- Carbon Reduction
The Single Most Important Policy Needed to Accelerate Microgrid Deployments
In 2011, Connecticut was the first state to pass a law authorizing microgrids to serve community resilience. A microgrid funding program was proposed in July 2012 as a response to Hurricane Irene and gained momentum after Hurricane Sandy hit in late October 2012.
Since 2012, several other states have followed Connecticut’s lead and developed specific programs to support microgrids. These states include California, Hawaii, Maryland, Massachusetts, New Jersey, New York, and Rhode Island. Washington, DC has also developed programs. Perhaps the most notable effort is not in a US state, but rather in the territory of Puerto Rico, which may redesign its entire distribution grid network around large, interconnected microgrids.
Different Forms of Government Support
Government support can take many forms. For example, incentives such as tax credits, low interest loans, or other forms of financial assistance for enabling technologies—such as solar PV systems—help facilitate microgrid developments. These incentivesare ubiquitous, however. They are not specifically focused on the integration of these assets into microgrids. The following are among the most common program support elements that are specifically driving microgrid adoption in the US today:
- Direct government grants for microgrid deployments
- Government authorized solicitations for microgrids (often meeting specific state policy criteria)
- Mandates and targets for distributed energy resources, renewables, or carbon reduction
- Specific financing vehicles that steer public or private dollars (or both) toward microgrids
- Utility regulatory reforms addressing existing barriers to microgrid deployments
- Technology commercialization roadmaps
- Approval of utility rate-basing of microgrids
Government Spending on Microgrids in US States and Territories
In terms of sheer government spending on microgrids, New Jersey comes out on top by a wide margin, largely a result of past hurricanes on the state’s economy. The state has $611.8 million earmarked for microgrids, which easily dwarfs all other state-level investments. With its $71.9 million investment, California would rank second if the focus remained on state-level microgrid funding budgets. To date, California has funded the full development of 17 microgrid projects. New York is also worth noting, since it planted more seeds for more future microgrid projects than any other state with 83 sites receiving $100,000 for feasibility studies. Only 11 of these sites, however, were awarded follow-on $1 million grants for actual project development, and then subsequent additional grants. Perhaps the most disappointing aspect of the programs analyzed was that most funding still flowed to fossil fuel capacity; only a quarter of state funding went to renewables and energy storage.
Microgrid Knowledge Conference
A recent Guidehouse Insights report will be the basis of my presentation at the Microgrid Knowledge conference in San Diego, California on May 13, 2019, Within this report are five principles that should drive government programs globally to make microgrids a mainstream reality:
- Shift from grants to market-based incentives
- Target funds toward new clean and smart technologies
- Choose projects that foster new financing business models
- Allow for flexibility and midcourse corrections
- Create metrics that capture the value of resiliency
Of these five principles to guide government support for microgrids, I would argue the most critical is the last. As noted in a previous blog, the National Renewable Energy Laboratory has done some groundbreaking work in this area. Nonetheless, such conceptual frameworks often find the translation into actual policy and regulations to be difficult. Though the value of resiliency will vary by end-use market segment and region, the microgrid industry should coalesce around a framework that could be applied to calculate resiliency. Notably, what other industry has been able to grow at double-digit growth rates in a market that doesn’t even recognize its most important value?