• Microgrid
  • DER
  • Carbon Emissions
  • Climate Change

The Energy Transition and Resiliency: Can Both Win?

Apr 22, 2021

Guidehouse Insights

The energy industry is undergoing a major revolution as the world turns from fossil fuels to renewable energy to stem global climate change. The hype surrounding the anticipated role of energy storage, including hydrogen, speaks to the major changes underway. Less attention is paid to the more nitty-gritty issues and the roles that supporting technologies and business models can play because they are not the shiny bright objects under the spotlight.

A Decarbonization-Focused Approach to Resiliency Is Needed

Along with a shift to renewable energy by countries, states, utilities, and corporations, distributed energy resources (DER) are also anticipated to rely on renewable energy. The chart below shows how DER and centralized capacity are anticipated to reshape the global energy economy, with DER likely surpassing centralized generation in 2021. The gap will grow over time as total variable renewable energy simultaneously increases.

Annual Total DER vs. Centralized Capacity by Region, World Markets: 2021-2030


(Source: Guidehouse Insights)

To prepare for this energy transition, utilities have upgraded their distribution and transmission infrastructure to accommodate this increased complexity. According to Guidehouse Insights, investments in smart grid upgrades are expected to reach over $25 billion between 2019 and 2021 for North America alone. Still, the reliability of the US power grid continues to decline, especially if major event days are included in measurements. Whether hurricanes, tornadoes, wildfires, or snowstorms, the effects of extreme weather outages can be substantial, resulting in deaths, loss of economic activity, and property. The extended February 2021 power outage in Texas underscores the challenges the US faces. The damage to the Texas economy was on par with a Category 5 hurricane. While part of the problem in Texas was linked to electrification trends on heating in the Lone Star state, this trend underscores the need for a new approach to resiliency that also supports long-term decarbonization.

Turning Microgrid Assumptions Upside Down

Ironically enough, the solution to this dilemma is homegrown for Texas in the form of dual purpose microgrids pioneered by Enchanted Rock of Houston. The company has come forward with the concept of dual purpose microgrids, which have turned many assumptions about microgrids on their head. A new white paper from Guidehouse Insights defines these microgrids and examines their successful performance during the February 2021 Texas power outage. The white paper spells out how microgrids, even if fueled by natural gas, can serve as critical supporting infrastructure as society moves toward a zero net carbon energy future.

Despite some popular misconceptions, these dual purpose microgrids do not compete with grid supplied power. Instead, the microgrids displace historical reliance on backup diesel generators—which represent one of the most polluting of all power generation options. Dual purpose microgrids also generate a cost-offsetting revenue stream by supplying services to the wider grid during emergencies. They can also help balance variable wholesale wind power in Texas, which boasts the largest installed wind capacity in the US. Most microgrids view the provision of grid services as an incremental future potential revenue stream. The Enchanted Rock business model, however, is based on revenue offsetting modest capital costs associated with modular microgrids that typically rely on ultra-efficient generators, which can also switch to cleaner fuels over time.

According to the US Environmental Protection Agency, eight of the 10 warmest years on record for the US have occurred since 1998. Furthermore, nine of the 10 most extreme 1-day precipitation events also have occurred since 1990. Scientists predict these extreme weather events are likely to continue or accelerate. Dual purpose microgrids need to be part of the solution.