new business opportunity. That’s exactly what Central Hudson Gas and Electric Company is thinking, as the New York-based transmission and distribution utility explained in recent testimony before state regulators.
Central Hudson wants to offer microgrids as a new service for electricity customers that desire improved reliability. A single large customer or an aggregation of many smaller customers with a total demand of 500 kilowatts or greater would enter into a service contract with the utility, which would build, own, maintain, and operate a custom-designed microgrid for those customers.
Microgrids would offer two main benefits: 1) assurance that energy supplies will be provided to sites deemed critical for public services or safety even during wide-scale outages or natural disasters; and 2) enhanced reliability and resilience for high-priority sites where outages can cause serious disruptions, risks, or financial costs.
Prime candidates for microgrids include hospitals, military bases, police and fire services, and other key government facilities, as well as university campuses, schools, and large commercial or industrial facilities that require uninterrupted power supplies. Costs for the microgrid would be recovered from participating customers through the service contract and would not affect other utility customers or rates, according to Centarl Hudson’s testimony.
Utility-owned and operated microgrids would compete with other installers of distributed generation, uninterruptable power supplies, and energy storage devices. A utility’s expertise in designing, building, and operating electricity networks could give them an advantage, and customers who want better reliability could benefit from a cheaper alternative to buying their own batteries or backup generators. On the other hand, regulators will need to be wary of any anti-competitive behavior that unfairly disadvantages non-utility providers of similar services. As usual, maintaining a balanced and level playing field for competition and innovation in new electricity services will be critical.
Publication: “Direct Testimony of the Reforming the Energy Vision Panel Before the New York Public Service Commission,” Central Hudson Gas and Electric Corporation, July 25, 2014 (NY PSC Case 14-E-0218).
Authors: Charles A. Freni is Senior Vice President for Customer Services at Central Hudson Gas and Electric Corporation. Anthony S. Campagiorni is Vice President for Business Development and Governmental Affairs at Central Hudson Gas and Electric Company.
Note: This is article is part of an ongoing series of concise summaries of interesting and important conclusions from new research and peer-reviewed journal articles. This series at Full Spectrum is written in partnership with Observatorio de las Ideas, a Spanish-language publication which finds and summarizes important, cutting-edge ideas for policy makers, business leaders, and others on key topics like energy, health care, economics, and more.
- Would you pay more for greater reliability of your electricity supply? Would you participate in a microgrid with other utility customsers if your utility offered this service?
- Should regulated monopoly electric utilities build, own, and operate microgrids for their customers, or should competitive third-parties provide microgrid services instead? Will utilities abuse their monopoly position to disadvantage competitors like battery, fuel cell, or cogeneration installers or energy service companies?
- Will traditional utilities be innovative enough to become leading providers of microgrids? Or would nimbler startups or new market challengers better capture the opportunities provided by new smart grid or microgrid technologies?
- What should regulators do — or refrain from doing — to promote innovation in electricity services and a modern grid?