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The Regulatory Path Forward for Networked Microgrids

May 21, 2020
If networked microgrids can contribute to a more resilient grid, we should investigate and implement options for them to do so.

The distribution grid is the most vulnerable part of the electric power system and it is where more than 90% of all power interruptions occur. Extreme weather events, such as Superstorm Sandy and wildfires, are occurring and affecting the power system with increasingly higher frequency and intensity. The human and economic costs of power interruptions are increasing, together with the frequency of interruptions, making a more resilient distribution grid more important than ever before. Recent cyberattacks show that protecting power delivery is also a matter of national security.

The U.S. Department of Energy (DOE) is investing in technologies that reinforce the reliability and resilience of the distribution system through cutting-edge research on new microgrid designs and grid operation algorithms.

Systems of two or more microgrids that exchange electricity during power outages can increase their combined resilience by sharing backup power resources. These systems can also reduce capital costs by reducing the total capacity of the distributed generation needed to provide a target level of resilience. Physically and operationally interconnecting separate microgrids into networked microgrid systems can further reduce operational costs by allowing two or more microgrids to share loads with diverse profiles and by sharing complementary sources of power during normal operation of the grid.

A system of networked microgrids could be designed to protect not only the critical loads inside the microgrids but also loads along the path that connects them. Networked microgrids could operate in a way that maximizes the value of added resilience for their users — and potentially for neighboring loads as well.

Increasing the resilience of microgrid systems also has the potential to improve the resilience of the whole electricity system. A system of networked microgrids and distributed energy resources (DERs) that intelligently reconnect during abnormal grid operation can provide power to critical infrastructure and assist in restarting the grid from the bottom up.

Despite advances in technology, however, networking separate microgrids remains a challenge because of regulatory issues. Microgrids and networked microgrids operate at the intersection of their technical capabilities and the features allowed by local regulatory environments. In other words, regulation can sometimes prevent technological advances from being implemented economically or at all. Regulatory practices vary across the country but they have many features in common that currently prevent society from realizing the benefits of networked microgrids.

Regulatory Challenges

One stumbling block in most regulatory jurisdictions is the lack of a definition in regulations or statutes that recognizes the unique characteristics of microgrids. A microgrid is more than the sum of its parts, thanks to the controller that coordinates the operation of the microgrid's diverse components and optimizes its operation for the benefit of the microgrid's owners and users. However, a microgrid is not a utility. Being regulated as a utility imposes regulatory requirements that make the operation of most microgrids financially unsustainable. Additionally, by being defined as a utility, a microgrid cannot operate in the same region as the incumbent utility in jurisdictions that have a franchise agreement that allows only incumbent utilities to serve customers, which is true for most distribution systems in the United States.

Rights-of-way present increased challenges and costs — or outright prevention — of building infrastructure over public spaces such as streets. Incumbent utilities usually stipulate waivers for rights-of-way in their franchise agreements. This means that for microgrids to serve customers outside of a single campus, it could be cost-prohibitive to go through the legal process to be allowed to cross a street with a wire or to use the incumbent utility's infrastructure. This is an especially difficult issue for networked microgrids because, by definition, they interconnect with offsite loads.

Potential Solutions

Ideally, microgrids could be defined in regulations as systems that sit above DERs but below utilities. Utilities serve all customers across their territory as a public service and users in most jurisdictions do not have a choice of utility. Utilities are required to meet minimum reliability indexes as part of their regulated monopoly compact. Microgrids serve a much smaller number of customers and in most cases these customers voluntarily join the microgrid and therefore might not need the same level of protection from the state's utility commission as utility customers do. A definition that recognizes the lower level of responsibility of a microgrid — compared with a public utility — could help microgrids serve third-party loads at a cost-effective rate. Such a definition could also include provisions under which the microgrid developer, owner, or operator can be granted temporary rights-of-way for specific purposes delineated in regulation.

Legislation in Connecticut allows microgrids owned by municipalities to cross public rights-of-way. Community choice aggregation programs could allow microgrids to operate without being subject to the same regulations as electric utilities, use the incumbent utility's infrastructure (under strict conditions), and develop sub-rates that apply to their customers. Regulatory environments that are friendlier to networked microgrids could emerge from these efforts to reform existing regulations.

Current regulations that favor a single provider of electricity in a territory and tie utility revenue to electricity volumetric sales are an important element that sets utility and microgrid business models in competition, particularly in the long term, as the share of load served by microgrids grows.

Regulators might be justifiably wary of the consequences of implementing some of these regulatory reforms because of their potentially far-reaching consequences. However, pilot programs that implement such reforms on a limited scale can help regulators, utilities, and other stakeholders gauge the reforms' impacts.

A resilient grid can save lives, especially as extreme weather events threaten to cause more numerous and acute disruptions to the U.S. electric power system. If networked microgrids can contribute to a more resilient grid, we should investigate and implement options for them to do so.

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