Chris Schuring: Micro Grid Schmicro Grid, What Is The Problem?

Well the event of blogging has risen to new high level, high or low will be your decision. I am here to tell you my point of view on all things solar and from time to time energy in general. Now keep in mind I am open to your point of view, I may not tell anyone else but I will listen.

Today I would like to open the discussion on the topic of micro, macro and mini grid development for the purposes of generating power via solar farms. The terms used for this view can be cloudy right from the beginning so let’s get the definition cleared up as it relates to this bloggers idea. I like the term microgrid for the simple fact that it takes it away from the larger picture of transmission necessary power generation and places it where it most useful, at the point of local use.  And local use can be a great opportunity for relief on the distribution network and infrastructure upgrade normally attributed to generation facilities. It can in most cases also create relief form regulatory issues in the area of Conditional Use Permits, CUP’s, and environmental issues related to large tracts of land needed for macro grid development efforts.

So for the life on my blogger ego we will define microgrid as a system that uses solar technology, either PV or CPV or thermal, to generated power at local level for local use within a reasonable radius of geographic proportions. In my history this size would generally be 10 kWh up to 100 kWh of name plate installed technology. Why chose 100 kWh as the top end, well most transformers and 3phase power sites can handle this amount of back feed without any significant upgrade and the utilities are generally more accepting of this level of power generation.

The definition of the macrogrid would be that system that has been designed to generate power in the range of 100 kWh up to 5 megawatt. These systems will require great analysis, line studies and environmental impact in some cases, as well as possible line and transformer upgrade, thus they need to have a better profit profile to gain finance traction. Minigrid systems will be those systems that are equal to or less than microgrid but fall into other finance or regulatory frameworks. Like the wheeling opportunities in California for political subdivisions and public schools. Or maybe those systems that serve a distinct client in an environment that requires accounting aggregation such as wheeled power.

First I will express my opinion as to the issues related to micro grid development and then I will espouse some possible solutions.

Now that we, meaning I, have set the bar let’s get into the bigger discussion, what is the status and process at this point. During a recent development process the creation of a microgrid was attempted. It went very well for a period of time then it went bust. The reason is that all grid connected development in this country, USA, will require a complimentary engagement with the local utilities. Sometimes this can be problematic and that problem can be magnified by local permitting agencies. The smaller the project the larger the possible impact of the regulatory issues can be as they affect the overall fiscal success of the project. It can be a major issue that some permitting agencies view all solar generation projects as the same as it relates to impact in the areas of health and safety and building code enforcement. So, permitting and regulatory issues are the first hurdle.

The second hurdle, which is also the first, which can be confusing, but keep in mind my job is not to eliminate confusion it is to create new confusion while you digest the old confusion, but that is blog for another day.

Finance is critical to any projects success, like you did not know that. Well in this case there may be a few little things that can cause you and your banker a bit of heartache. In most all case you will be dealing with the following people, land owner, title holder, title company, escrow officer, banker (the land owners), your banker, the installer (if it is not you), the utility, regulatory departments, supply chain, county planning commissions and your team. They all need money to operate and they all want some of it up front for services yet to be performed. And the team could be larger or smaller depending on how the project has been organized. Well once you have the majority of the fiscal stuff taken care of the 800 pound gorilla in the room is the Power Purchase Agreement (PPA) with the utility.

The PPA can be very tricky and should be reviewed by those that have traversed this territory before in their own projects; we can point you in a few directions on this portion. They can be complex and have a level of mathematical calculation that can trouble even a math wizard. To give you an idea we had a very competent engineer run the numbers and after several weeks of research and review he thought he was over the top on the detail. Then some other guy came by ad said, well but, and that started the ball all over again. Then we went to our finance guy and he said his guy had a different number, we went with the finance guy he had the check. These programs will be different in every jurisdiction around the globe, so check it out, do your research and then ask the finance guy what they think and meld them altogether. Placing them in a hat and drawing out a solution might be easier but in the long run it won’t work out to your advantage. Remember the price you sell the power at will be regulated by the utility or off taker not by your math genius engineer, so verify all your numbers.

That is the numbers and the supply chain and logistics are another part of the equation which I may get into on a later date. The text of the actual contracts can be daunting as well. In the area of contracts you will have contracts with all the afore mentioned people as well as logistics and supply chain. Read them carefully and in your first run have a professional review them all as one set of documents. I suggest a Para legal to flowchart them and create a review of over lapping and inconstancies prior to expending dollars on a full legal review, which should be done prior to the first project.

I am sure that I could go on about issue, but what I really want to do is create an image in your mind that micro grids can be difficult but in the long run are a great way to power local areas and support solar. I think micro grid solar development is the next big deal in energy generation and facility development. In the recent months, and I have been promoting micro grids for well over 3 years, there have been many article from people that are very smart, in those articles they too now support the microgrid solution for regional and international developing countries as well as rural areas of the domestic market. One such article said it was a very democratic way to generate and utilize power. Others have said it is the solution for a crumbling transmission and distribution infrastructure. And then one reviewed the need for microgrid for developing nations due to the large areas of uninhabitable areas that traversing power line would be problematic and dangerous.

So I said that I would give some solutions to the development of this way of doing business. Here is the solution, go out and build some, talk about it, share the idea with utilities, get them to support and buy in to the process, work with them to review with the agencies the process and permitting issues. It can be done and it will be done, there is enough business for everyone to have some. Focus on your area and region, learn from the process and seek advice.

I know it is not a technical solution nor is it a fiscal solution, it is a practical solution. If you build it they will not come, you will have to show them and teach them then they will help after you have groomed the field and place all the equipment, and then they will take the credit. I say let them, the check was made out to you anyway.

Go forth and discover, prosperity is gained by hard work and running faster than the gorilla in the room.

Chris Schuring

, , ,