Microgrids: How resilience is driving energy localisation

How would you feel if you lost power for a week, even though your electricity provider knew this was likely to happen but did very little to avoid it?

For many in the US, this is exactly what happened in 2012.

In response, communities and businesses are pursuing local energy solutions. Microgrids – one of the topics at next week’s Australian Energy Storage Conference – are being promoted by US policymakers and adopted by end-users as a means of improving system resilience.

Although various definitions of microgrids exist, in simple terms they can be thought of as small-scale electricity networks that are independently capable and controllable from the surrounding grid. While Australia has many examples of microgrids in isolated or island communities with power systems described as off-grid, standalone or remote, grid-connected applications are rare.

The increased focus on microgrids in the US is being largely driven by efforts to harden the grid and reduce the impacts of events such as extreme weather. By way of example, power outages caused by Superstorm Sandy in October 2012 cost an estimated $USD 14-26 billion and resulted in 50 deaths. Microgrids can be used to strategically fortify critical infrastructure such as hospitals, police stations, public shelters and emergency response facilities with the ability to disconnect and connect from the main grid in times of widespread outages.

These investments to promote system resilience are aligning with other objectives to promote cleaner, smarter energy. Project owners are incorporating increasingly larger amounts of renewable energy as a reflection of technology cost reductions and sustainability objectives. These decisions reflect the ability to tailor microgrid design and operation to specific customer needs, in contrast to the ‘one-size fits all’ approach for regional-scale grids.

For corporates, resiliency translates as business continuity. With the cost of unplanned outages necessitating uninterruptable and/or back-up power sources, the wider benefits and decreasing costs of microgrids are increasing their appeal. The peak demand charges applicable to large electricity users provide an incentive for increasing levels of self-sufficiency, and are a direct input into the financial argument for commercial microgrids. Data centres, which may access cost savings by switching to Direct Current (DC) power systems, have been identified as an early market application for microgrids.

So what of Australia? Is our electricity system resilient?

The system vulnerabilities have already been exposed. On 16 January 2007 around 690,000 Victorian electricity customers, including 70,000 businesses and public infrastructure services such as transport, telecommunications and healthcare, experienced electricity supply interruptions as an outcome from a fire in the northeast of the state in the vicinity of transmission lines. Despite there being no direct loss of life and a mere 7 homes lost to the bushfires themselves, the total economic impact on the state was estimated at $500 million due to the supply interruptions alone.

The community ability to respond during the 2009 Black Saturday bushfires was severely hampered by the loss of power.  In Queensland around 200,000 people lost power after Cyclone Yasi in 2011, while some residents lost power for up to four weeks after Cyclone Larry in 2006.

Actions to address these vulnerabilities have been slow and largely superficial.  In 2010 the Australian Government released a national Critical Infrastructure Resilience Strategy that is based mainly on information sharing.

A request by Victorian distribution network operators to address climate risk in the period from 2011-15 by upgrading components of the network was declined by the Australian Energy Regulator, who were unpersuaded by the companies’ submission.

The long leadtimes of the electricity network price determination and infrastructure investment processes, combined with the steep learning curve for dealing with the ‘new normal’ of climate risk, suggests we are some way off from increased resilience being provided by the system operators.

Instead responsibility has been largely passed onto electricity users themselves. In the wake of Cyclone Yasi, the Queensland Government published a guideline which recommended that “the relevant bodies undertake a review to identify the power supply security of critical infrastructure”. As lead of the energy sector group for the Critical Infrastructure Resilience Strategy, the Australian Energy Market Operator advice on preparing for power interruptions is to create a business continuity plan and install back-up power supplies where appropriate.

And while network operators are currently ‘ring-fenced’ from providing services such as microgrids in a competitive market, the review of these guidelines has been deferred despite the Australian Energy Market Commission recommending they be reformed.

As per the US, the path forward seems therefore to be one of customer action.

Microgrids, which largely evolve incrementally from existing investments in distributed energy, represent the end-game in terms of going off-grid.  As technology cost reductions and network cost increases drive many towards this outcome, resilience simply strengthens the argument.

Kristian Handberg is a Principal Consultant with Melbourne-based cleantech start-up Percepscion.  He is currently completing a research project on the topic of microgrids courtesy of a George Alexander Fellowship, the report from which will be released in mid-2014.  He is chairing two sessions at next week’s Australian Energy Storage Conference. Connect with him here.