Microgrids are generating a lot of buzz in energy circles, with most of the attention focused on off-the-grid islands that would enable communities and important facilities to keep the power on during disasters and other grid-failure situations.
There’s also talk about utility-side microgrids as stabilizers for the primary grid. But it’s the least talked about form of microgrid — behind-the-meter, grid-connected microgrids at commercial and industrial sites — that has the broadest market potential. And the key to making these microgrids flourish is the under-the-radar virtual battery.
C&I microgrids at their most useful consist of storage capacity in addition to the two fundamental elements — on-site power generation (usually solar power) and consuming loads — plus the capability to both send power to and receive power from the grid.
The solar boom is driving interest in behind-the-meter microgrids, as C&I facilities realize that installing solar panels reduces their overall power draw from the grid, but doesn’t increase resilience or necessarily reduce peak demand charges (because solar adds volatility, and solar production tends to drop while peak demand charges still apply).
This in turn is driving the emerging boom in energy storage — it’s why companies like Solar City are bundling solar with batteries, and battery makers see an enormous market in distributed energy. And it’s why companies are already using Powerit technology to integrate and manage solar and battery power at their facilities.
But C&I facilities don’t need a physical battery to create a microgrid. While physical batteries add valuable capacity and enable extensive participation in energy markets, the cheapest and most flexible storage solution is a virtual battery — and that’s where every facility should start.
A virtual battery is the storage capacity an advanced demand management system creates by manipulating a facility’s inherent energy flexibility and process buffers. For example, Powerit’s Spara DM application can use excess solar generation to precool cold storage rooms in food processing facilities, and then maintain the rooms’ temperatures during peak hours without drawing power from the grid.
A DMS creates this storage at a much lower cost than batteries. In our work with customers and partners, we’ve seen battery costs with a 1 MW solar system ranging from $500 per kW to $1,600 kW. That compares with $125 per kW for a DMS shedding peak load, and $240 per kW shedding demand response load. In other words: a virtual battery reduces peak demand for less than one-quarter to one-thirteenth the cost of a physical battery. It’s also much easier: installing a software-based demand management system typically does not require any build-out, and it reduces or eliminates the need for permits, which can take up to a year or more to obtain.
That’s not to say physical batteries aren’t worth the cost — they can be, depending on what you want to achieve. Early implementations we’ve seen fall into three levels of behind-the-meter microgrid, based on capacity and capabilities.
Solar power + demand management (virtual battery)
Solar power plus demand management is the minimum setup needed to create a behind-the-meter microgrid and provides essential control capability. In addition to creating a virtual battery that balances solar intermittence, the DMS enables participation in auto-demand response programs, controls demand peaks and manages loads against dynamic pricing structures — all without compromising essential production.
For example, our analysis of an 8 MW beverage facility in California, showed that the volatility of the facility’s demand from the grid increased by 30 to 50 percent after adding a 2 MW solar PV system. The facility was drawing less power from the grid, but its demand was less efficient. We found that Spara DM could shift potentially 370 kW of demand on peak and 400 kW at midpeak to smooth the demand profile, saving about $127,000 annually.
And from the utility point of view, this is a more stable customer — the utility doesn’t have to balance their intermittence because it’s their interest to do it themselves.
Solar power + demand management + basic battery
Once a facility has optimized use of the cheapest, most flexible option — the virtual battery — it can add a physical battery to create more capacity and expand its ability to participate in fast DR and the transactive energy market, which will allow distributed resources to contribute their generation and capacity resources to the grid at market rates.
With a basic battery, capable of storing 5 to 10 percent of the facility’s peak demand, responsive (designed for shorter-duration discharge), and allowing the facility to operate independently from the grid for less than one hour, the facility would gain increased demand charge shaving and solar firming (compensating for solar volatility) as well as additional capacity to provide ancillary services to the grid (a form of DR that yields the highest payments).
A smaller battery offers the best return on investment in utility environments where a relatively modest increase in energy flexibility will max out the benefits of peak demand shaving and ancillary services provision.
Solar power + demand management + deep-storage battery
A facility that adds a deep-storage battery, capable of storing 40 percent or more of the facility’s peak demand, can operate independently from the grid for more than one hour and go off the grid in emergency situations. That means resilience and independence: big batteries protect a facility from outages for extended periods of time, and with demand management maximizes that capacity.
In addition, the combination of a big battery and a virtual battery allows a facility to balance any remaining solar volatility, arbitrage energy purchases by charging up off-peak and discharging on-peak, participate in DR programs without any change to plant operations, and provide more ancillary services.
For businesses that need protection from grid outages or multiple opportunities to earn revenue from their load flexibility, a battery with deep storage capacity can be well worth the investment.
Incorporating a demand management system as a microgrid controller is a no-brainer for C&I facilities that install solar panels. The microgrid controller can monitor the availability of solar power and optimize facility loads, storage, on-site fossil-fuel generation, and power draw from the grid to produce the lowest-cost, highest-revenue energy solution for the facility. At the same time, installing these intelligent controls at the grid edge enables utilities to create new grid-balancing programs and avoid costly new grid infrastructure and generation projects.
Ultimately, that benefits everyone.
Author: Kevin Klustner is CEO of Powerit Solutions. Kevin is a seasoned executive with a successful track record that ranges from Fortune 50 companies to venture-backed startups and has led companies into new markets, increased revenues dramatically, and helped companies take leading positions in their markets.