4. Problem
“How do customers value Microgrids and
what are they willing to pay for them?”
Chris Cavanagh, National Grid at
New York Energy Week 2015
5. Methodology
1.
• Explored Microgrid opportunities
within geographies:
• Philippines, South Africa, New Jersey, New York
2.
• Designed system of four value drivers
for analysis
3.
• Conducted primary and secondary
research to reach conclusions and
recommendations
VoLL
Identity
Finance
ability
LCoE
6. Value Driver #1: Value of Lost Load (VoLL)
Elements:
• Wages (Direct)
• Lost Product
• Lost Revenues
• Lost Operating Capital
• Customer Frustration
• Management Frustration
• Liability Issues
Lower and Upper Bound VoLLs in Texas
by Electric Reliability Council of Texas (ERCOT)
Definition: the perceived value of uninterruptible power
Loss ($/kW) = ƒ (duration, season, time of day, notice)
7. Elements:
• TOU/Curtailment: DR
• Gov't Program : Grants
• Value of Upgrade: Real Estate
Value, Building Performance
• Grid Revenue
• kWh comparison to diesel/grid
Definition: (CAPEX + OPEX) / Energy
Value Driver #2: Levelized Cost of Energy (LCoE)
8. Value Driver #3: Identity
Elements:
• Green
• Cultural Acceptance
• Energy Independence
• Smart / Tech
• Resilient / Reliable
• No Noise, Comfort Factor, Health
Definition: the value of reputation and brand identity resulting from
Microgrid adoption
Hilton Ft. Lauderdale Beach Resort
distinguished itself as the destination for
green lodging and events
9. Value Driver #4: Financeability
Nation / Region
• National Credit
• National PPP
• Political Risk
• Utility Regulations
• Grants / Subsidies
Customer
• Cash
• Credit
• Underwriter
• Government Program
• Cost Savings
Asset Characteristics
• Warranty
• Performance Guarantee
• Insurance
• Standardized Contract
• Secondary Market
Definition: access to financing
Elements:
10. Philippines
Factors to Consider
• High Cost of Electricity
• Risk of Power Outages
• Government Incentives for Renewables
• Plentiful Solar and Wind Resources
Promising Industries
• Hospitals
• Universities
• Resorts
(Many others: data centers, call centers, supermarkets, OEMs, manufacturing, etc.)
VoLL
Identity
Finance
ability
LCoE
Hospitals
Universities
Resorts
11. South Africa:
• VoLL: High VoLL with “Load-Shedding”.
• IEA: 200k mini-grids by 2040
• LCoE: Modest kWh and kW rates, 12%+/yr.
• Government Commitments: 6.4GW by 2020
• Identity: A handful of target regions (Cape Town, REP)
• Wineries, Commercial, Light Manufacturing, Restaurants, Hospitals,
Retail, etc.
• Financebility: Poor Sovereign Credit, Variable Client Risk
• International Customers or Fund Support, i.e.
• Competition:
• Partners?:
VoLL
Identity
Finance
ability
LCoE
12. United States
• Aging US Power Grid Blacks Out More Than Any Other
Developed Nation (DoE/NERC)
• Loses power 285% more often than in 1984
• Costs American businesses $150 billion per year
• US Microgrid Capacity Will More Than Double by 2020—
and Include a lot More Renewables (Greentech Media)
• Commercial & Industrial will lead growth, with 40% in 2020
• Renewables from 6% today to 23% in 2020
13. New Jersey
VoLL
• Hurricane Sandy cost businesses in NJ $30B
LCoE
• Average cost of electricity: Medium/High
• Demand charge: High
Identity
• Market acceptance, but other factors more important
than “green”
Financeability
• Highly developed standards
• BPU energy storage program, ERB
• NJ PACE coming online for 2016
VoLL
Identity
Finance
ability
LCoE
14. New York
Progressive Energy Vision
• REV, RPS, Emphasis on Resilience
LCoE
• Extremely High kWh Rates and kW Charges
VoLL
• Sandy, Irene, 2003 blackout.
Identity
• New Yorkers Prefer Green
Financeability
• Federal Funding – HUD, RISE: NYC, DoE
• State Level – Green Bank; NYSERDA, NY Prize
• Utilities - ConEd DMP and BQDM
Promising Industries
• Critical Infrastructure
• Universities/Colleges, Libraries, Business Parks, Factories, Big-Chain Supermarkets
VoLL
Identity
Finance
ability
LCoE
NYC
Mid-Hudson
Long Island
15. Recommendations
Should UGE consider Microgrid projects in these locations?
• Philippines: Yes – Very high VoLL and LCoE. Focus on well-funded private employers in industries most
vulnerable to unreliable grid and high cost of electricity
• South Africa: Maybe – Rates increasing, but still low. Extremely high VoLL. Launch now in Cape Town if
feasible, future rate climate is promising
• New Jersey: Yes – High VoLL and LCoE. Leverage demand charge management, frequency regulation
and SRECs
• New York: Yes – High VoLL and LCoE. Abundant financing mechanisms. Leverage Public/Private
Partnerships to deploy at scale.
No “one-size-fits-all solution” - Microgrid projects must be tailored to individual clients’ needs
Stakeholder engagement and relationships are essential
