As global energy systems shift towards increasing decentralization, microgrids may have the potential to offer a myriad of benefits; such as enhanced resiliency, provision of grid ancillary services, optimization of assets, customer self-sufficiency, options for more distributed operations, avoided cost opportunities and reduced carbon emissions through integration of renewables. The analyst communities estimate that the global vendor revenue for microgrids may be as much as $20 billion annually by 2021. This represents potentially significant opportunities for investment in and export of Ontario energy innovation in this space.
Utilities and other end users in Ontario are noticing these trends and drivers, and some early adopters have already started to implement microgrid pilot and demonstration projects across the province. For example, Toronto Hydro worked alongside Opus One to build a microgrid for the Athlete’s Village, at the 2015 PanAm Games in Toronto. In June 2016, Powerstream commissioned its Penetanguishene MiDAS Microgrid project, in partnership with the Korea Electric Power Corporation (KEPCO). Similarly, Siemens has modelled and is in the process of implementing an optimized 4MW microgrid at Algonquin College in Ottawa.
There has been considerable discourse in the energy sector on the future integration of microgrids into our electricity systems, and yet the majority of microgrids currently operating in Ontario are still at pilot and demonstration phase, and have required fairly significant incentives. Minimal investment has been seen to date towards deploying these systems on a commercial scale.
So, what are the barriers to commercially viable microgrids in Ontario? The Advanced Energy Centre (AEC) at MaRS has consulted with industry and have found that technology is, for the most part, not the issue here. We have the innovative companies available right on our doorstep to provide these solutions, and the technological capabilities to successfully integrate them in our grid systems.
Energy players also recognise the tangible benefits in these systems hold, both utilities and end users alike. In 2015, consultations with the Ontario energy sector revealed that the top perceived value streams for microgrid development in Ontario were:
- environmental impact and accommodation of distributed, renewable energy sources;
- overall energy efficiency gains;
- resilience of strategic loads against extreme weather and other threats; and
- reliability for the customer.
Many key players in the sector cite financial, regulatory and legislative barriers as the main factors impacting widespread microgrid deployment. But the predominant barrier to microgrid deployment continues to be financial. There continues to be uncertainty and limitations around the business model for these systems.
While most agree on the benefits of microgrids, it is much harder to quantify these benefits and to extract actual revenue streams to balance capital outflows. The diffuse incentive structures and current pricing models for microgrids compound the difficulties often faced when defining the revenue structure for these systems. Who owns it? Who pays for it? Who operates it? … Who ultimately realizes the benefits?
We’ve also found that the closest data points and projections for microgrids are North America wide, or based on US state-level markets (e.g. New York and California), and for the most part microgrids deployed in these jurisdictions have also required incentives. Although there is much to be learnt from other markets, lack of local data makes it hard to extrapolate what the commercial viability for these systems is for Ontario specifically. There are nuances within our energy system’s structure, our regulation, our electricity pricing etc., which renders much of this data obsolete for the customers or utilities trying to make an informed decision on the economics of these systems.
In addition, microgrids often get lumped into one all encompassing bucket, when it comes to generating business cases and cost projections. But the use cases for these systems are very different, and their differing characteristics leads to different drivers, incentive structures and business cases. The business case for a utility scale microgrid is very different to that of a commercial or industrial microgrid customer.
[inlinetweet prefix=”” tweeter=”@marsdd” suffix=”#Futureofmicrogrids”]There needs to be a way to cut through the noise on microgrids[/inlinetweet], to make sense of and analyze all the diffuse data already out there, and look specifically at the economic and non-economic factors affecting the business case for these systems in Ontario. Energy players need to be able to make intelligent decisions when allocating funds towards microgrids. Government should be equipped to make informed policy decisions around these systems, based on pragmatic, Ontario-specific data.
To facilitate this evidence based decision making, the Advanced Energy Centre has begun work with Navigant, to analyze and forecast the commercial viability of four microgrid use cases in Ontario. The use cases examined are within the commercial and industrial, institutional, utility and residential customer groups. It is hoped this research will help enable the efficient direction of resources towards microgrids in the province, and expose the barriers and opportunities they present within our energy system. This research will culminate in a four-part report series, due for release in early October.
The AEC will be hosting the Future of Microgrids seminar on the 22nd September at Evergreen Brick Work’s Centre for Green Cities, to present the findings of this research to date. The goal of this event is to collect pragmatic industry feedback on the real world implications of our findings. We are inviting stakeholders from across the energy sector and microgrid customer segments to join us on the day. Please follow this link for more information and to register for the event.
The Advanced Energy Centre would like to acknowledge the support of our Future of Microgrids report series and event sponsors: Siemens Canada, Ontario Power Generation, NRStor, Toronto Hydro and PowerStream.
“We, at Siemens, were very interested in being a part of this report series because we felt we could contribute knowledge and experience from our Canadian microgrid projects. In addition, we were interested in engaging with other technical experts to understand how to move commercially viable microgrids forward.” Andrew Melchers, Digital Grid Products and Systems, Business Manager, Siemens Canada.
“Ontario Power Generation is pleased to be involved in this research series with the AEC and Navigant Research. Interest in urban and remote microgrids has increased significantly in the past few years. OPG has been investigating the viability of microgrid deployment in different scenarios. We see the Future of Microgrids initiative as furthering timely and relevant research in this burgeoning area. We also look forward to participating and contributing to this industry dialogue.” Josephina Erzetic, Vice President – Corporate Business Development, Ontario Power Generation
“Developing Microgrid projects is hard work. We need to develop new business models for compensation and value exchange, at the same time as deploying new and interconnected technologies. NRStor is pleased to support this initiative with AEC and help bring clarity on the potential for Microgrid opportunities in Ontario.” Jason Rioux, Vice President, NRStor.
“PowerStream believes that microgrids will complete the market by offering customers with innovative energy choices. We are particularly interested in getting past the pilot stage and understanding the commercial viability of these alternative energy sources.” Neetika Sathe, Vice President – Corporate Development, PowerStream Inc.