The old definition of a microgrid was usually an electricity source, often a combined heat and power natural gas plant or a reciprocating engine generator, that provided fulltime or backup power for an industrial site, military installation, university, or remote location.
Today’s definition is much broader, incorporating cleaner technologies and more diverse customers, establishing microgrids as a key component of tomorrow’s more resilient, efficient and low-emissions electricity system.
A new brief, Microgrid Momentum: Building Efficient, Resilient Power, by the Center for Climate and Energy Solutions (C2ES) and The George Washington University (GWU) outlines microgrids’ benefits and examines what is standing in the way of accelerating their deployment.
Microgrids currently provide a tiny fraction of U.S. electricity (about 1.6 gigawatts, or less than 0.2 percent), but their capacity is expected to more than double in the next three years.
Three examples of the growing interest:
- Montgomery County, Maryland, recently entered a public-private partnership to develop two microgrids to power county facilities. Ratepayers won’t have to foot the bill, and the government will get more resilient and affordable power with environmental benefits.
- In the Denver suburbs at Peña Station Next, a “smart” city is taking shape that will test LED lighting, autonomous vehicles, and a microgrid that uses solar panels and battery storage.
- In Alaska, the state with the most microgrids, the city of Anchorage is about to deploy a project that will make use of two energy storage technologies and help the area integrate more wind power.
Microgrids not only improve reliability and resilience – keeping the lights on during a widespread disaster that affects the main grid -- but also increase efficiency, better manage electricity supply and demand, and help integrate renewables, creating opportunities to reduce greenhouse gas emissions and save energy.
But financial and legal hurdles stand in the way of accelerating their deployment.
Each microgrid’s unique combination of power source, customer, geography, and market can be confusing for investors. Microgrids can run on renewables, natural gas-fueled turbines, or emerging sources such as fuel cells or even small modular nuclear reactors. They can power city facilities, city neighborhoods, or communities in remote areas. As we heard during our research, “If you’ve seen one microgrid, you’ve seen one microgrid.”
The legal framework can be confusing, too. Most states lack even a legal definition of a microgrid, and regulatory and legal challenges can differ between and within states. Issues include microgrid developers’ access to reasonably priced backup power and to wholesale power markets to sell excess electricity or other services. Also, franchise rights granted to utilities may limit microgrid developers’ access to customers.
The report identifies tools that can help address these challenges.
- Public-private partnerships could play a growing role in overcoming financial hurdles. Mixed ownership microgrid projects, which can include money from public institutions, utilities, and private entities, have increased from nearly zero in 2013, to a projected 38 percent of the market in 2016. Recent examples include microgrid partnerships at Peña Station Next in Denver, Colorado, and two government facility microgrids in Montgomery County, Maryland.
- States can also play a key role in facilitating microgrid development. Most existing microgrid projects are concentrated in seven states: Alaska, California, Georgia, Maryland, New York, Oklahoma, and Texas. Some states, including California, Connecticut, Massachusetts, New Jersey, and New York, have created clean energy banks, grants, or other funding opportunities for microgrids. For example, New York established a $40 million grant program (i.e., NY Prize) to create community microgrid projects that can serve as templates for other communities. More state grants or low-cost loans could help launch more microgrids.
- Linear programming models like the one outlined in the report can help focus a proposed project on cost savings, emissions reductions, or independence from the larger grid; forecast or estimate cash flows and financing needs; and manage power supply and demand.
Microgrids are not a traditional or typical infrastructure investment for utilities, nor has the existing electric power industry been structured to facilitate development of microgrids by non-utilities. We’ll need more dialogue among the finance community, service providers and implementers, and government and regulatory agencies to develop the frameworks and policies needed to foster microgrid development.
California and New York are leaders in setting ambitious climate goals. Both have committed to producing half their electricity from renewable sources by 2030. Both have set identical goals of reducing greenhouse gas emissions 40 percent below 1990 levels by 2030.
Where they part ways, however, is on nuclear power, which supplies the majority of zero-emission electricity in the United States. California is letting its nuclear plants ride off into the sunset while New York, which just approved a Clean Energy Standard that specifically includes nuclear power, is actively trying to preserve them.
This summer, Pacific Gas & Electric Company (PG&E) announced it will close its Diablo Canyon nuclear plant – the last one in the state of California – by 2025. After striking an agreement with environmental and labor groups, PG&E said it will seek to replace Diablo Canyon’s roughly 18,000 GWh of annual electricity – almost 10 percent of California’s in-state electricity – through improved energy efficiency, which will decrease demand, and renewable energy.
Many experts think it will be a stretch to reach that goal, especially by 2025, and that natural gas will have to fill the gap, as it has where nuclear plants have closed elsewhere in California, Vermont and Wisconsin. In New England, emissions increased 5 percent in 2015 after the Vermont Yankee nuclear plant shut down and was largely replaced by natural gas-fired electricity.
Diablo Canyon might have kept going if PG&E had gotten its way in negotiations with the state last year to include nuclear power in California’s renewable portfolio standard (RPS). That standard requires utilities to produce a certain amount of electricity from renewable sources like wind, solar, geothermal and hydropower. Including nuclear would have helped it compete economically with other low-carbon energy.
New York’s path
That’s exactly the path being taken in New York, which gets a third of its in-state electricity from nuclear power. To preserve the low-carbon benefits of its economically troubled upstate reactors and ensure its electricity mix becomes increasingly clean – with no backsliding – New York’s Public Service Commission has approved a clean energy standard (CES), which is essentially an RPS that includes nuclear.
New York’s CES mandate, which will take effect in 2017, is a novel approach that incorporates best practices from other states. It’s designed to incentivize new renewables deployment while also preserving existing clean electricity generation.
New York’s CES has three tiers, each with its own supply-demand dynamics. Tier 1 will incentivize new renewable development. Tier 2 is designed to provide sufficient revenue for existing renewable electricity supply. Tier 3 is designed to properly value the emission-free power from the state’s at-risk nuclear power plants.
Nuclear plant operators have long sought to correct what they perceive as a market failure to compensate nuclear power for its low-carbon benefits. If the at-risk reactors were replaced by an equivalent amount of fossil generation, emissions would increase by 14 million metric tons – increasing the state’s carbon dioxide emissions nearly 10 percent.
New York’s plan isn’t without controversy. There’s concern that it’s too costly. However, an associated cost study by the PSC found that the state could “meet its clean energy targets with less than a 1 percent impact on electricity bills.”
Most U.S. states have a renewable portfolio standard or alternative energy standard. Only Ohio allows new nuclear to qualify. Only New York has provisions for existing nuclear power plants.
Illinois is working to expand its RPS to include nuclear into a low-carbon portfolio standard, similar to New York’s CES, but efforts have stalled in the state legislature. Exelon has announced plans to close two nuclear power plants in the state in 2017 and 2018, which could lead to an additional 13 million metric tons of carbon dioxide emissions for the state.
Across the U.S., nine reactors are scheduled to close by 2025, which could increase carbon emissions by about 32 million metric tons, or 1.7 percent of the current total U.S. carbon emissions from the power sector.
New York’s approach to reducing its emissions is a practical, well-considered model that many other states could be following (Arguably, a national price on carbon would be more efficient, though more challenging to enact.)
New York’s four upstate reactors provide significant environmental and economic benefits. From a climate perspective, it doesn’t make sense to prematurely close these facilities when, in the short- and medium-term, they cannot realistically be replaced by alternative zero-emission power sources. Keeping these reactors operational also buys us additional time to address energy storage and transmission challenges to support more renewable generation.
With reasonable policies in place to support the existing U.S. reactor fleet, it will be easier for the U.S. to reduce its emissions and achieve its climate goals.
In fact, for the first time since 1979, U.S. cars, buses, trucks and airplanes emitted more carbon dioxide than U.S. power plants.
Based on the latest available rolling 12-month average, the electricity sector emitted 1,868 million metric tons (MMt) of carbon dioxide while the transportation sector emitted 1,876 MMt.
For the past 10 years, electricity emissions have been declining due to a number of factors, including growth in renewable energy, level electricity demand, and a shift from coal to natural gas. Since 2005, coal-fired generation has fallen from 50 to 33 percent of the mix, while less carbon-intensive natural gas-fired generation has risen from 19 to 33 percent.
Transportation emissions had been largely flat since the early 2000s, likely due to increasing vehicle efficiency and a combination of social trends (e.g. growing cities, ageing population, increasing telework). But emissions have begun to creep up in the past couple of years.
Some of this uptick can be attributed to much lower oil prices over the past 12 months. But even before oil prices dropped, the total number of vehicle miles traveled was increasing. So, even though our vehicles are getting more fuel efficient over time thanks to corporate average fuel economy (CAFE) standards, the increase in vehicle use is moving emissions in the wrong direction.
Over the long-term, the Energy Information Administration (EIA) projects that transportation emissions will decline as stricter vehicle emission standards come into force for cars and for trucks. As a result of these policies, we expect the adoption rate of vehicles with improved fuel economies, including zero-emission vehicles, will begin to accelerate in the next decade.
At the same time, EIA sees electricity sector emissions continuing to fall, especially as states begin to comply with targets set out in the Environmental Protection Agency’s Clean Power Plan and as the industry responds to other zero-emission incentives like the recently extended renewable tax credits.
Over the next 25 years, the rate of emission decline in the power sector is expected to be greater than in the transportation sector, so it looks like transportation will remain the largest emitting sector for the foreseeable future.
The good news is that carbon dioxide emissions will be declining in the two largest emitting sectors, due in part to strong policies to encourage a low-carbon future.
However, it’s also clear that additional policies and actions will be required for all economic sectors to see larger emissions reductions, which scientists say are necessary by mid-century in order to avoid the worst effects of climate change.
After witnessing the historic signing of the Paris Agreement by 175 nations, we now need to turn our attention to fulfilling its promise.
As its nationally determined contribution to the agreement, the United States set a goal of reducing net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. In a new paper, C2ES outlines how expected and in-place policies could get us close to the goal line -- reducing emissions by as much as 22 percent. Getting the rest of the way can likely be achieved through a mix of additional policies, city and business action, and technological innovation.
First, let’s look at how we can get to a 22 percent reduction.
U.S. net emissions are already down more than 9 percent from 2005 levels due to market- and policy-related factors, including a shift in electricity generation from coal to natural gas, growth in renewable energy, level electricity demand, and improved vehicle efficiency.
The C2ES business-as-usual forecast, drawn from a number of analyses, projects an additional 5.6 percent reduction in net emissions through such policies as greenhouse gas standards for vehicles and the Clean Power Plan.
The rest of the anticipated emissions reductions is expected to come from new, higher estimates of future carbon sequestration and additional measures under development, including steps to strengthen fuel economy standards for medium- and heavy-duty trucks, reduce methane emissions in the oil and gas sector, and reduce hydrofluorocarbons (HFCs).
Now, how will we address the remaining gap of at least 270 million metric tons carbon dioxide equivalent?
Additional federal policies would help. For example, greenhouse gas standards could be set for major industrial sectors under section 111(d) of the Clean Air Act, the same section that underlies the Clean Power Plan.
Technological advances that lower the cost of emissions reduction will also undoubtedly play an important role. Over the next five to 10 years, battery storage technologies are expected to improve by a factor of 10, which would support the integration of more renewable generation. A promising design for a natural gas power plant with nearly 100 percent carbon capture will enter the demonstration phase next year and could be commercialized soon after. And agricultural advances are leading to more sustainable crops able to sequester more carbon dioxide in their root systems.
Stronger efforts by cities will also be critical to filling the gap. A growing number of cities are working to improve the energy efficiency of residential and commercial buildings, which account for for 41 percent of total U.S. energy consumption. Greater adoption of Property Assessed Clean Energy (PACE) programs, which help finance energy efficiency and renewable energy projects, could significantly reduce city energy demand. Similarly, city programs to build out infrastructure to increase the adoption rate of electric vehicles will, in-time, appreciably lower transportation-related emissions.
Companies, too, will play a key role. Twelve leading companies signed the C2ES statement calling on governments to quickly join the Paris climate pact and pledging to work with countries toward the domestic measures needed to achieve their national emissions-cutting contributions. More than 150 U.S. companies with a combined market capitalization in excess of $7 trillion joined the American Business Act on Climate Pledge – committing to reduce emissions, increase renewable power, or finance climate efforts. And the White House is calling on more companies to join the initiative.
The United States has significantly reduced its greenhouse gas emissions over the past decade. Cutting emissions 26 to 28 percent below 2005 levels by 2025 is a challenging goal. But many options remain untapped, and concerted efforts across multiple fronts can get us across the goal line.
|Source: International Energy Agency|
For the second year in a row, the global economy grew and global carbon dioxide emissions did not.
Preliminary data from the International Energy Agency (IEA) indicate that energy-related carbon dioxide (CO2) emissions (from burning fossil fuels for electricity, transportation, industry, space heating and so on) remained unchanged from the previous two years at around 32.1 billion metric tons. Meanwhile, economic growth increased by more than 3 percent for the second consecutive year.
A couple years of data doesn’t necessarily translate into a trend. And continued ambition in the decades ahead - like we saw with the landmark Paris Agreement in December 2015 - will be required before we can announce that we have truly turned the corner on reducing CO2 emissions.
But the IEA noted that 90 percent of new electric generation in 2015 came from renewables. Yes, 90 percent. And this apparent decoupling – after decades of energy-related CO2 emissions moving in lockstep with economic growth -- is a positive sign that low-carbon policies may finally be gaining traction in many parts of the world.
The change is due to policies and market forces affecting two factors – energy intensity and fuel mix – both in China and in the developed economies.