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Gary Norman

Gary Norman

Gary is Oilprice.com's South-East Asia & Pacific correspondent. He writes about energy matters, geopolitics and international financial markets. 

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The Death Of Traditional Power Grids

The problem with centralized power grids is that they can be crippled at just one point of failure, leaving consumers vulnerable to outages. According to Mark Feasel of Schneider Electric, the cost of such outages for the U.S economy overall is $150 billion a year. An irritating inconvenience for domestic consumers, prolonged outages are expensive, damaging and potentially fatal to businesses of all scales. Insurance may not necessarily cover business that are forced to close due to power outages, just as it may not reimburse damage to property or stock. Given that the question of outages is likely to be when rather than if, it is no surprise that many businesses are looking to augment their power needs with backup systems. While for some that may simply be something like a backup generator, many more are utilising microgrids.

Put simply, a microgrid contains localised energy generation, distribution and in some cases, storage. Microgrids are generally used in discrete locations to provide all of the power needs of that site, but they also work in tandem with a centralized grid, augmenting or providing backup power to that supply.

The main benefits of microgrids are threefold; they are local, independent and intelligent. When energy is produced locally, the grid itself becomes more efficient. Delivering electricity form centralized grids leads to losses of between 8 and 15 percent. This locality also means that the site isn’t susceptible to power outages that affect the central grid. In such an event, the microgrid can take control of the delivery of power before there is any loss, eliminating blackouts and brownouts. The way it does this is by use of intelligent switching. A microgrid can monitor all aspects of the power system, and thereby intelligently switch between the local grid and the wider grid, depending on various factors. It can, for example, monitor price fluctuations and only draw from the main grid when prices are low, switching to local supply when they rise.

Historically, microgrids have generally been used by college campuses and the military. As of Q2 of 2017, there were 1,842 microgrids up and running, producing almost 20Gw. “The C&I microgrid market has historically been slow to develop due primarily to the lack of a clear value proposition based on the return on investment for microgrids,” says Peter Asmus, principal research analyst with Navigant Research. That is set to change as prices for solar and microgrid technologies are tumbling. Of the new and planned projects, commercial and industrial (C&I) microgrids are set to rise faster than any other - up from 20 percent to 35 percent in the next 8 years. Off-grid applications, such as mining and other commodity extraction are among the most promising markets, with data centers taking the lead in the commercial sector. Related: The World’s Largest Oil Traders Are Shifting Strategy

What does this mean for the wider grid, and specifically the utility companies that are running it? As we have seen there are applications that completely emancipate sites from the main grid, and many others are used to augment it. Both of those scenarios are certain to affect the bottom line of legacy power suppliers. Midcoast Regional Redevelopment Authority (MRRA), is currently building a microgrid at Brunswick Landing, a former Naval air base. The MRAA is planning to convert the site’s current energy system into an intelligent microgrid, in order to ultimately drive down energy costs.

In response to this threat to their business, utility companies such as Central Maine Power (SMP), who currently supply power to Brunswick Landing, are fighting back. Such action may be effective in the short term, but with the momentum of renewables and microgrids, how long will this be the case?

The legacy system of centralized power generation and distribution has remained unchallenged for decades, but with the growth of microgrids that is certainly set to change. The onus is now on those legacy utility companies to keep up with those changes. As Fortunat Mueller, co-founder of solar company ReVision Energy says, “In New York, California and many other states, strong and thoughtful regulators are starting to challenge the legacy utility business model and warning those companies to evolve or die.”

By Gary Norman for Oilprice.com

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Leave a comment
  • Lee James on March 23 2018 said:
    I've noticed that some folks just can't imagine life without large, centralized grids. In their minds, it's criminal and unethical to deny Africans, for example, modern power in the form of large power plants and miles and miles of wire and transformers.

    Do we want to go back to land phone lines in Africa? Distributed phone power seems to be doing fine. Distributed power based on the contributions of many users is the future.

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