Microgrids for Local Energy Supply to Remote Areas and Islands in APEC Region

APEC Project No. S EWG 15 11A Piloting Smart / Micro Grid Projects for Insular and Remote Localities in APEC Economies

Produced by INSTITUTE OF LIFELONG EDUCATION 86/1 Ryasanski Pr-t Moscow 109542 Russia Tel.: +7 495 740 00 40 Fax: +7 495 376 15 79 E-mail: [email protected] Website: www.7480040.ru

For ASIA PACIFIC ECONOMIC COOPERATION SECRETARIAT 35 Heng Mui Keng Terrace Singapore 119616 Tel.: +65 68919 600 Fax: +65 68919 690 Email: [email protected] Website: www.apec.org

APEC#212-RE-04.3 ISBN 978-981-07-4795-4

2 Microgrids for Local Energy Supply to Remote Areas and Islands in APEC Region

Edited by Kirill Muradov

APEC Energy Working Group

Expert Group on New and Renewable Energy Technologies

Institute of Lifelong Education, Moscow

November 2012 APEC Project No. S EWG 15 11A Piloting Smart / Micro Grid Projects for Insular and Remote Localities in APEC Economies

Produced by INSTITUTE OF LIFELONG EDUCATION 86/1 Ryasanski Pr-t Moscow 109542 Russia Tel.: +7 495 748 00 40 Fax: +7 495 376 15 79 E-mail: [email protected] Website: www.7480040.ru

For ASIA PACIFIC ECONOMIC COOPERATION SECRETARIAT 35 Heng Mui Keng Terrace Singapore 119616 Tel.: +65 68919 600 Fax: +65 68919 690 Email: [email protected] Website: www.apec.org

APEC #: 212-RE-04.3 ISBN: 978-981-07-4795-4 CONTENTS

Foreword and Acknowledgements ...... 4

CHAPTER 1.INTRODUCTION AND OVERVIEW ...... 6 Self-Organisation: The Key to Optimised Microgrid Development ...... 6 Mark Sardella Why Smart Micro-grids? In Quest of Humanistic, Developmental, Regionalist Approaches ...... 14 Beom-Shik Shin

CHAPTER 2. MICROGRIDS AS A WAY TO HARNESS RENEWABLE POTENTIAL. THE CASE OF RUSSIA’S FAR EAST ...... 17 Local Energy Development in the East of Russia: Preconditions and Priorities ...... 17 Irina Ivanova, Boris Saneev, Tatiana Tuguzova, Alexander Izhbuldin Prospects of Local Power Development with the Maximised Use of Renewables in Russia’s Far East ...... 24 Alexander Solonitsyn Wind and Hydro Potential at the Russian Paciﬁ c Coast for the Needs of Local Energy Development ...... 29 Elena Pipko Development of Local Energy Supply with the Use of Renewable Energy Sources ...... 33 Dariya Eremeeva Breakthrough in Small-Scale Power Generation at the Beginning of the XXI Century ...... 36 Anatoly Chomchoev

CHAPTER 3. HYBRID RENEWABLE MICROGRIDS. ECONOMICS AND TECHNOLOGY ...... 38 The Economics of Hybrid Renewable Microgrids ...... 38 Peter Lilienthal Feasibility Study on a Microgrid System with Wind Power Generation for Remote Isolated Grid Areas in the Russian Federation...... 42 Masao Hosomi, Emi Komai Developing Microgrid in Local Energy Systems in Russia: Barriers and Opportunities ...... 48 Irina Volkova, Viktor Kolesnik The Cell Controller Pilot Project ...... 53 Per Lund, Stig Holm Sørensen, Larry Adams

CHAPTER 4. SOCIALLY RESPONSIBLE BUSINESS MODELS. VILLAGES AND ENERGY COOPERATIVES ...... 63 Self-Management Capacity Diagnosis of a Rural Community for a Microgrid Project ...... 63 Karen Ubilla Microgrids in Alaska ...... 69 Brad Reeve Village Renewables-Enabled Microgrids ...... 76 Steven Pullins Energy for Freedom ...... 83 Fedor Lukovtsev

CHAPTER 5. MICROGRIDS AND APEC AGENDA ...... 85 Microgrids: APEC and Global Context...... 85 Kirill Muradov

About the authors ...... 95

Abbreviations and acronyms ...... 99

3 Foreword and Acknowledgements

With the advent of new digital capabilities Japan, Korea, Singapore, Chinese Taipei, Thai- and reduced costs of renewable power, smart land and the USA. A project team of experts and micro- or mini-grids have recently generated enthusiasts from Russia led the implementation considerable interest. By and large, intelligent of the project throughout 2012. microgrids will serve as building blocks to in- This volume brings together most essential tegrate distributed generation and dispersed contributions from the workshop on Microgrids loads into a future smart grid. Hybrid microgrids for Local Energy Supply to Remote Areas and combine power from both traditional and re- Islands in APEC Region that was held on October newable sources and can be a part of the larger 15-17, 2012 as the core activity of the project. The centralised networks or operate in the “islanded” objective that guided the project team in prepara- mode. Remote microgrids never connect to the tion for this release was to provide the reader with main grid and ensure the energy independence of basic insights on microgrid technology develop- isolated communities. In some cases, geography ment and, more importantly, outline a menu of and economics may never permit access to the options for microgrid pilot project development grid and connecting a remote community to the with references to some success stories. conventional power grid is expensive and can The report is organised in fi ve chapters. In take more than a decade. Now, building hybrid the fi rst, introductory chapter, Mark Sardella microgrids is cheaper and faster than extending offers an overview of the evolution of the power the grid to the areas where most of the people industry — from bulk macro-generation, to smart, without electricity live. micro-generation — and explains the essential In the Asia Pacifi c, there is growing under- properties of microgrid and related self-reliance standing that microgrid is capable to bring essen- and self-organisation principles. Beom-Shik tial energy services to off-grid communities and Shin further provides an insight from a political offset some notorious failures of the large-scale scientist, elaborating on the social signifi cance of centralised generation. Some countries show microgrid deployment. signifi cant progress in technology development, Chapter 2 focuses on the opportunities for a testing activities and have already established a transition to a localised hybrid power generation sizable energy sub-sector driven by microgrid- in case of Russia’s Far East. As a starting point, based solutions. Others are gradually catching Irina Ivanova and her co-authors from the Energy on and employing foreign expertise to run pilot Systems Institute, Siberian Branch of the Russian projects. Even in Russia with its large, centralised Academy of Sciences analyse the prerequisites power plants and abundant energy resource, high and priorities for local power development while fuel cost led enthusiasts in the far eastern regions Alexander Solonitsyn and Elena Pipko review to explore renewable power. Pilot projects of local the move towards “local energy systems” and the hybrid power have therefore taken off in a few renewable potential in the Primorsky Region of remote townships. Russia. Dariya Eremeeva and Anatoly Chomchoev Building on APEC efforts in creating enabling discuss the experience and opportunities for hy- environments for smart grid and smart energy brid power in the Republic of Sakha (Yakutia), communities, the Ministry of Energy of the Rus- the largest Russian region, including from uncon- sian Federation proposed an APEC project in ventional sources like small-scale nuclear plants. 2011 under the title “Piloting Smart/Micro Grid In chapter 3, authors discuss economics and Projects for Insular and Remote Localities in technology testing of hybrid smart micro systems. APEC Economies” (No. EWG 15/11A). This was Economics of hybrid renewable microgrid is an APEC New and Renewable Energy Technolo- briefl y reviewed by Peter Lilienthal. A summary gies Expert Group (EGNRET) project proposal outcome of a study of hybrid microgrid devel- which was approved by the APEC Energy Working opment in a typical eastern Russian township Group (EWG) and was co-sponsored by Canada, may be found in the paper by Irina Volkova (co-

4 authored with Viktor Kolesnik). Larry Adams comments on the workshop agenda while Anas- and his co-authors from Energinet.dk review tasia Vasilchenko (student, National Research the results of the Cell Controller Pilot Project in University Higher School of Economics) also Denmark. helped developing the agenda, engaging speakers Chapter 4 includes a few papers on commu- and provided technical support. nity-driven business models for rural off-grid The photos on the book cover showing vari- energy sector. Karen Ubilla summarises the ous components of microgrid systems are used research of the Energy Centre at the University by courtesy of Brad Reeve, General Manager of of Chile on self-management foundations for suc- Kotzebue Electric Association and Larry Adams, cessful microgrid projects. Brad Reeve shares a Senior Controls and Power Systems Engineer at success story of an energy cooperative in Alaska, Spirae, Inc. US that embarked on hybrid renewable power The project team expects that the readers development. Further, Steven Pullins presents will benefi t from this compilation. We tried to a “Village Renewable-Enabled Microgrid” con- make it accessible for a non-technical reader. cept, intended for implementation in India and APEC is known as a fl exible platform that brings other BRICs. Fedor Lukovtsev concludes with the together public and private sector interested in observations on the social benefi ts of microgrid low-carbon, green energy supply. APEC Energy solutions for remote ethnic communities. Working Group and APEC Expert Group on New Finally, in the concluding chapter, Kirill Mu- and Renewable Energy Technologies address radov recalls APEC activities related to rural, off- renewable and smart energy in a wider economic grid energy and puts these into a current regional context, beyond just technology solutions. We do and global context. hope that the project triggers wider adoption of This brief introduction would not be complete microgrid for effi cient and clean energy supply to without mentioning those who made this project remote and isolated communities across APEC viable and largely successful. Kirill Muradov (In- member economies. ternational Projects and Research Coordinator, International Institute for Training in Statistics, Vitaly Kalmykov National Research University Higher School of Project Team Coordinator Economics) and Pavel Korovko (Deputy Head of November 2012 Laboratory, All-Russian Thermal Engineering Institute) were the core project team members, having provided a lot of ideas and also made lots of paperwork. Talyat Aliev (Deputy Director, International Cooperation Department, Ministry of Energy of the Russian Federation) provided important guidance as the project overseer with essential support from Svetlana Beznasyuk and Maria Bunina (International Cooperation Department, Ministry of Energy of the Russian Federation). On behalf of the project team, I thank Kon- stantin Ilkovsky (Member of the State Duma of the Russian Federation, Chairman of the State Duma Sub-Committee for Regional Energy Policy) for effectively leading the preparation of the workshop and substantial contribution to the workshop agenda. Besides, Dmitry Timofeev (Deputy Director for Investment, Far Eastern Energy Management Company), Fedor Lukovt- sev (Director, Institute of Northern Asia and the Integration Processes) provided many useful

5 Chapter 1. Introduction and Overview

Self-Organisation: The Key to Optimised Microgrid Development

Mark Sardella Local Energy [email protected]

Nearly half of all electricity generated in the puting and countless other industries that have world today comes from power plants that use evolved so dramatically over the same time steam turbines built in the days of rotary tele- frame? phones and manual typewriters. These 1960’s-era The key to promoting an evolution of the power stations burn coal or fuel-oil and operate power grid begins with removing the barriers that at thermal effi ciencies of around thirty-percent, are hindering it, followed by laying the organisa- meaning that they waste about seventy percent tional and regulatory foundation on which evo- of the energy in the fuel they consume. lution can fl ourish. Power networks are complex Did the electric power industry miss out on systems, and as such they can be coaxed, using the technological revolution of the past 50-years? appropriate ownership models, incentives and What can be done to bring the industry in-line policies, to self-organise into highly benefi cial with telecommunications, transportation, com- and adaptive states.

Figure 1. Evolution of communications vs. electric power industry

6 Chapter 1. Introduction and Overview

Power Grid Evolution of regions around the globe have evolved grids, It is helpful to know what the evolution of the we have a window through which to see the power grid might look like, and since a couple future.

Figure 2. Decentralisation of the power system

7 Chapter 1. Introduction and Overview

The fi rst thing that becomes clear when study- Policy Drives Evolution ing evolved grids is that they are decentralised. The typical way the decentralisation process Most technological evolutions are driven by begins is by connecting additional generators to innovation and access to capital, but evolution in the grid, including solar and wind but preferably the electric power sector is predominantly driven including a wider array of technologies. The next by regulation. Privately owned electric utilities are step in decentralisation is connecting other types powerful monopolies, especially where regulators of resources to the grid, including controllable allow a single, private company to own both the loads and energy storage systems, such as batter- distribution system and the generation resources. ies. All three types of resources to be added — gen- Regulators attempt to reign in the power of such eration, storage and controllable loads — should utilities by making rules controlling access to be diverse in size and technology and should be markets and assigning risks and rewards. Regu- dispersed widely throughout the network. latory policy, depending on how it is crafted, can Decentralised power networks are considered either promote or hinder the evolution of electric an evolutionary step forward because they are power systems. more diverse, more complex and they bring signifi cant advantages. Distributed power systems are less reliant on the large, central power stations that are so ineffi cient, and they reduce reliance on expensive, long-haul transmission lines. Diversi- fying the energy supply opens electricity markets to new players, and makes the grid less vulnerable to problems that arise with any single generation technology. And distributed grids are more easily expandable, because increased loads can often be served by simply adding new generators rather than upgrading power lines. The next evolutionary step beyond distributed electric systems is microgrid systems. Microgrids Figure 3. Microgrids — a step in the evolution are decentralised power networks that have been of power systems strategically populated with distributed resources to the point that they are able to operate without central power stations. They typically have the Importance of Power Evolution ability to interconnect with other power grids, but they disconnect automatically whenever it Evolved electric power systems, including is benefi cial to do so, such as when the other microgrids, would yield a number important grid experiences an outage. When disconnected advantages over our current electric systems. (or “islanded”) from other grids, microgrids First, microgrids lend themselves to newer, rely solely on their own resources — generators, smaller generating units that are generally more storage systems and controllable loads — which effi cient and less polluting. Given that the U.S. work together to maintain stable conditions on electric power sector releases more than 300 the grid and a balance between electricity supply million pounds of toxic air pollution annu- and demand. ally, and is responsible for one-third of all U.S. Moving from distributed systems to microgrid climate-changing emissions, this is a signifi cant systems is especially signifi cant because it enables benefi t. local self-reliance in electricity. Once a region is The network architecture of microgrids gives no longer reliant on an outside power supplier, an them outstanding fault tolerance, assuming the entirely different relationship forms between the connected resources have been selected and region and its former electric supplier, putting the installed strategically. Unlike a central power region in a much stronger negotiating position and system, in which the loss of a critical generator making it far less vulnerable to outside infl uences. or transmission line causes a widespread outage,

8 Chapter 1. Introduction and Overview

a well confi gured microgrid simply breaks itself electric power. Implementation of microgrids to apart into smaller units when a fault occurs, promote economic development in remote and under a process called dynamic islanding. The insular regions is a focus of the Asia-Pacifi c Eco- degree to which connected resources have been nomic Cooperation (APEC). But microgrid devel- selected and located strategically on the grid opment need not be limited to remote regions — determines the number of islands that can form. they are just as applicable and advantageous, and For example, given a microgrid system with suf- potentially more easily implemented, in regions fi cient generation, storage, and load resources, served by central-power systems. And, just as individual homes could island from their neigh- the emergence of grid-connected solar systems borhood power system, the neighborhood system accelerated the development of photovoltaics could island from the local power system, and technology, the promotion of grid-connected the local system could island from the regional microgrids will greatly hasten the development system. of technologies and infrastructure to support Microgrids also offer significant economic microgrid development anywhere. advantages over central power systems. Because microgrids are decentralised, the money spent on electricity from microgrids gets dispersed more widely, creating a more vibrant and robust economy than if the money had been concentrated into a few hands. Further, microgrids lend themselves to local ownership and control, so more energy dollars stay in the local community, where they are re-spent to create additional, local economic value.

Figure 4. Sea Ice: IPCC projections and the actual size

Finally, the best reason to modernise our power systems is that failure to do so could be catastrophic. No other single industry contributes more climate-changing emissions than electric power, and the hour is getting late for address- Figure 3. Beneﬁ ts of the evolution ing carbon emissions. New data from the Arctic of power systems shows that the sea ice is melting far faster than predicted by climate models, and extrapolation of the data shows that the Arctic could be ice-free in Microgrid systems are not natural monopo- summer by the year 2019. Ice reﬂ ects sunlight far lies like central power systems, and therefore, so better than ocean water, so as more ice melts, the long as ownership and market rules are crafted planet absorbs more of the incident sunlight. It is properly, microgrids should also be less prone to estimated that the loss of summer ice in the Arctic the type of corruption that has plagued central will result in an additional climate forcing as large power systems. as the current anthropogenic forcing. Bluntly Since microgrids are self-reliant energy sys- stated, the rate at which the planet is warming tems, they are highly desirable for applications could double in the next seven years unless we in developing regions not currently served with move swiftly to cut our emissions.

9 Chapter 1. Introduction and Overview

In the electric sector, Denmark not only con- verted it’s privately owned transmission network to a public asset, they gave it a new, twofold purpose: ensure that it operates at peak effi ciency, and provide all Danish citizens with a right-of- access to generate power in parallel with the grid. Those policies should be the model for the world, especially given their success. A lesser known success story with energy decentralisation is the town of Gussing, Austria. Gussing was nearly bankrupt In 1988 when Peter Vadasz and two of his friends conducted a study to fi nd out how fast money was leaving town to Figure 5. Arctic sea ice volume, 2000–2012 pay for imported energy and fuels. Four years later, Vadasz was elected mayor on a platform Regions with Evolved Energy Systems to create jobs by stopping the leakage of energy dollars. By 1996, he had completed the fi rst phase Denmark is a model for decentralisation and of Gussing's biomass-fi red district energy system, self-reliance in energy. In 1973, more than 90 fueled by wood waste from a local forestry cooper- percent of Denmark’s energy supply came from ative. Next, they built the world’s most advanced imported oil, yet as a result of sweeping reforms, biomass gasifi er, and fed the gas to a cogeneration they became energy self-reliant in 1997 and have system to generate the town’s electricity. Over the stayed that way ever since. Today, nearly two- next ten years, energy localisation was credited thirds of the homes in Denmark are heated with with creating more than a thousand jobs, as busi- highly efficient district-heating systems, and nesses moved to Gussing to take advantage of the about 20 percent of all energy consumed comes stable, affordable energy costs. The tiny town has from renewable sources. The country is on target cut its carbon footprint by 90 percent, become a to reach their goal of a 30 percent renewable en- major center for renewable energy research, and ergy supply by 2020. they now host 30,000 eco-tourists per year.

Figure 6. Progress in the decentralisation of the electricity sector in Denmark

10 Chapter 1. Introduction and Overview

Figure 7. Gussing, Austria

Policies for Evolving be limited to generation — capacity and ancillary service providers should also be rewarded accord- Based on policies used in regions that have ing to the locational or time-based value created done the best job at decentralising their energy by the services they provide. systems, the following policies are recommended ► Treat users as valued system re- for supporting the evolution of power grids: sources. ► Operate the network of wires “for In the same way that resource-providers are benefi t” rather than “for profi t”. rewarded according to the value they create, us- Power lines are highways on which electricity ers should be charged according to the value of travels, and it makes far more sense to travel on what they consume. Again, the opportunity to publicly owned highways. The network of wires express the values held by residents of the region should be treated as essential infrastructure, is signifi cant. The rate structure can be highly much like bridges, roads and sewer lines. Don’t progressive, such that each user receives a basic expect a fi nancial return on the power lines — the amount of energy at little or no cost but pays an benefi ts come from having a good system in place, increasing price-per-unit as consumption rises. not from operating it at a profi t. And the use of real-time pricing, which alters ► Reward resource providers accord- the price of energy based on the network load, ing to the value they create. provides value by enticing users to shift loads to The most common way to attract independent times when electricity is less expensive, thereby generators to connect their systems to the power reducing the peak load on the system. grid is with multi-tier feed-in tariffs (FIT’s). Feed-in tariffs are guaranteed-price, long-term Policies That Hinder Evolution contracts for delivery of kilowatt-hours. They are the single most successful renewable energy Based on policies in use in the United States policy instrument in use today. But even at that, that have prevented evolution in the electric most FIT’s don’t do all they could to foster value- power sector, the following must be avoided: creation on the power network. Tariff rates should ► Allow combined generation/ dis- be carefully adjusted to incentivise the resources tribution entities that are private and for- the network needs most, and to express the values profi t. held by the region being served. Clean technolo- When the same, private for-profi t business is gies, or ones that use plentiful, local resources allowed to own both wires and generation, the might receive greater rewards, for example. If resulting monopoly has proven too powerful, and the system needs fi rm capacity at a certain time regulators have been unable to prevent it from or at a particular location on the network, the FIT wielding its monopoly power to the detriment of should be crafted to attract those resources to the consumers. All transmission and distribution those locations. And the reward system need not wires must be publicly owned and operated on a

11 Chapter 1. Introduction and Overview

“for-benefi t” basis, and the right of all users to rates,” gave utilities the right to negotiate special interconnect resources to the network must be rates, in secret, as needed to retain their best guaranteed by law. customers. The rationale for the laws was that ► Allow private, for-profi t market par- all customers benefi t when utilities don’t lose ticipants to control access to the market. their best customers. These load-retention laws, Under no condition can access to electric- still in effect in some parts of the United States, ity markets be controlled by a private market dealt a tremendous blow to the decentralisation participant. This seemingly obvious rule has of electric power. not been followed in the United States, where ► Decouple utility revenues from their for-profi t utility companies owning both wires sales volume. and generation have provisions in law allowing After years of building and operating electric them to disconnect any resource at any time, power systems with incredibly low production- for any reason, with no recourse by the owner side effi ciency, electric utilities in the United of the resource. This has not entirely stopped States were put in charge of consumption-side installations of distributed resources, but it has effi ciency. Arguing that the consumer-effi ciency limited them to those allowed by private utilities, measures they were advocating were reducing and utilities retain the right to disconnect any their revenues, utilities successfully lobbied for or all connected resources at any time, for any a policy known as “revenue decoupling.” Rev- reason. enue decoupling ensures that utility revenues ► Periodically withdraw public fund- remain unchanged as their sales decline. There ing assistance for a certain technology. are many fl aws in the logic of arguments sup- If public assistance is provided to accelerate porting revenue decoupling laws, but the main a particular technology (and it is questionable problem with them is that by guaranteeing the whether this is a good idea, since feed-in tariffs revenue streams of incumbent energy providers, may be more strategic), the support must be com- the process by which businesses get pushed out mitted for a known duration, and that duration of markets as they become obsolete no longer must be suffi cient to carry projects from concep- functions. If we had guaranteed the revenues of tion to commercialisation. typewriter-makers, for instance, we would still ► Provide guaranteed returns on capi- be paying them today, despite having no use for tal investments. their products. Under a policy of guaranteed investment returns, utilities maximised their rewards by Utilising Self-Organisation building expensive systems, rather than effi cient systems. Had returns been based on high fuel- Self-organisation is the process by which effi ciency or low emissions, we would have very simple rules give rise to order in complex sys- different power systems today. Incentives must tems. Most systems exhibit some degree of self- reward exactly what you want to see. organising behavior, but depending on the rules ► Allow private utilities to negotiate governing the system, higher levels of order can special rates to retain customers. emerge. One example is complex adaptive behav- Back in the 1970’s, businesses in the United ior, which enables the elements of a system to States that needed heat to carry out a manufac- respond collectively to changes in circumstances. turing process discovered that they could install All successful ecosystems are complex adaptive on-site cogeneration systems, which generate systems. The next higher level of order is swarm both power and heat, to get their energy at a intelligence, enabling elements of a system to col- lower cost than the utility could provide. To stop lectively solve problems in ways that individual them from doing it, utilities illegally offered mon- elements of the system cannot. Honey bees select etary incentives to these customers in exchange their new hive location using swarm intelligence. for agreements to forego installation of on-site Can complex-systems theory be applied to the generation. Lawsuits followed, until utilities development of electric power systems, as we try successfully convinced lawmakers to intervene. to usher them toward more complex, adaptive and The laws that followed, called “load-retention intelligent states?

12 Chapter 1. Introduction and Overview

There is reason to believe it can, especially to able, renewable and clean resources. Cooperation help solve the problem of optimally populating among participants may also be a characteristic networks with distributed resources. The electric common to self-reliant societies. power network itself is a complex system, but the system we want to optimise includes not only the Summary and Conclusions grid and the resources connected to it — it also includes the businesses and individuals involved Microgrids represent an evolved state of in developing new resources for the network. electric power systems, and so the key to ad- Experience shows that an important ingredi- vancing microgrids is to foster the evolution of ent for rapid technological evolution is provid- electric power systems. Because microgrids are ing a platform on which to evolve. The network self-reliant power systems, they are attractive of wires, so long as access is guaranteed, is that for remote regions not yet served by electricity, platform. It is also known from both theory and but microgrid development may progress more experiment that the rules governing interactions quickly with a focus that begins with upgrading between elements of a system determine the existing, centralised power systems. degree of order that will arise. The policies ef- The evolution of power systems begins fecting resource developers, and the regulations with populating existing grids with high levels governing markets and grid operations, are those of distributed resources. When this is done rules. strategically, the resulting system will take on The diffi culty lies in knowing how to craft rules benefi cial characteristics, such as being diverse, such that the system becomes populated opti- clean, reliable and fault tolerant, and yielding mally and ends up with the ordered, intelligent local economic benefi ts and opportunities. Fully characteristics we are seeking. The power network optimised, power systems can be operated as is- is complex enough, and the rulemaking options lands, providing the most desirable characteristic vast enough, that it is surely easier to fi nd an op- of all — local self-reliance in electricity. timal result experimentally than analytically — a Complex systems theory suggests that achiev- characteristic known as being “algorithmically ing an optimal result from decentralisation re- incompressible.” quires a platform on which the grid can evolve, Fortunately, there are examples of good poli- and a well crafted set of policies and practices. It cymaking leading to evolution. Countries with furthermore lends insight into the direct role that more evolved power grids have better rules for policies and practices play in the degree of order grid access and, consequently, more entities de- obtained in the result, including how strongly the veloping grid resources. Ones that pay a premium values embodied in the rules may be expressed for electricity generated by a particular technol- in the power system created under those rules. ogy excel in development of that technology. But Determining what policies will be needed to these examples evidence success in reaching goals help power systems evolve to a state so ordered that are somewhat limited compared to the task that they provide local self-reliance begins with at hand. To reach the goal of adding distributed identifi cation of the values of self-reliant societ- resources in suffi cient number and diversity to ies, followed by ensuring that those values are enable a self-reliant power system to emerge expressed throughout the policies. requires a more carefully crafted set of policies. Because values are so strongly expressed in If policies are to induce power systems to electric power-systems, energy policymaking evolve to the point of enabling local self-reliance, carries enormous responsibility. Energy policy as microgrids ultimately do, the policies may need provides one of very few opportunities to make to embody the values held by self-reliant societies. an enormous difference in the quality of people’s Each country seeking energy self-reliance must lives, the health of their environment, and the identify those values on its own, but examples vibrancy of their economy. Enabling energy self- common to all of them may include achieving the reliance, including by advancing the evolution highest possible effi ciency, and providing oppor- of central power systems to distributed power tunities for all interested parties to participate in systems and then to microgrids, is a tremendous the development of a wide range of locally avail- way to honor that responsibility.

13 Chapter 1. Introduction and Overview

Why Smart Micro-grids? In Quest of Humanistic, Developmental, Regionalist Approaches

Beom-Shik Shin Seoul National University [email protected]

Introduction revolution certainly built the foundation for modern developments, but the consequences of that This brief report discusses the establishment have not been so favorable to us today. With of, the usage of, and also the future of microgrid global warming so apparent in our daily lives, the off the grids from a social and political scientist’s future looks gloomier than ever. On one hand, perspective. this problem has led each nation to focus more Microgrid system can be defi ned as a network on acquiring energy resources, and on the other that links multiple distributed power generation hand, they’re betting the fate of their nations on sources into a small network serving some or all developing a sustainable energy system that can of the energy needs of participating users. Mi- be truly eco-friendly. crogrid can provide various benefi ts, including In dissecting the ways in which the energy reduced energy costs, increased overall energy issues are discussed recently, one may fi nd ineffi ciency, improved environmental performance teresting that experts are so used to treat energy and local electric system reliability. The growth issues as part of the greater economic and security of distributed generation combined with emerg- issues. This sometimes leads them to put their ing technologies, particularly energy storage and economist or security supremacist masks on. One power electronic interfaces and controls, are would therefore hear the terms "supply and de- making the concept of a microgrid a technological mand" and "international tensions" more so often reality. Benefi ts and potential of microgrid system than the actual human-related energy issue itself. are highly realistic and fair. Ultimately, corporations put priority in energy While it certainly is true that, the future of this development for profi t reasons and pay less at- project is heavily dependent on the technology tention to human beings. For example, a common development, it does not solely depend on technol- agenda in talks about the Russian Far East and ogy itself. Rather, one may put more weight on the the East Siberian development projects is energy- social and humanistic discussions on the topic at related. However, the people in these regions are stake. Most of the recent researches discuss mi- worried that these development projects only fi ll crogrid from just technological and business per- the pockets of the central or local governments spectives, such as generation, storage, distribution and the corporations without raising the living and further technical development etc. Meanwhile, standards for the local people. Such kinds of “ex- this paper will elaborate on the humanistic and ploitive resource developments” are only natural developmental aspects of microgrids to enhance to bear the burden of big worries of local people. the technological and business side of microgrids. Energy development and usage should not be approached solely from the economic and A Humanistic Approach to Microgrids security aspects, but from the human-centered aspect. Many researches shows that microgrids, Energy problems defi ne the 21st century and as an alternative, can serve that purpose very it will for a long time. Our predecessors’ unbear- well. Unfortunately, energy market regulations able reliance on fossil fuels after the industrial and policies lag behind the progress of microgrid

14 Chapter 1. Introduction and Overview

technology, creating uncertainty and inhibiting what microgrids are. This may seem so redundant investment in microgrids and the benefi ts they and simple for the experts, but it may not be the might provide. Moreover, in the middle of these case for the locals. This task may be hard because discussions, the importance of human factor is some locals might not bother learning about the not seriously taken into consideration most of benefi ts of microgrids. Winning the minds of the the times. locals with enough time and effort in persuading There are two points about the importance them, providing enough information and adver- of the human factor. First is the need for pro- tisement will be the biggest asset of the project portional representation of consumers in estab- developers without a doubt. lishing the microgrid systems. We ought to ask In addition, in creating a regulatory regime questions such as “why, where and how people for microgrids, people’s participation is also should be involved in microgrid system” fi rst. necessary. Unique local conditions should be The answer to this question is clearer than ever: considered as they may be different by regions. people should be involved from the early stages For instance, there are enough studies done on of designs to overall development plans of the the role of local awareness and support in de- region or area. Microgrid development especially termining the cost and sustaining the microgrid needs to consider the local conditions and the system. Concerning the cost sharing, subsidies, local inhabitants. etc., people should be informed of all possible In the 1960s and 1970s, many countries burdens and benefi ts from early on. around the world spent a lot of time and energy As far as a local community is concerned, it is in rural development. In the case of the Republic also important to establish an education system of Korea, the “New Village Movement” and other to pull labor sources from the locals themselves forms of rural development fostered the growth not only for sustainability reasons but also for the of farms and fi sheries and were very successful. local welfare. Local development plan and proj- But not all countries shared the same outcomes ect should accurately refl ect the unique features as the Republic of Korea, and important lessons of the local condition and the needs of the local were learnt from these experiences. Poor fund- people. A system that engages local people will ing for these great projects from the Western leave truly sustainable infrastructural legacies countries contributed to such negative turnouts. in the regions. A more important lesson is that one of the main reasons why a lot of developmental projects had Microgrids in the Context of Local negative outcomes had to do with the failure to Development Planning incorporate local participation in the process, and also the fact that these projects neglected a First, there must be an "extensive and com- realistic needs of the rural areas. prehensive development plan" that is networking The fact that the microgrid system has been many factors through microgrids as links. Making eyeing on small units of local community is very the lives of people better does not just equate to encouraging. Besides, the fact that the APEC En- enough and effi cient energy. Rather, the focus is ergy Group developed a project with a focus on on what they will do with the provided energy. microgrids for “remote and isolated local areas” is It is important that the rural conditions im- very exciting. Nevertheless, local contribution to prove to meet the needs of its inhabitants and the establishment of microgrids is a must. It will transform into a place where people can enjoy be hard for any locale to develop if there is no local living. Achieving such goal requires not only mi- contribution and participation from the beginning. crogrids, but also other infrastructures such as The second point is the absolute need for roads, bridges, schools, health and other facilities, public education on what microgrids are. This etc. Struggling to fi nd where and how the energy point has been made by many past experiences of will be used is an important step that should not “smart and microgrid” tests from all around the be ignored in the future endeavors. world, including the US, the EU, and even Kenya. For example, recent research shows that It is especially important to help the local com- the access to electricity, in conjunction with munities to come to a suffi cient understanding of complementary infrastructure such as markets,

15 Chapter 1. Introduction and Overview

roads, and communications, can contribute to platform of development that can replace the old the increased productivity in two key economic and wholly fossil-resource dependent system. The domains of rural livelihoods: small and micro- core issue at stake is how microgrids will develop enterprises (SMEs) and agriculture. a community with an eco-friendly and sustain- Hence, the way energy will be used will also able approach. We need to understand and plan determine the success or failure of the microgrid microgrid projects as a basis of new active units project. This, in turn, stresses a basic approach of the future post-industrial way of life. that puts priority on local characteristics. Mi- crogrid projects must be open to all possibilities, Microgrids for the Greater Asia-Pacifi c especially to refl ect the unique characteristics of Region the local region. The technology development should also follow the path of prioritising local Modern industrial-society development model characteristics instead of being solely driven by struck its match in Europe but lit really in the US. a set of standard project assumptions. Moving In Asia-Pacifi c, where modern and postmodern forward with discussions as to how this can be development is active, the meaning of micro-grids done may be the fi rst step. needs to be discovered not only in a paradigm of Second, there needs to be a gradual but pro- modern development, but in a realm of futur- gressive development plans about microgrid ological vision. establishments. Ways in which micro-grids link Asia-Pacifi c is The 21st century development is far different limitless: developments in low-inhabitant areas from the development of the industrial ages, such as the Russian Far East and Siberia, energy which tended to focus primarily on the economy equality in remote islands such as in Malaysia, of scale. A primary property of microgrid — “small Indonesia, the Philippines etc., and infrastruc- but effi cient” — helps it to be constructed on a tural developments in less-developed countries philosophical basis, apart from an economy- like the Democratic People’s Republic of Korea, centered basis of the industrialisation period. As Myanmar. And this kind of regional development mentioned in the beginning, global warming and efforts will form the foundation of macro-, meso-, the growing worries over the environment makes sub-, micro-region formation. us think like we did never before and develop a Of course, these problems confront each indi- greener development model of post-industrial vidual nation. However, regional cooperation in society, other than those before. solving this kind of problems is far more effi cient At the Durban Climate Change Conference and especially it will greatly contribute to regional which took place in South Africa in 2011, many stability and co-prosperity. This said, discussions nations agreed to start work on a new climate deal of smart microgrids can be more detailed and be that would have legal force and, crucially, require applied to seek the potential of becoming a key both developed and developing countries to cut solution to complicated regional problems. their carbon emissions. The term now need to be agreed by 2015 and come into effect from 2020. Concluding Remark This shows an international awareness of the need for change from an industrial-civilisation Deployment of microgrid systems should no that focuses on fossil fuels to a greener-energy- longer remain a topic of discussions on technol- supported-civilisation. ogy or economic profi t. With the importance of In this regard, "small but effi cient" is the key. those concerns fully respected, microgrids must The development of internet communication adopt a more humanistic and developmental ap- technology and spread of networking principles proach in its establishment and be discussed in a in political, economic and social spheres make mi- comprehensive environment where its potential crogrid systems more smart and realistic. These can be truly discovered in a futurological way in may indeed emerge as a new post-industrial the 21st century.

16 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Local Energy Development in the East of Russia: Preconditions and Priorities

Irina Ivanova, Boris Saneev, Tatiana Tuguzova, Alexander Izhbuldin Energy Systems Institute, Russian Academy of Sciences (Siberian Branch) [email protected]

Preconditions for Development Autonomous Area, Central subsystem in Kam- chatka Territory, Central and Okhta subsystems In the East of Russia, the border of centralised in Sakhalin Region (Figure 1). The South-Yakut electricity supply virtually coincides with the power subsystem is connected to the intercon- border of the Extreme North regions. In Eastern nected power system of the East by the 220 kV Siberia and the Far East there are large extensive overhead transmission line. These power sub- electric power systems that include 90 power systems include 40 power plants with the total plants with the total capacity 45.8 thousand MW, capacity 7.4 thousand MW, generating 20-25 generating about 180 billion kWh of electricity billion kWh of electricity annually. annually (Table 1). The rest of the territory is supplied with elec- In the north-eastern regions centralised electricity from autonomous power plants. Almost tricity supply covers only a minor part of the 25 per cent of autonomous and standby power territory. In total, 10 local power subsystems as sources of low capacity (up to 30 MW) in Rus- part of 6 isolated power systems are in operation sia are located here. Their number is about 4 in these regions. They are Norilsk subsystem thousand, the total capacity is 1.7 thousand MW. in Krasnoyarsk Territory, Western and Central Despite of their rather great number the share of subsystems in Sakha Republic (Yakutia), Central low-capacity power sources in the total capacity subsystem in Magadan Region, Chaun-Bilibino, of power plants in Russia’s East slightly exceeds Anadyr and Egvekinot subsystems in Chukot 3 per cent.

Table 1. Characteristic of electric power industry in the eastern regions of Russia (as of 2010)

Number Capacity of power Electricity production, Power systems and sources of power plants plants, thousand MW billion kWh Interconnected power 90 45.8 180 systems of East and Siberia Local power subsystems 40 7.4 24 including RES 4 0.1 0.5 Autonomous and standby 3,960 1.7 2.1 power sources including RES 12 0.02 0.01 Total 4,090 54.9 206

Compiled on the basis of the Federal State Statistics Service forms “Power balance” and “Information about thermal power plant operation” for 2010.

17 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Figure 1. Zoning of Russia’s territory by the degree of electricity supply centralisation

Figure 2. Allocation of renewable energy sources in the eastern regions

The local energy sector in the East is repre- ritory, weak development of transport infrastruc- sented mainly by diesel and gas-turbine power ture, complex fuel supply chains all considerably plants on delivered fuel. Dispersion over the ter- increase fuel cost. As a result they lead to high

18 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

indices of production cost of electricity (up to electricity tariffs in the system. The studies per- US$ 0.80/kWh) and heat (up to US$ 1.70/Gcal). formed made it possible to determine economi- Therefore, different mechanisms of cross subsi- cally expedient territorial borders for centralised disation are used to decrease the price burden electricity supply based on the price terms in the on consumers. The annual budget subventions eastern regions. to level energy tariffs are estimated at US$ 1.7 Depending on the connected load, the maxi- billion. mum remoteness of consumers that is expedient Renewable energy sources (RES) are not for connection amounts to 30-90 km in the power virtually used in the eastern regions. Their total systems of the East and 25-75 km in the north- capacity makes up only 116 MW, of which 84 MW eastern power subsystems (Figure 3)2. is the capacity of fi ve geothermal power plants Construction of mini-cogeneration plants located in Kamchatka and the Kuril Islands. Only on local fuels (coal and natural gas from local fi ve small hydro power plants, three wind power fi elds) allows the electricity production cost to plants and three photovoltaic power plants are in be decreased almost twice as compared to diesel operation there (Figure 2). power plants. At the same time, the admissible payback period of such projects is possible only at Priorities of Development the tariffs of US$ 0.30-0.40/kWh depending on the mini-cogeneration plant capacity (Figure 4). A rational scale of local energy development in Hence, this option of electricity supply is rational the East of Russia was determined based on the only for consumers located close to the fi elds3. studies that estimated the economic effi ciency of Conversion of power plants on diesel fuel to connection to centralised electricity supply, con- natural gas with involvement of cogeneration fa- struction of cogeneration plants with local fuels cilities is rational in the buffer zone of gas pipeline and low-capacity nuclear power plants as well routes. The results of feasibility studies on natural as construction of power plants with renewable gas usage at diesel power plants demonstrate energy resources. The studies used the method- suffi ciently high effi ciency of this option4. At the ological approach and simulation models1 the current level of diesel fuel price in the areas to authors had at their disposal. be switched to gas, the gas price economically Validity of centralised electricity supply is expedient for conversion should not exceed US$ under the infl uence of distance from electricity 200-500/1000 m3 depending on the diesel power supply centers and consumer load, as well as plant capacity (Figure 5).

Figure 3. Zones of expedient use of centralised and autonomous electricity supply

19 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Figure 4. Payback period for projects of construction of mini-cogeneration plants on local coal versus electricity tariff

Figure 5. Conditions for effectiveness of diesel power plant conversion to natural gas

The studies that estimated the cost-efﬁ ciency with a complex fuel delivery scheme and with a of the construction of low-capacity nuclear power considerable expected increase in electric loads plants (LC NPP) made it possible to determine the related to the development of mineral resources. conditions for their competitiveness as compared There appear to be dozens of potential sites for to the conventional scheme of diesel power plant the construction of LC NPP with 6-12 MW reac- + boiler plant. With the maximum fuel prices in torswhile the number of sites for ﬂ oating nuclear the eastern regions (US$ 1,000 /t of diesel fuel power plants with reactors KLT-40 is limited5. and US$ 125 /t of coal), the capital investment The top priority sites for the allocation of low- in low-capacity nuclear power plants should not capacity nuclear power plants intended for power exceed US$ 9 thousand /kW (Figure 6). supply to the new industrial facilities in hard-to- It is rational to place low-capacity nuclear access areas and electric capacities required to power plants in the hard-to-access settlements develop ore deposits are presented in Table 2.

20 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

According to the Energy Forecasting Agency that has been considering various scenarios of the development of electric power industry for the period until 20308, the total capacity of the renewable energy sources to be commissioned until 2030 is even lower and estimated at 5 thousand MW of which one fi fth is in the eastern Russian regions. This is explained fi rst of all by the insuffi cient measures of state support to the renewable energy in the legislative acts of the Government of the Russian Federation. The major barriers that hinder the development of renewable energy sources in Russia are: Institutional: • insuffi cient legislative basis in the sphere Figure 6. Cost-effectiveness zones of RES; for low-capacity nuclear power plants • ineffective system of measures intended to meet environmental constraints; • unwillingness of authorities to participate in funding of the investment projects; In the last years, documents of varied signifi - Financial: cance have highlighted the plans to use renewable • absence of federal fi nancing mechanisms; energy sources. The target of Russia’s Energy • insuffi cient domestic and foreign invest- 6 Strategy until 2030 is an increase in the share ment capital; of the renewable energy sources in the total elec- • high cost of special equipment; tricity production from 0.5 per cent to 4.5 per • lack of long-term loans on acceptable terms. cent. The total capacity of the renewable energy Informational: sources to be commissioned is estimated at 25 • insuffi cient information about technologies thousand MW. and possibilities of their application; The General Scheme for the Allocation of • lack of reliable data on the indices of renew- 7 Electric Power Facilities of Russia until 2030 able energy resources; sets the total capacity of the renewable energy • negative experience in RES operation. sources to be commissioned at a lower value, up Therefore, the authors’ forecast related to the to 6-14 thousand MW. Under the basic scenario, penetration of renewable energy sources is even the major increase is expected in the biomass less optimistic. A rational amount of renewable capacities,and under the maximum scenario, energy capacity to be commissioned in the eastern nearly 50 per cent of all capacities to be commis- regions until 2030 is estimated at 340-360 MW sioned are wind parks. (Figure 7). Thus, the total capacity of renew-

Table 2. Primary sites for allocation of low-capacity nuclear power plants Allocation Consumer Electric capacity, MW Yuryung-Khaya Tomtor rare-earth metal (niobium) deposit 36 settlement Tiksi settlement Restoration of Northern sea route 12 Ust-Kuiga settlement Kyuchus gold deposit 30 Peschanoe settlement Copper ore deposit 30

21 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

best potential and high fuel cost for consumers. By virtue of their capital intensity the projects for the construction of renewable energy facilities are not commercially attractive. Payback of the projects is provided by the reduction in fossil fuel consumption and decrease in budget subsidies. With the current level of RES cost, there is need for US$ 17-23 /kWh9 of state support on average for the eastern regions to decrease the electricity tariff. Figure 7. Rational commissioning of renewable energy sources in the eastern regions Conclusion

The research allowed to identify the sites for able energy sources in these regions will reach priority allocation of local energy facilities of 470 MW. different types which are presented in Figure 8. The key factors that affect the efﬁ ciency of RES The authors estimate the total capacities to allocation include the indices of the potential of be commissioned in the period until 2030 at renewable energy sources and distance between 520-540 MW, including 70 MW of mini-cogene- the settlements and fuel facilities. Therefore, the ration plants on local types of fuel, 108 MW of LC priority sites for the allocation of renewable en- NPP, and 357 MW of renewable energy sources ergy sources are the zones characterised by the (Table 3)10.

Figure 8. Sites for priority allocation of local energy facilities

22 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Table 3. Rational commissioning of local energy facilities in the eastern regions of Russia until 2030

Type of energy source Commissioning of capacities, MW

Mini cogeneration plant 70 Low-capacity nuclear power plant 108 Small hydro power plant 126 Wind power plant 123 Geo power plant 76 Photovoltaic plant 32 TOTAL 535

Endnotes 5 Saneev B.G., Ivanova I.Yu., Tuguzova T.F., Frank M.I. Role of low-capacity nuclear power 1 Ivanova I.Yu, Tuguzova T.F. Substantiation plants in the zones of decentralised power sup- of efﬁ cient options of energy and fuel supply to ply in the East of Russia // Low-capacity nuclear decentralised consumers in the region: meth- power plants: a new direction in energy develop- odological approach, results of investigations // ment/ ed. by Academician of RAS A.A.Sarkisyan; Energy Policy. — 2011. — Issue 4. — P. 42-49. Nuclear Safety Institute of RAS — M.: Nauka, 2 Ivanova I.Yu., Tuguzova T.F., Izhbuldin 2011. — P.88-100. A.K., Simonenko А.N. Development of mineral 6 Approved by the Resolution No.1715-p of resources of the North: options of energy supply the Government of the Russian Federation of // Region: ekonomika i sotsiologiya. — 2011. — November 13, 2009. No. 4. — P.187 — 199. (in Russian). 7 Approved by the Government of the Russian 3 Saneev B.G., Ivanova I.Yu., Tuguzova T.F. Federation on June 3, 2010. Role of low-capacity power plants in the zones of 8 Scenario conditions for development of elec- decentralised electricity supply to consumers in tric power industry until 2030. — M.: Minenergo the East of Russia / Materials of the Workshop of RF, APBF, edition of 2011, 204 p. “Economic problems of the energy supply system” 9 Saneev B.G., Ivanova I.Yu., Tuguzova T.F. (Workshop organised by A.S. Nekrasov). — М.: What is the cost of renewable energy for us // IEF RAS, 2011. — Issue 123. — P. 28-43. (in Rus- Energia: ekonomika, tekhnika, ekologia. — 2012. sian). — No.4. — P.23-30. 4 Ivanova I.Yu., Tuguzova T.F., Khalgaeva 10 Ivanova I.Yu., Tuguzova T.F. Expansion of N.A. Small-scale energy and development of systems for energy supply to isolated and hard-to- renewable energy sources // Energy strategy of access consumers// Eastern vector of Russia’s en- Sakha Republic (Yakutia) for the period to 2030 / ergy strategy: current state, look into the future/ Government of Sakha Republic (Yakutia). — ed. by N.I.Voropai, B.G.Saneev; Energy Systems Yakutsk; Irkutsk: Media-Holding “Yakutia”, Institute SB RAS. — Novosibirsk: Academic Pub- 2010. — P.159-178. (in Russian). lishing House “Geo”, 2011. — P. 207-240.

23 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Prospects of Local Power Development with the Maximised Use of Renewables in Russia’s Far East

Alexander Solonitsyn School of Engineering, Far Eastern Federal University and “Hydrotex” Scientiﬁ c Production Company [email protected]

Introduction Developing and Implementing a Concept of Local Energy Systems In 2001-2003, the School of Engineering of the Far Eastern Federal University (SE-FEFU) The basic Concept of Local Energy Systems in Russia introduced the notion of LoES which for Remote Areas of Russia was subsequently stands for Local Power (Energy) Systems, be- developed in 2002-2008. The authors deﬁ ned a fore the concepts of Smart Grid and Microgrid key operational unit: LoES, or Local Energy Sys- became widely known and accepted. SE-FEFU tem with Maximised Use of Non-Fossil Sources also proposed using such terms as “energy is- of Energy. The conceptual delimitation between land”, “energy aerology”. It adopted an end-user renewables and non-renewables was therefore re- perspective and began developing a holistic ap- jected as it was of no importance for the end user. proach to the power systems that would ensure What does this abbreviation really mean? high quality and reliability of energy supply to Strategically, SE-FEFU objective is to encour- remote settlements, mining companies etc. This age the emergence of a “Local Energy of Russia” was an interdisciplinary approach: a variety of sub-industry that would co-exist and complement specialists were employed to address a wide the “big” grid power. The rationale for creating scope of issues, including diesel gensets, WTGs, it is the notorious irregularity of operation of the mini-hydros, solar etc., and in fact, to combine existing Russian power system. Range of appli- all sources in one system. cations for this new local energy sub-sector will

Figure 1. Local Energy Systems = LoES

24 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

include: power supply to the “energy islands” wind farms and included regional wind maps and and the end points of weak grids that do require cadastral diagrams of rivers. reconstruction and backup. In fact, this concept The feasibility study of a wind farm 36 MW may apply to about two thirds of Russia’s terri- project on the Russky Island in the Far East of tory (especially in the North and the East), 20 Russia was the next important deliverable of the million people, 40 thousand settlements, 10 per Local Power team at the SE-FEFU in 2009 and cent of Russia’s generation today and up to 20 was used to assess the energy supply for the APEC per cent (50,000 MW of installed capacity) in 2012 Leaders’ Week. The study was commis- the future. sioned by the JSC RusHydro (Russia) and Mitsui The Concept suggests developing an integrated & Co (Japan). The capital expenditure, infrastruc- full cycle of LoES-related services, from research ture excluded, were estimated at ~ €2000/kW to construction where SE-FEFU is responsible of installed capacity while the estimated energy for research but implementation (production, costs, with a 20 years depreciation pattern of RUB procurement, installation) is handled by the Hy- 3.5/kWh. This project helped the team to acquire drotex Co. and other allied companies, to observe experience in construction and maintenance of specialisation. About 30 scientiﬁ c and practical three 60-meter high wind measurement masts, publications have been released so far. produced by NRG Systems (USA) and commis- The Concept provided a guiding framework sioned by Mitsui & Co. Despite of some additional for a number of investigations and reports. In expenses, SE-FEFU decided not to remove the 2007, the Local Power team of the SE-FEFU equipment completely and has been keeping one produced a research report on “Renewables of the of the masts in operation for education purposes Sakhalin Region: Assessment and Potential Use and meteorological services. for Energy Generation Purposes up to 2020”. It The wind-diesel LoES Golovnino project ar- was discovered that the technical wind potential rived in 2010. The project site is on the Kunashire exceeded current regional energy consumption by Island, one of the Kuril Island of the Sakhalin the factor of 1,400. The report identiﬁ ed tentative Region, Russia. It was commissioned within the sites for wind-diesel and hydro-diesel LoES, grid framework of the Kuril Islands State Develop-

Figure 2. Cadastral Diagram of Thym river, Sakhalin

25 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Figure 3. Golovnino Project. The sketch of General Layout ment Programme and the basic wind-diesel tech- teploenergo commissioned this project with nologies were provided by Danvest Energy A/S installed capacity (planned) at 640 kW, a hot (Denmark). It is expected that the wind power genset reserve of 120 kW, remote control, average penetration will reach 74 per cent annually. consumption at 60 kW. Development of the wind-diesel LoES Maxi- A follow-up undertaking — the Local Power movka project in Primorsky Territory is in Development Programme for Primteploenergo progress. The regional energy company Prim- Company — is also in progress. The scope of the

Figure 4. Arrangement map for wind-diesel and hydro-diesel LoES in Ternei municipal region, Sakhalin, Russia

26 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Programme includes the development and instal- First, the former “Soviet” system prioritised huge lation of ten wind-diesel and hydro-diesel LoES energy projects that included very expensive HV in Ternei Municipal Region, Sakhalin Region, grids with the length of thousands km. Second, Russia. Installed power now totals 6.5 MW and the Ministry of Energy of the Russian Federa- is projected to reach 14.08 MW. tion is not ready to work with the “energy fl eas”. The technical specifi cation of the Local Power Third, the Ministry of Energy focuses on fossil Development Programme for the Sakhalin Region fuel energy. There are subsidies for diesel fuel was developed in accordance with a request from for households, but no real subsidies for renew- the regional Ministry of Energy. The area includes able energy. 22 villages on the Sakhalin Island, Kuril Islands Given that the Ministry of Regional Develop- and the Programme relies heavily on mini-hydros ment of the Russian Federation is responsible for and wind turbines. equalising the economic opportunities among different Russian regions, SE-FEFU proposed that Challenges and Lessons Learnt this ministry be empowered to also address the regional energy issues and thus to complement The challenge is not in technical solutions or even compete with the Ministry of Energy. that are widely available now but in the specifi c This proved irrelevant because the whole power circumstances of the Russian power industry. For industry and related issues fall under purview example, the cost of energy in Agzu settlement of the Ministry of Energy. Some countries go as (North of the Primorsky Territory) is US$ 2.0 per far as creating new dedicated agencies, e.g. the 1 kWh (2012). The Local Power team at SE-FEFU Ministry of New and Renewable Energy in India. applied its in-house LoES-Balance software to In case of Russia, another more feasible option fi nd out that a hybrid LoES (wind-hydro-diesel) is to develop clear federal regulations stipulating may reduce the cost down to US$ 0.7 per 1 kWh the payback of investments instead of appointing (DCF depreciation for 20 years). Now, the ex- ministries. However, given that the life time of penditure on fuel supply contributes 50 per cent such projects is 20-25 years, investors may prob- of the basic energy cost. However, the customers ably start up here right now. may not be willing to pay even US$ 0.7/kWh and the “new” energy cost may also need subsidising The Way Forward from the Government. (Agzu is an aboriginal settlement of Udege people). Furthermore, the Opportunities exist to utilise the huge potential capital expenditure is very high to build this new of renewables in the Far East of Russia in dis- system from the owner perspective. It is not about tributed and isolated power systems to provide simply reconstructing the old power station built electricity to the end points of weak grids and in 1970s: the equipment has been fully depreci- remote “energy islands”: settlements, mines, oil ated, so the new required facilities include very & gas companies etc. expensive fuel supply and fi re defense systems. What is needed to further the development of These result in capital expenditure of more than Russia’s Far East? To name a few pre-requisites, US$ 3,500 per 1 kW of installed capacity. These these include rising fertility in remote areas, new long term investments may only be provided by all-season roads, new secondary schools and kin- the Federal Government. dergartens, upgraded municipal hospitals, lower Another underlying challenge is that a complex environmental impacts and preserved nature. federal system of subsidies discourages the owner Advanced technology in the power industry may from reducing the cost of energy and replacing help addressing these challenges, for example, diesel power supply with renewables. As a result, the use of derivation & fl oating type mini-hydros there have been only a few pioneer companies in can save salmon spawning rivers. Besides, people Russia that risked and tried exploring renewables in remote settlements have the right to live in for their internal, corporate use not for sales. conditions that do not differ from the urban In Russia, the absence of a leading govern- ones. Eventually, it is unlikely that these multiple ment agency which may be responsible for the problems could be solved without a reliable and development of local power is a particular issue. affordable local power.

27 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Figure 5. Local Energy branch structure

Figure 6. Prospects for LoES development in Far East up to 2030

There could be various opportunities worth (2) In the area of fundamental research — draft- exploring in collaboration with APEC member ing regional and federal concepts and programmes economies and APEC Energy Working Group in for the development of Local Power. This will in- the fi eld of local power: clude developing a core approach, drafting federal (1) In the area of university courses and regulations, identifying the basic technology choice. polytechnic education — developing a special- (3) In the area of applied research — in new ised Master or Graduate course on Local Power types of derivation and fl oating mini-hydros. Systems in FEFU; joining efforts in polytechnic (4) Setting up a Local Power research and education (hydrology & HPS facilities, wind development centre and a federal test bed in turbines, energy aerology, electrotechnics, au- FEFU to coordinate the process in its entirety, tomation, remote control, etc.). Such graduates from scientifi c ground to “full turnkey”. will have developed a good understanding of a (5) Implementing state-of-the-art technolo- combination of various technical and economic gies in real pilot LoES projects in Russia. disciplines, as the end user requires a complete (6) Development and engineering of LoES. and reliable power system not only a component, (7) Facilitating foreign investments in the con- such as WTG. It may not be feasible to bring in struction of LoES facilities in Russia’s Far East to so many different specialists. fulfi ll a projected capacity as indicated in Figure 6.

28 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Wind and Hydro Potential at the Russian Paciﬁ c Coast for the Needs of Local Energy Development

Elena Pipko Hydrotex Co. and Far East Federal University [email protected]

The resource of commercially available renewable energy in the Russian Federation is not less than 24 billion tons of oil equivalent. The share of electricity produced in Russia from renewable sources amounted to about 1 per cent in 2008, excluding hydro power stations above 25 MW, and more than 17 per cent with the latter. The share of thermal energy produced by renewable energy sources (RES) was about 3 per cent (according to the Ministry of Energy of the Russian Federation). Until recently, for a number of reasons, primarily because of the huge reserves of traditional energy sources, development of renewable energy in Russia has been given relatively little attention. The situation began to change signifi cantly in recent years. The need to secure a better environment, new opportunities to improve the quality of life, participation in international development of advanced technologies — these and other con- Figure 1. Measurement of wind potential siderations have enhanced efforts to increase the in Primorsky Territory, Russia’s Far East number of renewable energy sources and move to a low carbon economy. Introduction of renewable energy sources in place an assessment of the selected area for en- remote villages has a number of advantages: ergy effi ciency. For the purpose of measurement • an increase of useful electricity per capita; of wind potential, a common zoning scheme was • an improvement in the reliability of electric- adopted with fi ve grades where the higher grade ity supply; corresponds to an increased wind speed. Figure 1 • a signifi cant reduction in the cost of elec- shows a map of wind zones of Primorsky Territory tricity by maximising the use of renewable which is a result of a global research conducted energy and saving liquid fuels; by the Risø Danish National Laboratory for Sus- • a signifi cant increase in green energy com- tainable Energy at the Technical University of pared to diesel power stations; Denmark, with updates by district. Such studies • a full accounting for the balance LoES cu- as well as other works determine the zoning in mulative costs, including the costs of a full general, but are not appropriate to develop pro- recovery. posals for the use of wind potential. The choice of a site for the construction of Energy efficiency assessment is essential renewable energy facilities involves in the fi rst to identify the location of renewable energy

29 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East facilities. In the mentioned study, the structure been verifi ed by setting the anemometer at least of the wind zones complied with the the inter- on a one-year period to account for the annual national aerology requirements for a number wind variation. of compulsory details: orography and shading. The study identifi ed a number of locations in This allowed the authors to tentatively identify Sakhalin, and in particular on the Kuril Islands, the locations for the installation of wind power where the wind speeds far exceeded the gradation facilities. However, in each case at the pre-design zone fi ve, so the authors added the sixth grade stage, the preliminary indicators should have "very strong winds." The grade zones are there-

Figure 2. Wind potential of the Sakhalin Island and Kuril Islands

30 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East fore presented in two tables, with both standard anemometer height and the height of the wind power station of 50 m. In terms of coverage, zones 4 and 5 (strong winds) in Sakhalin and Kuril Islands represent a higher percentage of the surveyed area than, for example, in the Primorsky Territory (continental Russia). It should be noted that the above assessment did not impose any assumptions on the use of wind potential. Indeed, the energy resources are often not in demand due to the vast uninhab- ited regions, but these data are of long-term value. A more detailed map of the Terneisky region shows that there is a high wind potential and low population density in the areas with local electricity supply. As regards Primorsky Territory, despite a sharp decrease of energy deficiency after the start-up of the Bureya Hydro Power Station ir- regularities persist in the regional energy system. Reasonable solutions to these problems may be Figure 4. Prospects for local power development as follows. in Primorsky Territory, Russia’s Far East 1. Wind farms in the South of Primorsky Ter- ritory with a combined capacity of 100 MW (up- 2. Mini-hydros interconnected with stable gradeable to 300 MW in the future) to decrease grids. loads and losses in long grid lines and to reduce 3. Installation of 25-30 autonomous LoES with the cost of electricity. the capacity of 0.4-3 MW each in remote off-grid sites. Diesel gensets would remain for emergencies after mini-grids are developed at these sites. Sakhalin region possesses sufﬁ cient renewable energy resources, too. At some points, the average wind speed is 8 m/s or more at the standard height of the anemometer of 10-11 m above the ground level, so the average annual wind power at the height of the axis of a megawatt-class wind farm may reach 2,500 W/m2. The gross electricity generation is theoretically possible with the capacity of some real wind farm models of about 3,800 billion kWh, exceeding the annual consumption of the area which is 2,721 million kWh i.e. by a factor of 1,400. Available water resources enable the construction of mini-hydros. The gross hydro power potential of the Sakhalin region is measured in terms of the total gross theoretical hydropower: runoff (15,500 million kWh), reservoirs (4 million kWh), lakes (50 million kWh), tidal energy (4,400 million kWh), full gross hydro power potential — 20,000 million kWh. Figure 3. Wind potential of Terneysky region, The total theoretical capacity exceeds the an- Sakhalin, Russia’s Far East nual electricity consumption by a factor of 7.

31 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Figure 5. Prospects for the installation of local power facilities in Sakhalin and Kuril Islands

Average diesel consumption of 0.35 kg/kWh wind and mini-hydro may effectively complement implies that the gross potential of RES will save each other because of weaker river ﬂ ow and higher about 1,350 million tones diesel a year. In addition, wind speed in the winter compared to summer.

32 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Development of Local Energy Supply with the Use of Renewable Energy Sources

Dariya Eremeeva Sakha Energo JSC [email protected]

The Republic of Sakha (Yakutia) is the largest the reasons for such a high cost of diesel fuel is a region of the Russian Federation, about one fi fth complex multi-modal transportation with numer- of the total area. Nowadays, Yakutia is still one ous transfers along the routes which are mostly of the most isolated and remote regions of Russia of seasonal type. where year-round transport is not available for Sakha Energo has to use a credit of more than 90 per cent of the territory. RUB 2 billion annually to secure the delivery of Sakha Energo JSC serves seventeen sub- diesel fuel. Adding to the logistic complexity, wear regions of this Republic (as is highlighted on the of the equipment and transmission lines coupled map) with the total area of 2.2 million km2. One with high specifi c fuel consumption result in sig- hundred and twenty fi ve diesel power stations nifi cant fi nancial losses. are operated here to provide almost one hundred A comprehensive technical modernisation thousand people with electricity (Figure 1). is not affordable due to the limited fi nancial re- The electricity tariff is US$ 0.79/kWh (as of sources that originate from the customers. 2012). The fuel that contributes 47 percent to Diesel fuel that is responsible for the largest the tariff is of course the main challenge. One of component in the electricity tariff accounts for

Figure 1. Local power supply systems in the Republic of Sakha (Yakutia), the largest region of the Russian Federation

33 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

90 per cent of all primary fuel consumption by The lessons learnt from the operation of this Sakha Energo for electricity production. wind turbine led to a list of recommendations and The curve in Figure 2 shows what may be technical specifi cations for the wind power equip- expected until 2016: the fuel price is increasing ment that would perfectly fi t Russia’s northern while its consumption is signifi cantly decreasing. territories: This is because the company intends to address • new, arctic version equipment; the fuel issue and one of the ways is to promote • without hydraulic braking system; the use of alternative renewable energy of the sun • direct-drive model; and the wind. • with pitch control; The Northern coastal zone of the Republic • ability to work off-grid; has signifi cant wind potential while the central • installation without the use of a crane and southern parts receive high level of solar (method of downward arrow) because of radiation. the complex logistics arrangements; The fi rst wind turbine in Yakutia — Tacke • maximum unit power — 100kW-150kW TW250 with the capacity of 250 kW — was because of uneven wind speed spread; mounted in the settlement of Tiksi in the coastal • remote management and monitoring of zone in 2007. Sakha Energo has been operating wind farm by operations staff of diesel this turbine for fi ve years and it produced 328 power station; thousand kWh of “green” electricity that saved • installation site with due regard of the na- the company 84 tons of diesel fuel. ture of wind speed and direction; However, the results of the fi ve-year opera- • staff training on the repair and maintenance tion are somewhat mixed for various reasons. of wind turbines. First, at the time of purchase the turbine was Sakha Energo built its fi rst solar power plant not new, it was fi fteen years old already. Failures with the capacity of 10 kW in the settlement of occurred often due to wear. This equipment was Batamai in 2011 to produce electricity in parallel also of non-arctic version, its lowest working with diesel generators. For one year of operation, temperature is minus 20 C while the winter tem- it produced about 10 thousand kWh that saved perature in Yakutia falls to minus 40 C and even the company 3.4 tons of diesel fuel. That is a good lower. indicator. Besides, the turbine didn’t have the remote The generation is uneven due to the difference control and the company staff had to visit the in solar radiation in winter and summer. In 2012, installation site every time the data from turbine the company added 20 kW to the existing 10 kW was needed or in case of improper operation. and changed the supporting construction. The

Figure 2. Dynamics of fuel consumption and price for electricity generation in the Republic of Sakha (Yakutia), 2001-2016

34 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

new design allowed the operator to change the • modularity, i.e. possibility to increase or angle of solar modules relative to the horizon. decrease the power of PV plant by changing There are now two options: winter (the maxi- the number of panels and inverters; mum angle) and summer (the minimum angle). • adaptability, autonomy and the ability to It is not automated yet, so the staff has to do it be on-grid; manually. • wide operating temperature range that is An express analysis of the economic effect of important in Yakutia’s severe climate con- the new solar power plant was conducted under ditions; current assumptions and showed that the payback • remote monitoring and control; period may take 8.6 years. • no harmful emissions. In 2012, Sakha Energo has also built a solar Meanwhile, there are also disadvantages: power plant with the capacity of 20 kW in the • high cost of equipment; settlement of Yuchugei that is close to the Pole of • relatively low efﬁ ciency (12-18 per cent for cold of the Northern Hemisphere (that is Oimya- solar cells based on mono-crystalline silicon); kon where the temperature was registered at -71 • unstable solar radiation (night, clouds, C circa 1924). This solar power plant is also oper- smoke, fog etc.); ated in the parallel mode with diesel generators. • seasonality of PV plant: from early Novem- The company notes that the solar power plant ber to mid-January exposure to the sun is has the following advantages: greatly reduced; • compactness of the equipment; • need for tracking the sun. • simplicity and ease of installation and use; Ultimately, Sakha Energo has developed a • long lifetime period; programme for renewable energy sources in the • absence of rotating and moving parts, which Republic of Sakha (Yakutia) in 2012 that was reduces wear; approved by the President of the Republic. The • minimum cost of operation and low cost of plans include building ﬁ ve wind farms, 51 solar energy, i.e. no fuel consumption, continu- power plants and three small hydropower plants ous maintenance, low depreciation etc. of seasonal type.

35 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

Breakthrough in Small-Scale Power Generation at the Beginning of the XXI Century

Anatoly Chomchoev Test Ground of the Cold LLC [email protected]

Test Ground of the Cold LLC has been devel- collaboration with partners such as the Institute oping a venture capital business for fi ve years, of Physical and Technical Problems of the North, selling solar power units for household generation Permafrost Institute, Federal University of the in the Republic of Sakha (Yakutia). The com- North East. These institutions are represented pany uses fi ve acres of land where it tests wind by renowned scientists in such fi elds as small and solar power generating household stations, distributed energy, studies in materials at low construction materials, electric heating in chal- temperatures, temperature extremes and others. lenging climate conditions of Northern Russia. Building on the experience acquired, test The research focused on the use of the wind Ground of the Cold developed specifi cations for and solar facilities in the climate conditions of a self-regulating source of small-scale distributed Yakutia and indicated the following: power, in furtherance of an accelerated deploy- 1. There is no wind at nights in Yakutia, espe- ment of microgrids. Here are some of the desir- cially in winter when it is extremely cold. Usually able characteristics: it should be maintenance- wind speed is 4-6 m/s, except high winds (over free, reliable, safe, small in size and weight, 25 m/s), which makes the wind power generation capable to operate uninterruptedly for at least inapplicable. Besides, Yakutia has no constant seven years at the outdoor temperature from wind fl ow. + 70 °C to — 55 °C, of a capacity of 7-200 kW, 2. Vibration and noise produced by wind costing not more than US$ 800/kW. power turbines cause additional disturbance for This issue is critical for Russia that is the the inhabitants of the North. world's largest country in terms of surface area. 3. Another problem of the wind power in Yaku- There are vast areas with the chernozem soil in tia is that the extreme temperature drop freezes Russia suitable for meat, milk, vegetables, grains wind generator, causing icing of the fans installed. output and with water basins for fi shing. The 4. In the North, the sun orbit is not high: in population of 143 million people is dispersed summer it is 320°, so solar modules need track- across the country’s territory, but due to the lack ers. This increases the cost of the industrial use of electric energy is mostly concentrated in the of the solar power. Yakutia is situated in the Polar cities with central heating now. Meanwhile, Rus- Circle, thus it has polar nights in winter and solar sia is facing the challenge to explore its natural modules do not work here. resources in new areas of the North, and this will Given the peculiar climate condition, the com- require low energy sources, especially at the early pany embarked on exploring other non-conven- stages. A well known problem is the delivery of tional sources of small-scale, distributed energy petroleum products for the operation of power and integrating those into remote microgrids. The stations that is very expensive in the North. Test Ground of the Cold conducts fundamental At the beginning of XXI century, the Rus- research in extracting hydrogen fuel from ice sian science is at the forefront of addressing this and generating electricity from the difference challenge and has launched groundwork for the between constant temperature of the permafrost industrial production of Autonomous Sources of and the outside surface temperature. It furthers Electric Power (ASEP) to meet the above technical

36 Chapter 2. Microgrids as a Way to Harness Renewable Potential. The Case of Russia’s Far East

requirements. At this stage, the Test Ground of mer Soviet Union have been declassifi ed and the the Cold works in Yakutia to fi nalise the specifi ca- relevant scientifi c articles and books have been tions and conduct fi eld tests. published. But unfortunately, the government does Industrially mature and commercially avail- not show interest in the development and produc- able ASEPs that meet the above specifi cations are tion of new small scale energy sources for the local in great demand in the North of Russia. Today, energy supply to remote areas and islands. about 900 horse-breeding bases, 300 summer Another issue with accelerating the develop- farms, 120 deer and 70 fi shing teams in Yakutia ment of a new self-regulating power source on await microgrid solutions that will incorporate natural uranium and solid oxide fuel element in ASEPs. These smart power plants will replace Russia is that the research and development is diesel power stations, will reduce the imports of scattered among various research institutes of the petroleum products and will reduce electricity Russian Academy of Sciences, the Federal Space loss during transportation. The ASEPs may also Agency, Rosatom State Nuclear Energy Corpora- be in demand in many of the remote areas and tion, the Ministry of Defense and others, while islands of APEC member economies. engineering teams almost do not exist. Many There are ongoing experiments to develop highly qualifi ed or world-class engineers either commercial ASEP prototypes in North America have retired or are busy with routine assignments and Europe. In 2009, John Deal of Hyperion to secure their regular incomes. Power Generation, USA announced that self- Indeed, today we do not have a reliable, long- regulating energy sources would produce up to 25 lasting source of small scale power. The world MW from natural uranium in 2011. In 2008, the today is not far away from the electrochemical ele- Danish Technical University received an alloca- ment invented in the early XIX century. Modern tion of €7 million for the development of small battery (100 amp/hour) used for solar module distributed power source using solid oxide fuel has the weight of 36kg, which a woman, reindeer element based on zirconium. These projects have herder, has to carry in order to watch TV. But this not yet been completed and the single prototypes battery cannot help to heat water as the power is that have been developed are highly expensive not enough. and are not competitive to modern diesel power That is why the Test Ground of Cold LLC has stations. However, the direction of research and been promoting roadmaps for the production development is absolutely correct. of ASEPs of the XXI century. The company has ASEPs will be fi fteen times cheaper than fl oat- identifi ed potential Russian partners and strives ing atomic power stations and safe in all respects. to be a leader in the emerging ASEP industry. The Development of ASEPs using natural uranium ambition is to spearhead the development of tech- and solid oxide fuel elements based on zirconium nical specifi cations, implementation of fi eld tests dioxide is a core of the breakthrough in small scale in Yakutia, and to launch the commercial produc- power generation at the beginning of XXI century tion in the shortest possible time. Government for heat supply of small settlements, lighthouses support and cooperation with interested private and providers of the navigation waypoints. Today, stakeholders will provide substantial impetus to the research and development outputs of the for- these activities.

37 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

The Economics of Hybrid Renewable Microgrids

Peter Lilienthal HOMER Energy [email protected]

Defi nition was the only cost-effective renewable technology and that was only true in locations with a good There are many possible defi nitions of a mi- wind resource. The diffi culty of verifying local crogrid. For our purposes we consider any power wind resources remains a signifi cant obstacle system that is capable of standing on its own to be to small wind projects because the resource can a microgrid. This includes both remote systems, vary dramatically over relatively short distances, such as island utilities, and grid-connected sys- especially in complex terrain. The power output tems that are capable of “islanding”. That means and therefore the fi nancial feasibility of wind they can continue to supply power after becoming power is very sensitive to the resource. disconnected to a central grid. It does not include In the last couple of years the economics of renewable and distributed power projects that do microgrids has changed dramatically due to sub- not have islanding capability. stantial increases in the price of oil and decreases This defi nition includes thousands of island in the cost of photovoltaics. Figure 1 shows just power systems and millions of systems if you the fuel cost of diesel versus the fully amortised include relatively small systems. Historically, cost of PV. Ten years ago PV power was four times almost all of them have been simple diesel power the cost of diesel power. As recently as 2009 it systems, but that is changing quickly. was still almost twice the cost, but as of 2011 PV is now less costly than diesel power. Economics of Microgrids Microgrid Applications All of those simple diesel power systems are cost-effective candidates for becoming hybrid Microgrids have many applications. Off-grid renewable microgrids. Until recently, wind power microgrids are mostly applicable in developing

Figure 1. Cost parity for PV on diesel grids

38 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 2. What makes PV cost-effective?

countries, with some exceptions like Alaska and the Hybrid Systems Australian outback. Within this category, island power systems and mining operations tend to be Microgrids are the key to the development the larger applications. The military is very inter- of smart grid technology. Large, interconnected ested in making the forward operating bases more utilities have daunting security and regulatory ob- effi cient and less dependent on vulnerable supply stacles to implementing smart grid technologies, logisitics. Ecotourism is a small, but interesting but the cost of diesel fuel is making high penetra- niche. Village power is a potentially huge market tion renewables an economic necessity for smaller for supplying 1.5 billion people who currently grids. Those high renewable penetrations require have no access to power. That market will require distributed controls and load management within a sustained programme of institutional support. a smart microgrid. Nor do isolated utilities have The central grid in most developing countries to worry about cyber security threats and regional does not provide the same level of reliability that power fl ows. This isn’t conventional wisdom but we are used to in developed countries. As a result smart grid technologies will be proven out on most commercial enterprises and many middle microgrids fi rst (see Figure 4). and upper income households have their own Microgrids can use a variety of new modular backup power systems. The noise and mainte- technologies that give designers substantial fl ex- nance requirements of diesel generators is a major ibility. Because solar and wind power systems burden for these users in addition to the fuel cost. produce variable power they do not stand on Within developed countries the main markets their own and must be part of a hybrid microgrid. currently are emergency service applications that Hybrid systems not only allow a diesel to operate require extremely high reliability, such as hos- at its peak performance level, but they also give pitals, data centers, police stations and military system designers new design fl exibility. We devel- bases. University campuses are a special case oped the HOMER® software to optimise system because of their low cost of capital, long planning design and identify cost-effective applications of horizons, and the fact that they have multiple microgrids. buildings under the same ownership. In the long run, microgrids have an enormous potential to Design and Simulation enable central grids to manage the variability and other challenges of high penetrations of renew- HOMER allows system designers to distin- able power sources and electric vehicles. guish between critical, high priority loads and Each of the microgrid applications is driven by other loads that can be controllable. Cogenera- a different combination of the three distinct value tion or combined heat and power systems are propositions for microgrids, as Figure 3 shows. more easily deployed in microgrids. The HOMER

39 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 3. Multiple market segments with different value propositions

Figure 4. Clean power evolution

software handles all of these technologies, in ad- many trade-offs between design variables. For dition to storage and conventional and renewable example, a larger battery bank will reduce fuel resources. use, but so will additional renewable capacity. A In order to identify optimal microgrid system well-designed load management system can serve designs, HOMER must answer questions, such a similar function to additional storage capacity. as how much fuel will a system require, how long Local power systems are hard to design be- can the storage last. HOMER also identiﬁ es the cause there are so many alternatives and there

40 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 5. Hourly simulation results (sample) is no cookie-cutter, one-size-fi ts-all, Model T particularly important when new technologies are solution. Many of them are new and different evolving rapidly and for smaller systems where and the best solution is often a combination of some of the input data may be quite uncertain. technologies. Because a confused mind says “No” Because HOMER performs hourly simulations we developed HOMER as an easy to use software you can look at exactly how each component op- package to show which set of technologies is best erated and the energy fl ows in every hour of the under what conditions. year (as is shown in Figure 5). The renewable resources as well as the loads vary throughout each day and over a whole year. Conclusion The charge and discharge cycles of a storage systems must be explicitly modeled. This makes We are very optimistic about the potential of it essential to perform chronological simula- microgrids. We strongly believe that the remote tion over a whole year. HOMER’s chronological microgrids will be the trailblazers for a variety of simulation engine will estimate the fuel and O&M load management, demand response, energy stor- requirements for a particular system. Its opti- age, and smart grid technologies that will allow misation algorithm performs these simulations renewable power to be deployed at much higher for hundreds of thousands of different system levels. These technologies can be deployed much confi gurations and ranks them by a variety of more easily in microgrids because that avoids the cost metrics to identify the optimal system. That security and regulatory complications that are identifi es the least cost system for a particular major concerns for larger interconnected utilities. scenario. HOMER’s built-in automated sensi- At HOMER Energy we are committed to helping tivity analyses can then show how those results microgrids achieve their potential by making a vary when conditions, such as fuel prices, loads, sophisticated analytical tool widely available and component costs and performance change. his is providing support to our users.

41 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Feasibility Study on a Microgrid System with Wind Power Generation for Remote Isolated Grid Areas in the Russian Federation

Masao Hosomi, Emi Komai KomaiHaltek Inc. [email protected]

Summary Case Study: Novikovo Village, Sakhalin

This is a report of a feasibility study on microgrid Outline of the village system with wind power generation in Russia. The Novikovo is a village of 550 inhabitants lo- study was performed by a team of Komaihaltec Inc, cated in southern Sakhalin. It is about 110 km Mitsui and Co., Ltd., Toyo Engineering, and Oki- from Yuzhno-Sakhalinsk, and the distance from nawa Enetech, in the second half of 2011, funded the neighboring community Ozerski is about 40 by the Ministry of Economy, Trade and Industry km. It has an independent power system not of Japan. The village of Novikovo, Sakhalin was connected to the power system of the Sakhalin selected as a case study and the energy balance was regional grid. simulated when integrating 300kW wind turbine The only industry in the village is ﬁ sh process- to the microgrid system of the village. ing that only runs in the summer. When it is in operation from August to October, the electric Introduction consumption in the village is the highest with the daily maximum load around 500 kW (Figure 2). For thousands of remote and isolated com- Novikovo power station is equipped with seven munities in Russia, energy security has been generators, which were used in the past for the always an issue, as bad weather or transportation coal mining industry, but electricity is supplied troubles could easily interrupt the fuel supply to by only one generator at a time. There is no syn- their small community power stations. As these chronization board, and the power plant is not small power stations, often powered by diesel able to operate two generators at the same time. generators, produce expensive and high carbon emitting electricity, the situation is getting harder these days with the ever rising oil price as well as the rising awareness in the international community of the need to reduce carbon emission. Our study team, including a manufacturer of 300kW wind generating system and microgrid management experts, investigated the possibilities of wind–diesel hybrid generation system in isolated grid areas in Russia with a hope that the Japanese technology could lead to enhancing the quality of life in those communities as well as contribute to actions against global warming. This paper describes especially the case study of Novikovo village of Sakhalin, and its simulation Figure 1. Location of Novikovo village, results when introducing wind turbine. south of the Sakhalin Island

42 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

The cold weather model exists for some wind turbines, and one of the team members Komai- haltec is developing one for their 300 kW wind turbine. Most of the cold weather model wind turbines operate until minus 30C and survives until minus 40C.

Figure 2. Daily maximum load, Novikovo village

Wind resource analysis in Novikovo Wind resource assessment is essential to judge the feasibility of a wind energy project. In this study, two sets of data were analyzed: wind data of the Novikovo weather station and the data of 34 m high meteorological mast, installed during Figure 3. Air temperature at every three hours the study period. interval, Novikovo weather station The wind resource simulation was made with data from the weather station and the topographi- cal data of Novikovo, using WAsP software, wind This study analyzed the correlation between simulator widely used in the wind energy market. the wind speed and the air temperature, taking an As a result, it was predicted that, rather than along example of Salekhard airport in western Siberia. the coast (6.14 m/s), the better wind (7.24 m/s) It was found that the wind speed is below 5 m/s is expected around the hill side, several hundreds when the air temperature is below minus 30C. meter away from the power station. This wind This means that the wind turbine stop due to the speed is used for the energy mix simulation de- low temperature could be minimal and there is scribed in the later section of this paper. a good possibility for cold weather model wind turbines to be introduced to the areas studied. Cold weather consideration The features of Komaihaltec’s cold climate Standard wind turbines are designed to survive model are listed below (Table 1). We intend to in the air temperature as low as minus 15C or 20C. verify the speciﬁ cation under real circumstances. Although Novikvo is located in southern Sakhalin where the climate is relatively moderate com- Wind–diesel Hybrid Microgrid System pared to other regions in Russia, the temperature Simulations tendency is investigated during winter season. Figure 3 illustrates the change in tempera- In this study, four cases of wind–diesel hybrid ture every three hours during the winter of 2010 systems in Novikovo are simulated. The compo- observed at Novikovo. The daily temperature nents are 508 kW diesel generator, 300 kW wind ﬂ uctuates widely and may fall below minus 15C turbine with output limitation if necessary, hot or minus 20C, but the minimum below 20C is water heating system to absorb the surplus power only observed for a few hours a day. Therefore, by dump load, and 100 kW and 250 kW batteries. it does not seem to be a major problem even with Case 1 is the model with only the diesel genera- the introduction of the standard model. tor and wind turbine, case 2 is the model with On the other hand, there are areas which are both the heater, case 3 is the model with the 250 kW rich in wind resource and very cold with the lowest battery and case 4 is the model with the heater temperature below 40C. Yamal peninsula and the and 100 kW battery. Hot water heating system is neighboring regions are well known examples. considered to be added on the existing heat gener-

43 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Table 1. Specifi cation of Komaihaltec’s cold climate model Temperature Operating temperature -30C ~ +30 C specifi cations Standby temperature (standard) -40C ~ +40 C Standby temperature (high specifi ca- -50C ~ +40 C tion type) Output control At the wind speed range near to the rated wind speed and at a low temperature of nearly minus 30C, the output is controlled as shown in the diagram on the left, correspond- ing to an increase in the air density.

Sensor Anemometer, wind direction Cold area speciﬁ cation Freeze sensor Yes Video monitor Optional equipment Heating Blade Anti-icing tape Nasser Yes heating Tower base Yes heating Each unit Yes heating Ventilation The nacelle Closure

ating plant to preheat the water. The average wind when only wind turbine was introduced without speed is set as 7.24 m/s based on the simulation of the output stabilisation device. Given that the weather station data, and the real daily load curves lower limit of the wind turbine output is 90 kW at Novikovo power station are used. which is equivalent to 30 per cent of the rated The result shows that the case 1 model can output, if the DG system capacity is less than not use the 29 per cent of the amount of electric- 130 kW which is equivalent to a 90 kW difference ity generated by the wind turbine, which means between the maximum load and minimum load, the importance of putting the surplus power to the introduction of the KWT-300 is impossible practical use. When surplus using device such as in order to protect the equipment. If the system battery or heater is combined, the wind generated capacity is less than 430 kW, which is equivalent power will be effi ciently utilised in the order of to a 300 kW difference between maximum load case 2, 3, and 4. The system confi guration needs and minimum load, KWT-300 always needs to to be decided according to the project economy of perform output limit. combining different optional devices (Figure 4). On the other hand, if the system capacity is ex- The simulation is made to investigate the panded to 1,000 kW, 2,000 kW or 3,000 kW, sur- impact of integrating a 300 kW wind turbine to plus power can be minimised and over 3,000 kW communities with different grid capacity, namely, of system capacity, it is not necessary to perform 130 kW, 430 kW, 500 kW, 1,000 kW, 2,000 kW output limit most of the time. and 3,000 kW. Assuming a power system of any scale of 500 kW system capacity where the Wind Turbine Output Control in Microgrid maximum load rate is 100 per cent, average load rate is 61 per cent, and the minimum load rate is In the wind turbine integrated microgrid 30 per cent, simulation analysis was performed system, it is necessary to match the system ca- for the long cycle fl uctuation control measure pacity and demand, and control the output of

44 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 4. Simulation results for four cases of wind–diesel hybrid systems in Novikovo village

45 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Table 2. Simulation results: output control

Case Power change measures Scale measures

• For long cycle output fl uctuation control, the wind [A] Wind power turbine operation has to stop to handle output limit None output control • The control for a short cycle output fl uctuation (only wind turbine only might be unable to operate the wind turbine due to output control) turbine control diffi culty

• For a long cycle output ﬂ uctuations, rerouting surplus power to the heating system of a boiler as a [B] Wind power dump load can be used, output limit (wind turbine Dump Load output control operation has to stop) is also available (250 kW) and dump load • As a short cycle output control measure, there is the possibility that some frequency deviations appear

• For long cycle output ﬂ uctuation, control of surplus power can be directed to a storage battery, or wind [C] Wind power turbine output compensation, and output limit are Storage Battery output control available (250 kW — and storage • As a short cycle output ﬂ uctuation measure, output 6000 Ah) battery stabilisation (output control or frequency control) by storage battery is possible

• For long cycle ﬂ uctuations, surplus power control by [D] Wind power storage battery, wind turbine output compensation Storage Battery output control, and supply heat of surplus power by dump load are (100 kW — storage battery available 1500 Ah) and dump load • As a short cycle output ﬂ uctuation measure, output Dump Load (minimum stabilisation (output control or frequency control) by (250 kW) storage battery) storage battery is possible

the wind turbine. As part of this study, we have also investigated the output control of the wind turbine. There is a need to control the wind turbine power generator according to the state of the power system. System requirements may vary depending on the size of the system. For a large system, time changing rates on reactive power and active power have to be set to the required Figure 5. Output limit requirements value of the system, and there are some cases that the installation of reactive power compensation device is required. For a small system, the control The 300 kW model analyzed in this research of reactive power and active power is required can control reactive power and active power by ex- in order to respond to the situation of electricity ternal signal input to handle such requirements. demand every moment according to the size of The contents that can be controlled are sum- the system such as remote islands. marised in the table below.

46 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Table 3. Output control in microgrid: summary Active power control Reactive power control Power factor Control range 10100% of the rated power Cosφ=-0.860.86 Input Input Constant (max. value) (ﬁ xed value) ― Initial measurement value Content of control External signal External signal valuable (420mA) (420mA) Time schedule Soft cut-in Etc. Soft cut-out

Concluding Remarks and demand over time produced results that seem to be appropriate. In future, we would like This study investigated the feasibility of intro- to consider the proposal of a more concrete and ducing wind–diesel hybrid microgrid in remote practical system, including the measure to keep communities in Russia. Simulation of four system the power quality. models and calculations of the balance of supply

47 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Developing Microgrid in Local Energy Systems in Russia: Barriers and Opportunities

Irina Volkova, Viktor Kolesnik National Research University Higher School of Economics [email protected]

A Structural-innovative • innovative model — adopted under the Model for the Development of Energy “General Scheme of the Location of Energy Sector in Russia Facilities in Russia” and the “Russian En- ergy Strategy until 2030” (approved by the The last decade saw notable changes in the federal government); external conditions for the development of the • structural-innovative model — proposed by energy sector in all countries, including Russia. the Agency for Energy Forecasting project The most signifi cant of these, requiring an adjust- “Development of a Concept of Energy and ment of the industry, included: Electric Heat Infrastructure of Russia on • decrease in the reliability of electric supply; the Basis of Cogeneration and Distributed • changes in the electricity and power market Generation”. conditions; Since the second model proposes to signifi - • the necessity to enhance the environmen- cantly increase the share of distributed and local tal safety and energy effi ciency of electric power generating capacity, the implementation of power industry; this model will substantially increase the potential • increase of consumer demand for higher for microgrid development in Russia (Figure 1). reliability and quality of electric supply; However, the implementation of both models • continuous increase of electricity prices all faces signifi cant barriers at the moment. The basic over the world. barriers are as follows. Worldwide experience in power industry development and research show that the only solution is to change the paradigm of the industry, and to further a transition from the extensive development characterised by the construction of major new energy facilities to the intensive development where a sharp increase of the role and functions of management through intelligent energy technologies will ensure greater effi ciency of all basic energy processes. This will signifi cantly reduce the investment in large-scale generation and will create an optimal balance through the development of local and distributed integrated power in a single system based on microgrid technologies. Given the specifi city of Russia, it can be said that the development potential for microgrids is very high, but the level of their use will depend on Figure 1. Microgrid development potential the model for energy sector development. Now, in Russia using various models of industry there are two emerging models: development

48 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

1. Market barriers: will microgrid lead to a • no link between educational programmes, reorganisation of the energy sector? (Figure 2) the standards for professional and technol- • no policy for distributed generation (DG) ogy innovation in the largest power compa- development in Russia — a chaotic and nies; unregulated development of DG; • lack of suffi cient skills in universities for a • DG only exists at a regional level; new energy sector model • the Federal Grid Company / JSC Interre- • inadequacy of educational standards in the gional Distribution Grid Companies Hold- key areas of training required for the imple- ing / System Operator are not interested in mentation and deployment of smart grid. DG development; In both models of energy sector development, • there is no schedule or information on DG. the priority development of microgrids is neces- 2. Microgrid investment and regulatory sary for isolated and island territories, fi rst and framework: barriers foremost in the Far East of Russia. At present, • defi ciency of the regulatory framework — the territory of decentralised power of the Far tariff regulation should motivate innova- Eastern Federal District (FEFD) is home to about tion; 1,160 thousand people out of total 6,400 thousand • understanding benefi ts is a barrier — con- population in FEFD. sumer is not engaged in the discussion; Huge moral and physical wear and tear, high • Duma (Russian parliament) vision shows unregulated prices for diesel fuel in the logisti- the need to increase waste-to-energy and cally complex northern regions, and high staff energy storage; pay differentials in power plants and boilers all • lack of typical technology and investment contribute to the high cost of energy in the decen- solutions for microgrids. tralised sector — up to RUB 39/KWh and RUB 3. Education in microgrid: barriers 10,427/Gcal., (2009: RUB 28.02/kWh and RUB • inadequate skills and personnel for a new 4995/Gcal). High cost of equipment depreciation energy sector model; and repair imply additional burden on the energy • insuffi cient, not optimal government edu- tariff rate. In addition, in the absence of a single cational policies; managing company, management of individual

Figure 2. Market: will microgrid lead to a reorganisation of the energy sector?

49 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

companies in the decentralised energy supply Table 1. sector increases the managerial overhead. In 2011, the subsidies from the regional budget to compensate for the difference in rates for people receiving energy from local generation (the total number of inhabitants of the Far East region make up less than 5 per cent of Russia’s population) were RUB 1.931 billion, including thermal energy RUB 1.363 billion. Including the cost of the modernisation and development into the local energy tariffs for electricity and heat is not feasible which makes it almost impossible to attract private investment into the modernisation and development of decentralised energy supply sector of this region. In fact, there is no money not only for the develop- • Annual consumption of electric energy is ment of energy systems, but also for the necessary 1,000 thousand KWh, electric heat — 4,000 maintenance. All of this leads to frequent failures GСal. in the energy infrastructure and interruptions • Average temperature of the heating season in the fuel, heat, and electricity delivery to the is -20С, duration of heating season — 7-9 customers, and even the threat of bankruptcy of months. Considerable part of populated the supplier. areas is characterised by an adequate wind potential (average speed — over 6 meters A Simulated Microgrid Project for per second). a Typical Township in Russia’s Far East • The length of heating lines is 1,600 m, electrical lines — 9 кm. Overall, an analysis of the current situation in • Electrical energy tariffs for the operating the decentralised energy sector of the Khabarovsk organisation are approximately RUB 21/ Territory leads to a recognition that the economic kWh, for heat energy — RUB 5,000/GСal. effi ciency of the regional energy sector is cur- • Electric energy tariffs for the households rently at an extremely low level. A realistic and are approximately RUB 2/kWh, for heat — productive approach to the energy development RUB 1,500/GСal; the difference between in the region should be based on microgrids and the tariffs is subsidised from the regional distributed generation, which in the authors' es- budget or from cross-subsidising (the case timates can be quite benefi cial, and therefore at- of the Republic of Sakha — Yakutia). tractive for investors. Further, the report provides • Financial breakdown: 50 per cent budget an assessment of the effectiveness of a typical funding, 50 per cent credit (10 years, 11 per microgrid project for a township in FEFD. The cent interest). basic scenario is assumed as follows. • Tariff growth rate in case of project implementation in 2012-2014 does not exceed the forecast of Russia’s Ministry of Eco- nomic Development. • Reduction of tariffs on electric energy and heat energy by 30 per cent after the credit repayment. • Key question for the banks: guarantee of economically justifi ed tariffs for the duration of the credit term. Figure 3. Typical microgrid project for Evaluation results are shown in Figure 3 and a Far Eastern Federal District (FEFD) Table 1. township: results Financial results appear in Table 2 below.

50 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 4. Typical project Microgrids for Far Eastern Federal District (FEFD): project effectiveness indicators

The project is of considerable interest for systems for all types of local and central investors, credit institutions, and FEFD sub- generators, maintaining the stability of regions. For the implementation of the projects voltage and frequency in the general net- under consideration, various technical and policy works; issues should be effectively addressed: • Technological: there must be available • Technical: existence of system of double equipment for local energy generation accounting, coordinated work of local and (solar panels, wind turbines, co-generation central generators, appropriate protection equipment);

Table 2.

51 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 4. Typical project Microgrids for Far Eastern Federal District (FEFD): tariff forecast

• Organisational: there must be coordina- • providing long-term tariff rates for the tion between all participants in order to introduced energy facilities for the entire avoid overloads of generating capacities payback period; or building extra capacity, which would be • providing budget support on a payback or underutilised; payback-free basis (subsidies, favorable • Legal and economic: a legal possibility of budget fi nancing, other mechanisms); selling the excesses of self-generated energy • subsidies from the budget of the difference to the end user; there must be a developed between the economically justifi ed tariff market for energy or an economically at- rates and the actual rates; tractive environment for all participants in • elimination of cross-subsidising and transi- terms of tariffs for energy usage and transit. tion to direct budget subsidies; Specifi c conditions for introduction of mi- • co-fi nancing from the federal budget funds, crogrids and DG in remote localities and island including Federal Target Programmes, communities, i.e. state support of projects, aimed based on the public-private partnership; at modernising and developing of isolated re- • mechanism of fi nancial injections from the gions, must include: investment funds and other sources.

52 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

The Cell Controller Pilot Project1

Per Lund and Stig Holm Sørensen Energinet.dk

Larry Adams Spirae, Inc. [email protected]

Introduction large power plant, and therefore provide ancillary services such as power balancing, import/export of Over the past twenty years, there has been a active and reactive power, and voltage control at se- remarkable transformation in the generation, lect locations within the distribution system. Lastly, transmission, and distribution of electric power in the event of a transmission system emergency, in Denmark. Prior to 1990, most Danish electric local distribution networks (60 kV and below) power was produced at large, centralised genera- could be rapidly isolated from the transmission tion plants from which it was transmitted and dis- network (150 kV and above) and operated autono- tributed to commercial, industrial, and residential mously using local resources, thereby reducing the consumers. Since then, thousands of generating impact on consumers and contributing to more assets have been installed throughout Denmark, in- rapid recovery from the emergency. cluding dispersed combined heat and power plants and wind turbines. The Cell Controller Pilot Project Initiation of the Cell Controller Pilot (CCPP) was initiated to develop and demonstrate Project the capability to use distributed generation and other energy resources connected to distribution Due to a constant political wish for environ- networks for grid reliability and power-ﬂ ow related mentally friendly power generation, Denmark has applications. Moreover, it was recognised that the experienced a vast growth in distributed genera- coordinated control of local assets such as com- tion (DG). This includes a signiﬁ cant increase in bined heat and power plants, wind turbines, and wind power as well as dispersed combined heat load control could mimic the operation of a single and power plants (DCHP).

Figure 1. Production capacity per voltage level in the western part of Denmark in 2004

53 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Already early in this millennium, the amount a situation. This paradigm shift requires a major of installed decentralised generation systems had effort which can only be implemented gradually reached very high relative numbers especially in in order to uphold the security of supply. the western Danish power system as depicted Generally each local distribution grid con- in Figure 1. In 2004 the total installed capacity nected to the transmission system could form an in this area could be summarised to 3,502 MW active network including all local DG assets and central power plants, 1,643 MW DCHP units, and all distribution network operator (DNO) facilities. 2,374 MW wind turbines (WTs), totalling 7,519 Following this perception the following experi- MW. In comparison, the minimum load of the ment of thought was devised as the core of the area was approx. 1,150 MW and the maximum Cell Controller idea. load was approx. 3,800 MW. If the 60 kV distribution grid below each All of the DCHP units were primarily built for 150/60 kV transformer is defi ned as an autono- the purpose of providing local district heating. mous (self-regulated) Cell with a fully automated It follows that the electrical power production Cell Controller with fast data communication to from these units were tied to the heat demand all DCHP plants, WTs, transformers and load and not to the power demand. Hence the area of feeders within the Cell area inclusive of synchro- western Denmark experienced power overfl ows nization equipment on the breaker in the 150/60 on a regular basis with close correlation to both kV grid interconnection point, then this Cell can wind conditions and outdoor temperature. be given one or more of the following technical One of the consequences of this massive functionalities: build-up of DG was that several 60 kV distribu- • Automated transfer to islanded operation tion networks, especially those situated along the at the instance of conditions on the 150 kV coast line to the North Sea with prevailing wind transmission system may lead to a blackout; regimes, in fact became net power producers • Restore the cell to operation in the event of transmitting their excess power up on the 150 kV a complete blackout independently of the transmission grid. grid (Black start); The 60 kV distribution systems in Western • Maintain frequency and voltage within the Denmark (the peninsula of Jutland) has been cell within acceptable limits; built as a meshed network with at least two sup- • Resynchronisation back to the transmission ply possibilities to each 60 kV station and with grid to provide power and voltage support interconnections between neighbouring distribu- to local parts of the transmission system tion companies. The 400 and 150 kV transmission during the repowering sequence. system in Jutland serves partly as a transport corridor between the hydro powered systems of Genesis of the Danish Cell Project Norway and Sweden and the fossil and nuclear powered systems of Western Europe. Hence to In 2002-2004, power systems in North Amer- avoid that the 60 kV distribution systems take ica, Italy, Sweden and Denmark all experienced part in any power transit on the transmission blackouts of large areas involving millions of system, the 60 kV distribution systems is operated consumers in each event. All of these blackouts as isolated radial systems beneath each 150/60 were caused by voltage collapses due to insuf- kV transformer station. fi cient reactive power resources available locally. These blackouts were not seen as isolated Initial Cell Controller Concept events but rather as a consequence of the introduction of market driven power systems indicat- Presently, the operation of the power system ing that the power systems are operated closer still relies on the ancillary services provided by to the limits without timely investment in the the central generation units. But ideally, it should necessary reinforcements. Hence it was believed be possible to operate the decentralised power that such blackouts can and will happen again. system without any central generation or central This perception, combined with the large DG control. It is therefore necessary to completely re- base already at hand, motivated Eltra, the former vise the whole operating concept to deal with such TSO of western Denmark, to initiate a Cell Con-

54 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology troller Pilot Project (CCPP) with the following ment expertise within smart-grid design ambitions: and business infrastructure for distributed • High Ambition: In case of a regional energy. emergency situation reaching the point of • Energynautics GmbH, Langen, Germany. no return, the Cell disconnects itself from Provides consultancy services to the energy the high voltage (HV) grid and transfers to industry focusing on renewable energies controlled island operation. and innovative energy applications. • Moderate Ambition: After a total system collapse, the Cell black-starts itself to a state Cell Controller Pilot Project Test Area of controlled island operation. A project based on the high ambition was The test area for the Cell Controller pilot preferred. The outcome of the project aimed project is located in western Denmark (Figure at a full utility scale pilot where the envisioned 2) in the Holsted area. This region was selected technical functionalities would be developed and in consultation with Syd Energi (SE), the DNO tested live. project partner, and is referred to as the Holsted As indicated above one of the progressive dis- Cell. The Holsted substation was the intercon- tribution companies of western Denmark agreed nection point between the distribution grid (60 to be part of the CCPP and a suitable full 60 kV kV and below) and the 150 kV sub transmission Cell of that company was selected as the pilot cell. grid. Consequently the Cell Controller was confi g- The Cell area selected contained a large number ured to leverage assets available in the area and of DG equally shared between DCHPs and WTs to work within grid constraints associated with thus locally attaining 50 per cent wind penetra- the Holsted distribution network. Although the tion. The project did not include local grids for Holsted distribution network contained many lower voltages than 10 kV. of the asset classes found throughout Denmark The participants of the CCPP were: (and the rest of the world), not all classes were • Energinet.dk, Skærbæk, Denmark. The represented. For example, as only Danish-style national power and gas TSO of Denmark, wind turbines were available within the pilot which initiated, fully fi nanced and did the region, controls for more modern wind turbines conceptual design and overall management with “state-of-the-art” controls (WT type 3 and of the project. 4) were not developed during the CCPP. • Syd Energi A/S (now known as SE), Esb- In addition, the topology of the Holsted Cell jerg, Denmark. Independent Distribution guided the general deployment strategy of the Company and DNO located at the south Cell Controller. Specifi cally, the Cell Controller of Jutland in which grid the pilot Cell was master was deployed at the Holsted substation, established. intermediate control nodes were deployed at sub- • Spirae Inc, Fort Collins, Colorado, USA. stations found throughout the Holsted distribu- Provides consultancy services and develop- tion network, and the end nodes were deployed

Figure 2. The Holsted Cell (pilot region) located in Western Denmark

55 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 3. Topology of the Holsted Cell. The cell was divided into three test areas; testing prior to 2008 was performed in Area 1 only; the testing region was expanded to include Area 2 for 2008 and 2009, and all three Areas were involved in the testing done in 2010 and 2011

at each controllable asset such as CHP plants The general strategy employed by the CCPP and Wind Turbines. Major Cell Controller design was to expand the capabilities of the Cell Con- consideration included: troller incrementally by fi rst testing and validat- • Prepare for higher penetration renewable DER ing solutions at a smaller scale (in the laboratory (current 20 per cent, goal 30 per cent 2020, or on an individual asset), then expanding its 50 per cent 2025, carbon neutral by 2050); reach across multiple assets. Only after “proof • Ensure grid reliability through intentional of concept” was established would additional islanding; functionality be added. Each new phase of the • Enable additional value streams through project involved incorporating lessons learned ancillary services; from the previous phase, making modifica- • Provide replicable model. tions to the Cell Controller as needed, adding Solving these challenges was expected to yield new functionality, and carrying out model- a robust technical foundation for meeting the based, lab-based, and fi eld-based tests in that ambitious renewables integration and advanced order. market operations capabilities envisaged by The CCPP can be roughly divided into three Energinet.dk for future intelligent power system major development phases: operations. In short, the Cell Controller project • 2005 – 2007: Development and deploy- had to prove out the technical capabilities needed ment of the Cell Monitoring System (CMS) to foster Smart Grid deployment in Denmark to to Areas 1 and 2 of the pilot Cell area; devel- meet its 2025 goals. opment of the core Cell Controller opera- Figure 3 illustrates the topology of the Holsted tions and laboratory testing; procurement Cell which was divided into three sub-regions, of additional fi eld assets and upgrading of referenced as Test Areas 1, 2, and 3. The three the existing CHP plants. regions were defi ned to support a staged deploy- • 2007 – 2009: Deployment and testing of ment strategy. Initial deployment and testing was the Cell Controller in Area 1 of the pilot Cell done in Test Area 1 and the fi nal round of tests area. included all three areas. Table 1 summarises the • 2009 – 2011: Additions to Cell Controller assets found within the Holsted Cell; the primary capabilities; expanded deployment and interconnect breaker was located at the Holsted testing to Areas 2 and 3 of the pilot Cell substation in Area 2. area.

56 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Capabilities, Deployment and Testing Plan would behave analogously to the actual distribution network of the Pilot Cell. From the very Islanding of the cell requires an extensive capa- beginning of the project it was therefore seen as bility set to handle variations in current operating necessary to also build and validate a simulation conditions when the island command is received: model of the Pilot Cell electricity grid. The main • Load shedding to achieve controllable con- purpose of the model was twofold: ditions in the case of importing power when 1. To study the operating boundaries of the dis- islanding; tribution system in general, like exploring inher- • Generation shedding in the case of export- ent limits of active and reactive power production ing power when islanding; in terms of allowed voltage profi le boundaries and • Black start in the event no generation is thermal loading limits; available within the cell when islanded; 2. To serve as a test platform for Cell Controller • Load restoration when suffi cient generation function validation, and testing the algorithms is brought online; that were developed for distributed voltage con- • Frequency and voltage control during is- trol, and frequency control in island operation. land operation; PowerFactory from DiGSILENT was chosen • Under frequency load shedding; as the power system modelling and simula- • Maintenance of frequency and voltage re- tion tool. Custom interfaces were developed to serves; achieve interoperability with the Cell Controller. • Master synchronization to reconnect to the The integration strategy was such that the Cell grid. Controller could run on separate hardware, in- The Cell Controller is a complex software cluding the hardware to be deployed in the fi eld, application that is distributed across multiple with communications between the Cell Controller locations and dynamically coordinates the op- and the simulation occurring across a network. eration of devices and systems at multiple time In this confi guration, as far as the Cell Controller scales and different geographic ranges to meet was concerned, it was operating the target power specifi c operational goals. The Cell Controller system. development team followed a rigorous process of In the course of construction, the development requirements specifi cation, design, development, of the simulation model followed the strategy of simulation and lab testing and software release the fi eld implementation: full functionality was for fi eld testing. Development of the Cell Control- fi rst established in Area 1 of the Pilot Cell, and ler, installation in the test areas, and testing was later extended to include Areas 2 and 3. The data a multi-year, multi-stage effort: collection process included sending question- • Instrument the test area to determine ex- naires to grid operators, power plant owners and pected operating conditions in the cell; operators, and manufacturers. All generator sites • Model the cell and perform simulations to and substations were visited to collect one-line validate the model with respect to collected diagrams, SCADA screenshots, and name plate data; photographs. This process was repeated for all • Validate the control functions against the three stages of the Cell expansion, until all re- model; quired information had been obtained. • Validate the control functions in a physical laboratory environment; Cell Controller Field Testing • Install and test the controller and additional equipment in an initial smaller test area; One of the most signifi cant accomplishments • Expand and test the controller in larger of the Cell Controller Pilot Project was the ex- areas of the cell. tensive fi eld deployment, testing and the general success of demonstrations on a live power system. Modelling and Simulation As outlined above, much care was taken by the CCPP team to develop, build, and test both the Cell Controller testing required the implemen- algorithms and the controls in the InteGrid labo- tation of a time-domain simulation model that ratory, hosted in Colorado State University’s En-

57 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

gines and Energy Conversion Laboratory in Fort ready for the preparation of the fi nal fi eld tests Collins, CO, jointly owned and operated by Spi- in autumn 2010 and summer 2011. This process rae and CSU. The algorithms and controls were was started with a series of power system studies, further refi ned using comprehensive numerical and then continued with extensive Cell Controller analysis and simulation. The ultimate payoff was testing in scenarios similar to the projected fi eld the ability to deploy the Cell Controller incremen- test cases. tally into actual fi eld conditions where testing Additional assets for islanding included: parameters could not be completely prescribed • Secondary Load Controller (SLC): A fast- (e.g. consumer demand, wind conditions, etc.). acting load bank capable of continuous The fi eld tests were designed to cover a broad regulation between 0 and 1000 kW on a 40 range of operating conditions and usage scenarios ms basis. and intended to validate technical capabilities — Commissioned 2007 that were deemed essential for future power — Tested 2008 as part of Area 1 system operations. Some of the most important • Synchronous Condenser (SC): Rapid reac- results were obtained through collection and tive power response in the range analysis of fi eld data prior to deployment of the — -250 — +600 kVAR; also equipped with a Cell Controller using the CMS, tests to validate fl ywheel for greater inertia. the acquisition and deployment of new assets — Commissioned 2007 (SLC and SC), then expanding testing to include — Tested 2008 as part of Area 1 multiple assets, e.g. testing of a single L1 control, • Master Synchronizer (MS): Needed to the successful islanding and desynchronizing of resynchronize islanded cell with grid. the cell with and without wind generation, testing — Commissioned 2008 the ability to service multiple parties (e.g. TSO, — Tested 2008 as part of Area 1 DNO, BRP) simultaneously. — Moved 2010 to fi nal location in Area 2 In order to validate the dynamic models, a series of control system performance tests were Results: Islanding Area 1 (2008) conducted at all CHP assets and the synchronous condenser and load bank at commissioning time. The fi rst Cell Controller fi eld tests were con- The results of the tests were used for model pa- ducted in Area 1 in late 2008, and were thoroughly rameter identifi cation, leading to well- validated prepared by simulations in summer and autumn asset model performance throughout Area 1. 2008. After the set of test cases had been specifi ed Similar to the asset-level testing already con- (determining the set of assets involved in each ducted in Area 1, commissioning tests for model test, the operating conditions, and the sequence validation purposes were carried out at the CHP of operation), all scenarios expected during the generator units in Area 2 and Area 3. The scope test were fi rst analysed in load fl ow calculations. of these tests was adapted from the previous tests The sequence of events of each test case was then as the controllers of the “new” CHP generators investigated in multiple dynamic simulation runs were not equipped with the same functions, and with the 2008 prototype of the Cell Controller. additional functions were added in secondary or Total 28 runs of islanding scenarios were tested: tertiary control loops. • Of those, 2/3 led to successful resynchroni- Despite detailed asset modelling based on zation after islanded operation for at least manufacturer information, the validation process 15 minutes, never violating grid codes/ revealed that signifi cant changes must be made protection settings; to some controller models, as the measured re- • Remaining cases led to brief blackouts. Root sponse could not be matched closely by the model causes were identifi ed: not traceable to Cell without modifi cations in the control structure. Controller design or execution. These changes were applied and the models were During the fi eld tests, extensive data record- re-validated until no further improvement could ings were collected at the substations and the gen- be achieved from the given set of data recordings. eration assets (and the load bank). The purpose At this point, after the last CHP model valida- of these data was to allow for detailed analysis in tion in 2010, the model was deemed complete and case of test failure, further model validation, and

58 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

development of improved load feeder models. energy was put into the wind turbine, the SLC This data analysis was undertaken over several went to its upper limit and stayed there. The months in 2008 until late 2009. SLC had no resources with which to counteract the increasing wind energy and the wind turbine Results: SLC and SC (2008) shutdown on turbine over-speed. Analysis of four wind turbines using the data collected with the The analysis of SLC and SC was performed to CMS shows that there can be a signifi cant amount test the Cell Controller capabilities to transition of variation between wind turbine power outputs to island and perform island operations in a wind even when the turbines are geographically close only state. Test Setup and Initial Conditions in- to one another. However the natural variation cluded the mini-island consisted of a single wind of the loads typically cancels the variability of turbine, the SC and the SLC. generation, thereby implying that the SLC could The SLC and the SC were able to support the balance multiple turbines if combined with dis- frequency and voltage of the mini-island for more persed loads. than fi ve (5) minutes. Figure 4 and Figure 5 illus- trate very effective control of the cell frequency Results: Areas 1—3 Islanded (2011) (black) and voltage (blue), respectively. Figure 4 also shows that the SLC was able to balance the In work conducted in parallel to the Area 1 fi eld wind generation during the fi rst 5 minutes dur- test preparation and data analysis, the simulation ing island operation. Hereafter the 1000 kW SLC model was extended to cover the further substa- began to dramatically lag during the very large tions in Area 2 (six additional 60 kV substations) wind transient then occurring resulting in 1100 and Area 3 (fi ve more). Dynamic models were kW wind turbine production which ultimately built for all 43 additional wind turbines and the lead to blackout of the mini-island. six additional CHP generators. The mini-island test matched the SLC to a • All island operations tested and validated single wind turbine; as soon as suffi cient wind with full cell:

Figure 4. Effect of SLC during the Mini-Island Test. The black trace plots the observed frequency (Hz); the blue and orange traces plot wind generation (kW) and the SLC response (kW), respectively. The Cell Controller was able to maintain a stable frequency (nominal 50 Hz) during the test prior to black out. Note the SLC’s ability to balance the wind generation

59 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 5. Effect of SC during the Mini-Island Test. The blue and orange traces plot the voltage and kVAR, respectively, measured at the SC. The Cell Controller was able to maintain a stable voltage until black out; as expected, the trace of the SC closely follows the wind generation trace

• Preload plan: rapid shedding of load and/ Project Outcomes, Conclusions and or wind turbines; Lessons Learned • Load restoration; • Island voltage control; The initial goal of the CCPP was to develop • Under-frequency load shedding; and fi eld test a control system with a distributable • Resynchronization. control architecture capable of rapidly islanding a distribution network below a 150/60 kV substa- Results: Islanded Frequency and Voltage tion upon receiving a one-second trigger signal Management from the transmission system operator. The CCPP has successfully achieved this goal One test was implemented to verify (i) the by carefully designing, modelling & simulat- preload plan (PLP) operation when cell assets ing, building, and testing in both the laboratory were participating in day-ahead market and and the fi eld a distributed control system (Cell (ii) the load restoration operation. Test setup Controller) that safely islanded the Holsted Cell. included approx. 15 MW load across 9 substa- The Cell Controller coordinated one 150/60 kV tions, Approx. 4 MW online wind capacity, 3 substation with tap changer controlled trans- CHP plants online. former, 13 substations (60/10 kV), 5 CHP plants, This test was a complete success: the preload 47 wind turbines, 69 load feeders, and numer- plan functioned as expected, the load restoration ous additional assets (breakers, SLC, SC, etc.) to was successful, and the cell was resynchronized separate from the high-voltage transmission grid to the grid after eight (8) minutes of island opera- (150 kV), operate independently, and ultimately tion. The cell frequency remains stable through- resynchronize and re-connect when commanded out the test with a maximum frequency excursion by the TSO. of -0.69 Hz which occurs at 15:21:14 (Figure 6) The key capabilities of the CCPP were identi- which coincides with the restoration of the Bil- fi ed as follows: lund SØK load (Figure 7). Due to the signifi cant • Power Import/Export using DER at remote presence of wind generation, the Cell Controller inter-ties; successfully dispatched the generation of reactive • Firm wind production using DER; power to balance the cell as depicted in Figure 7. • Aggregated market participation for DER;

60 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

Figure 6. Island Frequency and Voltage Stability during Preload Plan with Small Import Test. The traces plot the cell frequency (Hz), the 60 kV voltage, and the total wind generation (kW). The region shaded grey indicates the time where the primary interconnect was open. The cell was able to maintain stable voltage and frequency in the presence of signiﬁ cant wind generation. The largest deviation in frequency occurs at 15:21:30 which coincides with a drop in wind generation and the restoration of the ﬁ rst load

Figure 7. Reactive Power Support during Preload Plan with Small Import Test. Due to the signiﬁ cant presence of wind generation, the Cell Controller successfully dispatches the generation of reactive power to balance the cell

61 Chapter 3. Hybrid Renewable Microgrids. Economics and Technology

• Feeder Volt/VAR control using DER; control can be deployed. The CCPP successfully • Fast islanding and resynchronisation. demonstrated that coordinated control of DER is The benefi ts of the CCPP include: not only possible, but adds signifi cant benefi ts and • Maximise value of DER by exposing mul- potential services to all stakeholder levels. tiple value streams; • DNO can enable new services to multiple Endnotes parties; • TSO leverages assets on distribution net- 1 This article draws on Cell Controller Pilot work for reliability and optimisation; Project: 2011 Public Report, published by En- • Market Operators can aggregate and dis- erginet.dk. The full report is available at: http:// patch DER to market; energinet.dk/EN/FORSKNING/Nyheder/Sider/ • Same portfolio of DER can be used for Den-ustyrlige-vind-kan-styres.aspx. multiple applications. Energinet.dk, based in Erritsø, Denmark, is the The future of land based energy generation and national transmission system operator for elec- distribution is clearly moving away from the tradi- tricity and natural gas in Denmark which initi- tional centralised model. As the penetration level of ated, fully fi nanced and did the conceptual design distributed generation continues to increase there and overall management of the Cell Controller will inevitably be more and more opportunities to Pilot Project. Per Lund, Chief Design Engineer, defi ne cells (regions where local generation meets and Stig Holm Sørensen, Chief Project Manager, or exceeds local loading) to which coordinated lead the project for Energinet.dk.

62 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Self-Management Capacity Diagnosis of a Rural Community for a Microgrid Project

Karen Ubilla Energy Center, Faculty of Physical and Mathematical Sciences University of Chile [email protected]

Introduction It is for this reason why it is necessary to identify the criteria for a local structure that should Access to electricity is one of the principal be responsible for the operation, maintenance needs of the humanity nowadays. Many rural com- and overall sustainability of the project. In this munities don’t have this service and renewable context, we consider creating a local management power appears as a solution, mostly thanks to the structure that represents the whole community autonomy that it can deliver to the communities and is in charge of the local power system. But to off the network of electric power. As far as this type propose a model of management, we need to know of solutions is concerned, it is necessary to think the characteristics of the community, those who that the implementation of electric generation are external actors, who have inﬂ uence in the area, technologies will bring about a change in the com- the existing projections of development, activities munities which must be treated as an integral part that can be promoted by upgrading the electric throughout the project development. In addition, supply in the locality. one must consider that the community should be To address the issues identified above, we responsible for the project and should ensure its should stress the importance of an interdisciplin- sustainability, that’s why the capacity for com- ary approach towards this type of projects that munity self-management will be fundamental to will provide a comprehensive vision of the area embrace new solutions for the electricity problem. and could deliver integrated solutions. The objective of this work was to diagnose the capacity of self-management of a rural commu- Local Sustainable Development Model nity for the development of microgrid projects with wind and solar power, to propose a system Beyond addressing the need for electricity, a of self-management which would encourage microgrid project also aims at creating enabling the community to take responsibility for local conditions for the emergence of activities that power facilities while addressing all dimensions beneﬁ t the local population and contribute to the of sustainability (social, economic, environmen- organisation of the community. It initiates a co- tal, technological, institutional). We understand operative social process for the local development microgrid as a social concept: it helps meeting with a collective sense. community’s energy needs, but is also a driver of From this perspective, we understand sustain- the local development and gives autonomy to the ability in an environmental and social dimension. isolated communities. Given that technological Environmental sustainability is based on the func- innovation is introduced at a community level, as tioning of the biophysical systems and the rational is the case with the rural microgrid projects, one use of the natural resources, in order to achieve a of the challenges takes root in the non-existence balanced reciprocal relation between the nature and of a permanent local structure for administration the human communities, to assure availability of and decision-making. This may lead to a situation the necessary natural resources in the future for the where innovations do not last long. well-being of the local population. Social sustain-

63 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

ability is understood as a process of strengthening The Project and the Implementation of human communities on the basis of the establishment of harmonic relations with their natural We take the model of local sustainable devel- and social environment, promotion of dialogue opment as a theoretical foundation and consider and horizontal relations of the community that is the components and functioning and, in turn, the developing a microgrid project. Building on the defi - objectives and goals of a community proposal to nition of sustainable development, the community develop a microgrid project. The interdisciplinary is the principal actor, capable of appropriating the consideration of the drivers of the local develop- projects. Communities are the drivers and owners ment must be organised in four fundamental of these development projects with the necessary variables: technical, economic, social and envi- support of external agents as strategic allies. ronmental. The integrated management of these It is the idea that makes way for itself in the variables enables the social and environmental experiences of development where communities sustainability of the projects and the sustainability and the external agents engage in a partnership of the local communities at a rural level at present and share responsibilities in proportion to their and in the future. contribution to the design, execution and proj- We have conducted a case study to diagnose ect evaluation at a local level. But in order that a community self-management capacity for the the community takes the responsibility if of the development of a microgrid project. One of the project, it is needed to promote deep processes of objectives of the study was to generate a replicable participation, self-management and build share methodology for other rural communities. capital in line with the priorities of community In this study, we considered the following development. In accordance with the founda- aspects: tions of the proposed development model, the • learn how a community is organised in community participation must not be a mere terms of use of local resources; aspiration or a declaration of intention, but it • evaluate economic, social, environmental should be fully substantiated in practice through opportunities and barriers for the imple- the effective participation of the communities in mentation of a microgrid with renewable decision-making relative to all the stages of the power in the surveyed community; project development. Community self-manage- • analyse and propose a self-management ment is considered to be fundamental for the system for the development of a microgrid local population to use and control a microgrid project with renewable power in the sur- project from technical, administrative and social veyed community. point of view. A related objective is to strengthen The proposed self-management system was human capital that is necessary to fulfi ll com- conceived with the assumption that the commu- munity development proposals. To achieve an nity had interest in making decisions on the design effective community self-management, relevant of the initiative and in taking the responsibility of organisations should be fundamentally based on the administration. This setup is appropriate to the relations of cooperation. These organisations investigate the development of a microgrid with are related with the third component of the model: renewable power, specifi cally wind and solar, that share capital. The diverse studies conducted in also relies on the support of an existing diesel rural Chilean communities found a low level of engine that generates the electricity for the com- community organisation with serious problems of munity at present. functioning of the formal organisations, a marked It is also assumed that there is a permanent individualism, and a questioned leadership. This local structure in charge of the power system with situation refl ects the weakness of communities decision-making and administrative functions. A in front of the challenges that the general model distinction is made between a transition structure imposes on the development. This said, strength- and the fi nal structure. ening of the relations of confi dence, cooperation The transition structure is based on the char- and reciprocity between the community members, acteristics of the community and accounts for two fundamental relations to reveal and promote the specifi c features detected through the study: munic- share capital are of greater importance. ipal assistance and a “custom of not paying for the

64 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

basic services”. The structure attempts to achieve of the microgrid. For this responsibility, a transition in which the community manages to contractors of the project may be considered appropriate the project, decrease the municipal (professionals of the Energy Center, Faculty assistance and change the mindset as to paying for of Physical and Mathematical Sciences, the electricity. The electricity cost will be defi ned University of Chile (CE-FCFM) meet the by all the actors involved on the basis of the level of requirements since it possesses the knowl- economic well-being of the community members. edge of the implemented technologies); The transition structure corresponds to a • Cooperative body — will handle the contribu- hybrid self-management system while the fi nal tions to the community that originate from structure corresponds to the community self- private entities with infl uence in the area. It is management system. suggested to keep the relation of cooperation, but focus on contributions that are destined Self-management Hybrid System for the maintenance of the microgrid. The cooperative will have to rely on a board that Considering the threat that the municipal as- should consider the participation of the natural sistance represents for the implementation of the leaders and the current operators of the system, if microgrid with renewable power in the area under there is interest to take part in this organisation. study, it should be gradually eradicated. One goal In addition, there will be a designated representa- is therefore to establish a hybrid (transitional) tive of the municipality on the board, so that the system between the community and the munici- municipality has a stake in the functioning and pality. This step includes setting up a cooperative decision-making of the cooperative. The respon- where the benefi ciary of the service participates sibilities of the cooperative will include: as a whole and the municipality is represented by • Report to the community a designated offi cial. Reporting on the system operation, disclosing The proposed structure appears in Figure 1. the accounts, inviting to meetings when it is nec- The following components may be discerned: essary to take decisions, report in case of faults • Administrative agency — involves the of the system, and identify response upon the community cooperative and the municipal information from the advisory body. managers of the power system; • Maintenance • Advisory body — will engage a manager to Maintenance of the microgrid for which it will provide technical and administrative sup- have to implement a protocol as advised by the port to the community on the functioning CE-FCFM (which is part of the advisory body).

Figure 1: Self-managed hybrid system

65 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

• Operation of the system representative and will have the meetings The system will serve the members of the local and performance of the cooperative evalu- community for which the cooperative will be the ated. If the cooperative doesn’t fulfi ll the manager of contracting personnel, considering initial objectives, it would undergo a change, those persons who have the intention to support otherwise it will continue with the current the system. In addition, the cooperative will coor- functions. dinate technical training for the members of the When the municipality is not present any lon- advisory body. ger in the board of the cooperative, it will assume The cooperative will be shaped prior to the an overseer's role. The municipality will be in construction of the microgrid in the stage of so- charge of auditing the cooperative and reviewing cialisation of the project via workshops that will its adherence to the existing protocols. At this be developed by the project contractors. These stage, the board will have to take charge of the meetings will help raising awareness of the com- payments of the service according to the scheme munity members and will allow them to take part selected by the cooperative. For this purpose, it in setting up the cooperative. As soon as the com- will have to contract personnel that would read munity knows the advantages and disadvantages the meters and ensure that this personnel had of the project, it will have to choose the board attended the training organised by the board of to represent the whole cooperative and to fulfi ll the cooperative. the functions described above. The campaign to The structure that will work at this stage sup- raise the community awareness will be targeted to ports engaging collaborators which will contribute ensure a good understanding of some of the core to the operation of the system when it is necessary cooperative principles: the service is produced but will keep their interventions at a minimum. completely by the community, it will be necessary This scheme in a hierarchic form appears in Fig- to pay for this service. However, it should be made ure 2. clear that for the transition period, the community This self-management system ensures that will not pay all the costs associated with the system the community takes responsibility of the electric and the costs will be covered by the cooperative system. It should maintain a decision-making agents and the municipality. Besides, the com- process directed by the board of the cooperative munity should understand that during the transi- which will involve the whole community as a lead- tion period, the municipality will continue to be a ing stakeholder in the power system. stakeholder, refl ected in the active participation An important aspect of which the coopera- of a municipal civil servant in the board. tive will have to take charge, is decision-making Once the board is established, it will conduct related to the functioning of the system. Those training for the community members and instruct decisions that should be approved at the board them on technical topics of the operation and level are the most important: maintenance of the microgrid as well as adminis- • organisation of the meetings on the part of tration. CE-FCFM will be technically responsible the board; for the training.

Self-management Community System

As soon as the transition period expires, the full community management will take shape. This is a self-management community system, with the modiﬁ cations that may be summarised as follows: • cooperative formed only by the community; • municipality performs the role of an overseeing body; • “Pay for the electrical service!” At this stage, the cooperative will terminate the membership in the board of a municipal Figure 2: Self-managed community system

66 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

• accountability to all the actors of the system, experiences, there is a high probability that the including the presence of a representative motivation of the members of the cooperative is in the advisory body; unstable. • willingness to provide background information, in a clear way, on the situation that Testing the Methodology: needs a decision. a Microgrid for Ollagüe Village All the actors together will have to choose the best solutions. The implementation of the proposed model is As regards another aspect for the development currently in progress in a northern village of Chile, of energy projects, it is essential to involve the Ollagüe (see Figures 3, 4). It is a remote village at target community in the whole process, begin- the Chile-Bolivia border, about 215 km northeast ning with the presentation and validation of the of the city of Calama and it has the population of selected project setup. A common way to raise 131 persons (in 2011). Overall result is that people awareness is arranging a series of workshops that showed interest and availability to participate in explain the project, its benefi ts and the participa- the self-managed structure, trained by the expert tion that is expected from the community. entity that supports them in the fi rst years. For this system, it is also necessary to reserve More specifi cally, lessons already learnt from the possibility of generating share capital in the this pilot project indicated the following positive community, besides reducing responsibility of the outcomes: electric system to the municipality. • participation in social organisation; This self-management model also offers an • interest in a high quality power system; advantage associated with other actors since they • emergence of natural leaders; would become stakeholders of the community • current system operated by people in the electric system. Meanwhile, a local managing community; body that is the cooperative would assume all the • interest in promoting tourism; responsibilities of the functioning of the system. • external actors have interest in being part A weakness typical to this system takes root in of the solution; that the functioning of the cooperative depends on • promotion of the microgrid facilities as a the degree of motivation on the part of the board tourist route; members. As was revealed by true community • economic benefi ts.

Figure 3. Ollagüe village, North of Chile

67 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 4. Outline of the microgrid for Ollagüe village, Chile

Meanwhile, the pilot revealed the following Future work will therefore include: shortcomings: • validate the results with the community and • lack of social cohesion; bring them into the whole process of project • lack of social capital; development; • lack of experience in community projects; • support and advise on the creation and • “welfarism”; operation of the cooperative; • high migration; • develop an action agenda and / or an energy • project underperformance relative to the effi ciency plan; needs and expectations; • launch trial run period and differential • community without energy effi ciency be- subsidy system in the fi rst months of the havior; implementation of the project. • no payment for services.

68 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Microgrids in Alaska

Brad Reeve Kotzebue Electric Association Inc. [email protected]

Introduction Practically all of the communities are located in a coastal area or are on one of the major rivers Kotzebue Electric Association Inc. (KEA) is a in the state. Fuel is typically purchased for the en- small utility that operates a generation and distri- tire year in an annual delivery during the summer bution system in Kotzebue Alaska 30 miles above barge season. The majority of the communities in the Arctic Circle. The city of Kotzebue is located 67 the northern and western part of the state are only deg. North latitude, 162 deg. West longitude at the ice free for 3-4 months each year. A number of tip of the Baldwin Peninsula on Kotzebue Sound communities do not have barge access and receive in Northwestern Alaska (see fi gure 1). Climatic their fuel by air transport. These communities pay conditions at Kotzebue are characterised by long a premium for air delivery which can add 30-70 cold winters and cool summers. per cent to the delivered cost. These logistics This report is intended to cover several topics create increased cost for all goods and services. related to microgrids. The issue of governance is There are a growing number of rural utilities discussed as it relates to the capability of the util- that are adding some form of renewable energy ity to make decisions related to technology dem- (mostly wind) to their systems to reduce the cost onstrations that in other circumstances would of energy. Distances from population centers are not have happened. Projects as they relate to the signifi cant for these communities and travel to economic development for the community are the largest state cities usually involves travel to also described. The report shows that in order to a hub community and then a transfer to a jet or incorporate renewables a lot of innovation and commuter plane to complete the journey. perseverance was required. Also described is the Energy costs double from the rail-belt (the level of accomplishment while minimising risk area served by the Alaska Railroad including to the consumer. Anchorage and Fairbanks) to the hub communities Barrow, Bethel, Dillingham, Kotzebue, and Rural Alaskan Utilities Nome. These hub communities serve as the regional transportation, medical and educational Small stand-alone utilities are a standard part centers for the respective regions. Prices double of the landscape in rural Alaska. There are 183 again with the additional transportation link to PCE (Power Cost Equalisation) communities that the smaller villages (air or barge). are off grid, not connected to any road system and Kotzebue Electric Association (KEA) first are diesel powered. These islanded electric grids generated electric diesel power in 1954. This was provide central station electric service to their after fi rst receiving a loan from the REA (now communities either independently, or as part of called RUS for the Rural Utility Service). KEA a larger cooperative. provides power for Kotzebue Alaska, a commu- These small grids can be defi ned as microgrids nity of over 3,500 people and a service hub for all with the added note that they are critical in the villages in this northwest region of Alaska. KEA protection of infrastructure i.e. state supported has a fulltime staff of 16 people, including power- schools in each community, water and sewer plant operators, diesel mechanics, linemen and systems, and municipal buildings. These diesel administrative staff. KEA has a peak electrical utilities usually have three engines per utility, the load of approximately 3,700 kW. In addition to majority of which are less than 300 kW in size. operating the local utility, KEA has agreements

69 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 1. Location and an aerial view of Kotzebue Alaska

with other communities in the region to provide Development of Wind as a Resource utility operations and maintenance assistance. The utility currently has 1,272 meters, 17 miles Kotzebue Electric Association embarked on a of distribution, and 22 million annual kWh sales. wind programme in the early 1990’s to prepare for the loss of the PCE programme which at that Power Cost Equalisation time was under constant threat of elimination In 1982, the State of Alaska created a pro- by the legislature. Although the programme has gramme to reduce the cost of electricity for the continued a larger threat to the utility appeared residential customers and municipal services in in the form of escalating fuel cost. In simple terms rural communities that operated on diesel. This the cost of fuel doubled from 2002-2005, and was done in recognition that the more populous then practically doubled again from 2005-2008. areas of Alaska had received state funded in- In 1995, KEA acquired a 148 acre site leased frastructure that did not help the rural areas of from Kikiktagruk Inupiat Corporation (KIC), the the state. The programme has had several name local Native village corporation. The site is located changes over time but is currently called the about 4.5 miles to the southeast of Kotzebue, Alas- “Power Cost Equalisation” (PCE) programme. A ka on the northwest coast about 30 miles above few highlights of the programme are listed below. the Arctic Circle. It is located about 0.5 miles • PCE programme reduces cost (1st 500 kWh) inland from the coast and is about 50 feet above for residential consumers; mean sea level. It is relatively fl at, with a surface • The cost is based upon the average of An- characterised as tundra. It is underlain by per- chorage, Juneau and Fairbank’s cost of mafrost and is offi cially classifi ed as “wetlands”. power; The tundra is characterised as well vegetated • The subsidy applies to all kWh that are used with mossy plants, with other low-growing plants for public facilities, such as streetlights, (berry bushes and scrub). The area is completely water plants, police and fi re stations public treeless. There are bird populations, typically buildings etc. various types of gulls, shore birds, and migra- In 2011, the State of Alaska paid over US$ 31 tory waterfowl with most being ground nesters. million to fully fund the programme (mostly from At times, there are transient caribou, moose and the PCE Endowment Fund). There is no similar musk ox which pass through the site. The site is programme to address heating costs and although not visible from the town of Kotzebue. PCE helps rural residents they still pay 30-40 Kotzebue Electric Association’s fi rst construc- per cent of their disposable income for energy tion venture was to establish a three turbine wind compared to 10-15 per cent for urban consumers. farm, installed on the site with KEA and State of

70 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Alaska grant funds. The turbines are fully func- At least part of that capital is usually the common tional and are connected back to the KEA power property of the cooperative. Members usually plant. Full operation was achieved in August receive limited compensation, if any, on capital 1997. Although the weather is severe the turbines subscribed as a condition of membership. performed very well for many years as reported Members allocate surpluses for any or all of in the US DOE Turbine Verifi cation Programme. the following purposes: (1) developing the coop- The turbines selected were the Atlantic Orient erative, possibly by setting up reserves, part of Corporation 15/50 machines that were made which at least would be indivisible; (2) benefi ting in Vermont. The turbines were selected for 2 members in proportion to their transactions with reasons: (1) AOC was interested in working in the cooperative; and (3) supporting other activi- the North, and (2) KEA was supporting US DOE ties approved by the membership. cold weather research. The initial design for the 4. Autonomy and Independence AOC turbines came from the 14/40 Enertech fi rst Cooperatives are autonomous, self-help or- made in the 1980’s. Several bankruptcies (AOC/ ganisations controlled by their members. If they EWS: Entegrity Wind Systems replaced AOC and enter into agreements with other organisations, also went bankrupt) and equipment issues have including governments, or raise capital from ex- affected the operation of the equipment over time. ternal sources, they do so on terms that ensure democratic control by their members and main- The Cooperative Model of Business in tain their cooperative autonomy. Rural Alaska 5. Education, Training, and Information Cooperatives provide education and train- KEA is a non-profi t consumer owned electric ing for their members, elected representatives, cooperative, governed by a nine-member Board managers, and employees so they can contribute of Directors elected from the membership. In effectively to the development of their coopera- Alaska, over 50 per cent of all utilities are coop- tives. They inform the general public, particularly eratives including the largest utility in Alaska, young people and opinion leaders, about the na- Chugach Electric which serves the Anchorage ture and benefi ts of cooperation. area. Another 30 per cent of Alaskan utilities are 6. Cooperation among Cooperatives municipally owned, which makes Alaska a mostly Cooperatives serve their members most effec- Public Power State. tively and strengthen the cooperative movement The Cooperative structure has worked well by working together through local, national, re- in Alaska and is based upon 7 principals which gional, and international structures. are listed below. 7. Concern for Community 1. Voluntary and Open Membership While focusing on member needs, coopera- Cooperatives are voluntary organisations, tives work for the sustainable development of open to all persons able to use their services and their communities through policies accepted by willing to accept the responsibilities of member- their members. ship, without gender, social, racial, political, or On a larger scale there are over 900 coopera- religious discrimination. tives in the US that act in unison to protect their 2. Democratic Member Control customers, lobby congress, provide insurance and Cooperatives are democratic organisations pension services and have a research component controlled by their members, who actively par- CRN (Cooperative Research Network). It was ticipate in setting policies and making decisions. cooperative money from CRN’s predecessor the The elected representatives are accountable to the RER (Rural Electric Research) that was the source membership. In primary cooperatives, members of the initial grant that began the process of KEA’s have equal voting rights (one member, one vote) progression to having a reliable wind power plant. and cooperatives at other levels are organised in a democratic manner. Alaska Wind Background 3. Members’ Economic Participation Members contribute equitably to, and demo- In the early 1980’s, the State of Alaska invested cratically control, the capital of their cooperative. in the installation of over 140 small wind turbines

71 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 2. The Electric Cooperative Network in the United States

across rural Alaska. These investments met with • 1995 — Kotzebue Electric Association and limited success not only because the equipment the State of Alaska Department of Com- was poorly designed but also because little was munity and Regional Affairs Division of known about how to service and maintain the Energy (DCRA) entered into an agreement equipment to obtain optimum performance. to develop wind energy systems for rural After this experience the state was unwilling for communities. The Kotzebue Wind project a period of years to invest in wind equipment. was begun in 1995 to demonstrate the vi- Timeline of KEA Wind Activities/Progress ability of operating wind turbines in rural • 1992 — Received a grant from the Rural Alaska. The goals of the Kotzebue turbine Electric Research, the research arm of the test programme were to evaluate the com- National Rural Electric Cooperative Asso- mercial viability of wind energy in rural ciation (NRECA) for “Power Quality Study Alaska, gain ﬁ eld experience with mid-sized with Induction Wind Turbines”. This grant commercial wind turbines, describe the ex- brought valuable industry recognition. It perience gained and problems encountered, should be noted that this cooperative based and then transfer this experience to other grant opened the door for many future wind communities across the state. KEA later activities. received additional funds from the U.S. • 1992 — Joined the “Utility Wind Interest Department of Energy to expand this test Group” This group provided research and programme to six turbines, and then to ten was an important source of information machines. regarding wind integration activities. • 1997 — Installed initial three AOC 15/50 • 1993 — Found a company willing to work turbines, becoming the ﬁ rst utility wind in Alaska, Atlantic Orient Corporation. farm in Alaska. • 1993 — KEA Board committed US$ • 1997 — KEA was approached by the State 250,000 to develop a wind project. of Alaska and NREL to develop a high pen-

72 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

etration wind diesel project Deering AK was leveraged into a US$ 11 million project to fi rst selected but the project was moved to develop wind project with battery storage. Wales AK due to its higher winds. • 2012 — Installed two EWT 900 kW — wind • The Wales project began as a joint effort of turbines. the National Renewable Energy Labora- • Project was leveraged with funding from tory (NREL), KEA, the State of Alaska and the Denali Commissions Emerging Energy AVEC (Alaska Village Electric Cooperative) Technology Fund for the storage compo- to develop high penetration wind project. nent. This project started with an Environmental The ability of KEA to move to larger wind tur- Protection Agency (EPA) grant. Other con- bines came through the State of Alaska “Renew- tributors were the Alaska Energy Authority able Energy Fund Grant” administered by AEA. (AEA), the Alaska Science and Technology This programme is considered probably the most Fund (ASTF) and the US Department of successful renewable energy programme in the Energy. The project is no longer opera- country. Some highlights about the programme tional and has fi nished its demonstration are listed below. phase. The project is credited with being Renewable Energy Fund Grant Recommen- instrumental in moving Alaska wind/ dation Programme diesel efforts forward. • State of Alaska “Renewable Energy Fund” • 2001 — Established Federal Grant with was legislated in 2008. US DOE that allowed for the purchase of • US$ 125 million appropriated in FY2009, additional wind turbines. “Demonstration FY2010. of Wind Energy for High Latitude Village • AEA recommended up to US$ 66 million Applications” submitted in response to the for FY2011. US DOE — STEP Pilot Programme. • AEA recommended up to US$37 million for • 2002 — Installed 1st Commercial North FY2012. Wind 100 kW. This project was funded in • Advisory committee helps develop criteria part by the National Science Foundation for for grants. cold weather testing for South Pole deploy- • Selection criteria: ment: — Economic and technical feasibility; — The North Wind 100 was at the time tied — Energy cost per capita; up in patent issues; — Statewide balance; — Kotzebue provided a good cold weather test — Matching funds. site; In order to move into higher levels of wind — This opened the North Wind 100 to the on the system KEA needed a SCADA system Alaska market; (installed in 2006) and wind turbines with more — Alaska Village Electric Cooperative (AVEC) fl exibility than the previous induction machines has purchased over 24 turbines; (AOC’s/Vestas). The machines with the required — Unalakleet Valley Elec. Cooperative recent- power output qualities needed had direct drive ly installed six North Wind 100 turbines. generators Another reason to select them was • 2005 — KEA Installed two more AOC 15/50 to reduce the possibility to bring a crane back to turbines of 66kW. Kotzebue to overhaul drive trains (cranes must • 2006 — KEA Installed two more AOC 15/50 overwinter to work during frozen conditions). turbines. Turbine Selection EWT 900 • 2006 — Installed new SCADA system (die- • Larger tower height available (more pro- sel/wind/jack-water/fuel, see fi gure 3). duction). • 2006 — KEA Installed the fi rst Vestas V-15 • Variable Pitch. turbine. • Controllable Power. • 2007 — KEA Installed one more AOC 15/50 • Cranes were available in Alaska for this size turbine. turbine. • 2010 — KEA awarded State of Alaska — In the process of developing the project a Renewable Energy Fund grant that was number of innovations were developed. KEA

73 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 3. SCADA system installed in 2006

pioneered the use of freeze-back pilings for wind • The grid project includes distribution and turbines, and now was able to improve the design thermal switching related to the wind sys- working with engineers and the construction fi rm tem, and electronic VAR compensation to selected. The addition of thermal siphons has assist with wind penetration power factor improved the design further. and frequency issues, and smart thermo- stats to deliver thermal energy from excess Batteries wind power. A part of the Renewable Energy Fund grant was the purchase of a 3.7 MW Zinc/Bromide fl ow Other Community Projects battery. The battery was ordered, passed Factory Acceptance Testing and was shipped by barge to Solar Thermal Project Kotzebue. The company Premium Power was not KEA submitted several successful grant appli- able to commission the unit due to cold weather is- cations with the Denali Commissions Emerging sues that caused problems with the unit. They have Energy Technology Fund. One was for a Solar taken the unit back to the Boston area for a redesign. Thermal Demonstration Project. The goal was to demonstrate the feasibility of using different Smart Grid designs and confi gurations to measure effective- • KEA is one of 26 Utilities that are participat- ness. ing in a National “Smart Grid Project”. • Kotzebue and area’s above the Arctic Circle • NRECA sponsored the programme using have higher solar gain in the spring than US DOE funds from the American Reinvest- states in southwestern US. ment and Recovery Act (ARRA). • This grant was used to install the equipment • This is a 50/50 matching grant project. on 6 elder’s homes. • KEA will install meters with bi-directional • Worked with two vendors on the project. control, pre-paid metering, consumer in • Tried evacuated tube and fl at plate. home displays to create energy effi ciency • Solar heating displaced over 40 per cent of awareness. heating costs for one of the installations.

74 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 4. Installation of an EWT 900 wind turbine

Absorption Thermochiller we adhere to as a cooperative are evident in the Energy Concepts approached the AEA about a philosophy we follow to develop projects. project using a design to create ice using power- KEA Philosophy plant exhaust heat. KEA was the only utility that • Develop in-house expertise, create jobs and was willing to try this technology, but before be- local project management capability. coming a partner wanted the unit redesigned to • Reduce risk to community and consumers be used with jacket water heat to accommodate by working with funding, cooperative and maintenance and account for future deployment vendor partners. criteria. Although the project was a short term • Leverage projects whenever possible with demonstration the initial unit ran for 10 years and low cost loans, grant funds, and vendor in- a replacement unit is now in place. Having this kind participation. ice-making capability has meant the survival of • Work with legislators to build advocacy and the fi shing industry in Kotzebue Sound. to gain government support, both political The new unit is slightly larger than the initial and fi nancial. unit and is a “TC 20 THERMOCHILLER” which • Review all technologies that reduce cost and supplies 20 tons of refrigeration at 0°f, and is specifi cally fuel cost to the cooperative and powered by 160°f engine jacket coolant. our members. KEA has a stated interest in the research and • Bring matching funds to a project (have skin development of products and technologies that can in the game). lower the cost of energy for its member/owner’s. This is how electric cooperatives can affect the Many doors have been opened to allow this small economic ability of the communities which they utility to take on a larger role in the research and serve. Concern for community is one of the guid- deployment of renewable energy. The principles ing principles for strategic planning.

75 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Village Renewables-Enabled Microgrids

Steven Pullins President, Horizon Energy Group [email protected]

Introduction systems. A technical complexity for microgrids is the sensing, monitoring and resultant control of Energy poverty is a serious global challenge, distributed energy resources due to the signifi cant facing 1.4 billion people worldwide, roughly 20 degree of local imbalance caused by variable en- per cent of the world’s population. More than 675 ergy resources, such as wind and solar. million people in Asia and the Pacifi c lack access This project will consider not only the geo- to electricity — mainly in rural and remote areas. graphic specific opportunities, but will also A desperate need for new delivery mechanisms take into consideration broader international and fuel sources exists throughout the world. A organisation interests. As other international challenge facing much of the developing world organisations provide insights into elimination is the creation of a robust electricity distribution of energy poverty, this project will incorporate system that provides access to reliable and af- those ideas that are consistent with the work of fordable power. this project; including policy, technology and The proposed project aims to develop a scal- social implications. able, sustainable model that would provide access to affordable, reliable, cost effective, and envi- Development Challenge and Expected ronment friendly electricity. The model should Outcomes also demonstrate that good and transparent governance at local level is integral and essential Historically, the energy industry has expanded to effective energy management. services to rural areas outwardly from the urban The team’s collective research to date shows centers using the same infrastructure model that that in the developing nations there are many made sense in the dense urban areas where there clusters of villages and communities under- are hundreds of energy users per kilometer. But, served by electricity, sanitation, health services, as the infrastructure is moved outward, only education, and job creation. Such clustered a few energy users per kilometer in the rural communities appear to be the right size for a mi- area are supporting the expensive infrastructure. crogrid solution that enables multiple renewable Thus, where the traditional, centrally-developed, resource technologies. centrally-managed expensive infrastructure is A microgrid is a localised, scalable, and sus- available to many energy users per kilometer (in tainable power grid consisting of an aggregation urban areas), distributed communities (especially of electrical and thermal loads and correspond- in developing nations) are most often left with ing energy generation sources. Microgrid com- little or no access to affordable energy solution. ponents include: distributed energy resources Compounding this, the mostly state-run In- (including both energy storage and generation), dian electricity sector is plagued by signifi cant control and management subsystems, secure supply shortages, fi nancially insolvent utilities, network and communications infrastructure, and the ineffi cient delivery of what supply is avail- and assured information management. Relevant able. Utilities pay high charges for overdrawing renewable energy resources that are often con- power from the grid, provide free or low cost sidered for microgrids, include combinations of electricity to a handful of large farmers that use wind, solar, battery storage, waste and biomass electrifi ed pump-sets for irrigation, and deal with to energy plants, and combined heat and power high levels of electricity theft in urban areas. All

76 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

of this makes it unlikely that state utilities can sustainable farming, it signifi cantly reduces afford to make needed upgrades in urban areas, product spoilage by enabling crops to move let alone expand distribution into rural areas. to market quicker, cooler and cleaner. In India, as in other developing countries, The proposed village-based renewable re- families seeking access to improved wages, sources enabled microgrid (VREM) can leverage health, and education often move to a large urban interconnected variable renewable resources, area. Such migration has two signifi cant impacts: develop a locally-managed energy infrastructure, • Pressure on urban infrastructure stretches help promote expertise in electricity market national resources; concepts, and demonstrate a model for pro- • Leaving rural communities behind worsens gramme development of low income clustered the urban rural divide, and contributes to communities. More importantly, a VREM can the decline of local knowledge and local provide access to affordable energy, allowing for culture. increased economic development, better health The solution is not to move the families into and educational opportunities. urban areas, but to move affordable energy to the rural, distributed communities to enable The Objective of the Proposed Project — jobs, health, education, and a quality of life that Stage 1, Pre-feasibility maintains or expands the local culture. Access to a real and sustainable energy solu- The goal of the VREM pilot project is to pro- tion to the energy poverty problem has been vide reliable, cost-effective, and environmentally identifi ed as the “missing Millennium Develop- sustainable power that meets both the electricity ment Goal”.1 The UN Millennium Goals now seek and thermal needs of the approximately 60,000 to set goals for global partnerships to proliferate residents of Rahitmatpur and surrounding vil- the availability and accessibility to new tech- lages in Maharashtra. Rahimatpur has four nologies, especially information technology (IT) educational institutes and a young population and communications2; plus the development of ready to launch itself into the services and manu- environmental sustainability by integrating sus- facturing sectors. This area is underserved by the tainable development into country policies and power sector, which supplies only intermittent programmes.3 electricity. As we want the community members The lack of affordable, reliable, and accessible actively engaged in supporting and benefi ting energy is a signifi cant challenge in many parts of from the project, we also want to demonstrate the developing world, affecting sanitation and that good, transparent governance is essential to health, economic development, education, and energy management. other important factors in quality of life: In the fi rst stage of the project, we will con- • Energy enables economic development of duct a pre-feasibility analysis of the site. Suc- commercial and industrial businesses that cessful application of distributed generation lead to more jobs and better jobs; requires a portfolio-type system perspective • Energy enables sanitation and health — en- that views generation and associated loads as ergy to run sanitation processes for water an integrated and autonomous subsystem or a and waste water, energy for health care “microgrid”. Distributed generation operating facilities, etc; within a microgrid is a viable energy effi ciency • Energy enables education — energy for option and has the potential to greatly improve schools, expansion of lighting for evenings energy reliability. for student study, expanded access to edu- A project relying on various waste-energy tech- cational media, etc; nologies can also help resolve the challenges of • Energy enables environmental improve- waste management and sanitation issues. Small- ments — VREM energy is much cleaner scale gasifi cation waste-to-energy (WTE) systems than using kerosene or fuel oil for cooking, are a perfect fi t for community microgrids, which lighting, and heating; can use locally-generated solid waste, wastewater • Energy enables agriculture economic de- sludge, agriculture waste, or specifi c energy crops, velopment. Not only will energy provide for promoting new agricultural techniques.

77 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 1: Series of Interconnected Village Renewables-Enabled Microgrids (VREM)

The VREM can be viewed as cells (microgrids) addressing environmental and water issues, that are networked to form a collaborative and providing a sustainable model for high-growth, distributed power system (see Figure 1). low-carbon economic development. Each cell addresses a local focus, yet is available to supply adjacent cells with power address Stage 1 Pre-Feasibility Approach peak demand needs or failure recovery. Adjacent cells can be leveraged to provide sustaining power The project team approach upon award is to when a neighboring cell cannot support its peak conduct a data gathering site visit to Rahimatpur demand, or scheduled as a planned failover. The and Solapur (alternate) village clusters in India. adjacent cell concept presents an opportunity The data gathering will follow the Horizon En- for each class of microgrid operator to generate ergy Group microgrid feasibility study template revenue by bidding excess generation capability plus add essential socio-economic data about into a future wholesale energy market or poten- the local village clusters, and determine the cur- tially to negotiate collaboration directly with a rent state of area services such as health care, neighboring cell. sanitation, education, water, agriculture, and Smart Grid technology is implemented to energy. Upon completion of the data gathering create an automated, widely distributed energy step, the team will analyze the data, develop a delivery network characterised by a two-way detailed plan for Stage 2, Stage 3 and beyond, fl ow of electricity and information, capable of and develop a Stage 1 report on all the above. See monitoring and responding to changes in ev- Figure 2. erything from local power plants to customer Fundamentally, Stage 2 will be the stage for de- preferences to individual appliances. Build- veloping the fi rst VREM, associated programmes, ing a ‘smarter’ grid is an incremental process and shared funding programme. The DIV Stage of applying information and communications 2 funding will be the leverage for international technologies to the electricity system, enabling and country funding of the VREM and associated more effi cient delivery, reliable supply, and bet- pilot programmes. ter access to energy. Microgrids provide a unique Stage 3 will be the full roll-out of the VREM de- solution to addressing the unique challenges to ployment programme. This includes development rural electrifi cation, incorporating the market of the shared funding programme, the design/ development of renewable energies as well as build programme, and the programme support.

78 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Figure 2: VREM Approach Overview

Innovative Solution within the Competi- tion Automation, or Management Information tive Landscape System (MIS). This project utilises each of these components, providing a prototype for scalability. This project takes advantage of advances in In addition, this project will be testing the ef- information technologies to integrate power fectiveness of using duckweed, a form of algae, generation from a variety of renewable resources as a feedstock for a methane digester to produce that are appropriate for the target pilot areas biogas. to provide reliable power generation to villages The initial evidence for the VREM concept is independent of a large centralised distribution compelling. VREM is a microgrid, and there are power grid network. Most distributed energy multiple microgrid projects operating world- sources in non-urban areas rely on imported fuel wide. In the US, there are three true microgrids stock, such as fuel, diesel, natural gas, and in some operating today, with 20 additional microgrids cases coal. India is challenged with the provision in development with many going operational in of petrochemical feedstock for power generation 2012. Consider three examples. in non-urban areas. A micro-grid will be able to The Borrego Springs microgrid in California is integrate power from various renewable energy for a remote desert community that has a single, streams, such as wind and solar, to optimise the troubled electrical connection to the main grid in reliable delivery over a twenty-four hour period. California. This microgrid (5 MW) incorporates This project concept is revolutionary, by incor- locally-owned solar photovoltaic arrays, diesel porating renewable energy generation, network- generators, energy storage, demand response, ing microgrids, and integrating distributed energy and electric market pricing inﬂ uences. The mi- resources for localised power generation as well crogrid incorporates all power resources, circuit as providing for the opportunity of connecting switching, voltage and reactive power manage- to other nearby villages. Indian utilities in many ment, management of electric demand, and cases lack the basic hardware or software, which energy storage to deliver the improvements the would be required to deploy a Smart Grid. Most community desires — affordable energy, better utilities have not yet adopted on a large scale reliability, and reduced emissions. what are considered basic enterprise IT systems The Kythnos microgrid on Kythnos Island (i.e. Geographical Information System (GIS), in the Agean Sea is a small (100 kW) microgrid Outage Management System (OMS), Supervisory that connects all resources (PV arrays) and loads Control and Data Acquisition (SCADA), Distribu- in a system that is autonomously managed by

79 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

software agents who interact with each other to Few — if any — decentralised generation projects arbitrate the optimal electric service to all loads. in India are networked. With the possible inclu- There is one project in State of Maharshtra: a 17 sion of one of the nearby industrial power plants MW MicroGrid at Alamprabhu Pathar. The empha- into the microgrid, the project could operate both sis here is on wind turbines based on the topography as island for the village cluster, as well as be a net- of the area. Bagasse-based generators are used for worked microgrid. The networked option is more the project. The microgrid includes 2.4 MW of natu- sustainable — i.e. generation available beyond ral gas based generators, 0.5 MW of biomass-based the household and agricultural needs of the vil- generators, and 14.3 MW of wind turbines. These lage cluster — with sales to industrial consumers, various resources are being installed at various lo- who currently rely on expensive diesel for their cations in the Microgrid. While microgrids present back-up power generation. non- traditional electric infrastructure challenges, In Maharashtra, rural, grid-connected con- the world-wide body of work in microgrids has sumers receive about 8-10 hours of electricity per proven that all the challenges are addressable with day during off-peak hours.6 Currently, the average the right design and integration. household uses approximately 300 kwh of power The VREM concept was derived from these per year, mostly for lighting needs.7 To provide example microgrids as well as a dozen other mi- 24-hour electricity that meets the agricultural and crogrids in development. household lighting needs of the village cluster Also considered is cutting edge technology would require ~1 MWh per household per year.8 with duckweed gasifi cation process. This concept A project designed for 23 MW of installed capacity pilot actually has its roots in the concept pilot out could meet this requirement and possibly meet of North Carolina. Researchers at North Carolina the needs of a nearby industrial plant, allowing State University have proven that duckweed is for greater rural integration in Maharashtra’s ideal as a biomass crop that can be manipulated industrial development. to have a very high protein or starch content. The development and installation of a 23 MW The researchers used hog wastewater streams as VREM requires US$ 115M of capital. We are look- the duckweed feedstock, proving initial proof of ing to fi nance the VREM as a joint public/private concept the positive economics of duckweed for partnership, where the capital investment is split ethanol production.4 three ways (US$ 46M, US$ 46M, US$ 23M): • 40 per cent international grant (UN, UN Business Plan Foundation, USAID, or other foundations); • 40 per cent national grant (Ministry of Eco- A village renewable-enable microgrid (VREM) nomic Development, RGGVY Electrifi ca- pilot project that incorporates solar, wind, bat- tion, Ministry of Non-Conventional Energy tery storage, biogas, and/or biomass resources, Sources, etc.); can provide sustainable, reliable electricity to • 20 per cent repayment by the VREM con- the Rahimatpur village cluster. The proposed sumers at 0 per cent interest for 20 years. VREM will be a locally-managed power grid The VREM annual operations and fuel ex- serving only the needs of the village cluster, or penses combined are US$ 0.071/kWh (Rs. 3). a locally-managed power grid that also connects Carrying this debt for a 20-year period at 0 per to a nearby industrial power plant. Both business cent interest would add US$ 0.029/kWh (Rs. 1) models can be scaled beyond Rahimatpur. Since to the operating costs. This requires residents in the goal of the project is to scale via the private the village cluster to pay US$ 0.08/kwh (Rs. 4). sector, the feasibility study (Stage 1) will allow us Grid-connected consumers receiving power 8-10 to determine which model best meets the needs hours/day pay Rs. 2 or US$ 0.04/kwh. Including of the village cluster, by providing the greatest the costs of procuring kerosene for lighting needs sustainable social and environmental benefi ts at when grid-connected power is not available, most the lowest cost. households in India spend approximately Rs. 11 The goal of the VREM pilot project is to provide or US$ 0.20/kwh.9 The VREM cost of or Rs. 4 or reliable electricity to the approximately 60,000 US$ 0.08/kwh is not only economically viable, residents of the Rahimatpur village cluster.5 but a better option.

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Scaling Plan Carbon Emission Reduction credits could also be used as a funding source for the project expan- The VREM pilot project we envision (Stage 2) sion. In addition, as the pilot project and initial relies on funding from various sources, and is deployment projects are successful, private eq- intended to scale as a joint public-private venture uity could be interested in fi nancing additional (Stage 3). projects. There are two key issues with making the VREM sustainable and scalable: Conclusion 1. Financing the project in such a way as to not unduly burden the village cluster within the A key indicator of success for our project is VREM with a large, long-term mortgage; access to affordable, reliable, and sustainable 2. Providing training to local entrepreneurs electricity. Following the World Bank report men- to operate and maintain the micro-grids, tioned earlier, we will verify the current cost of which, beyond the build phase, creates last- electricity for lighting needs per household, con- ing new jobs in the region. sidering any costs associated with grid-connected The project can scale both within India and power, as well as the costs of procuring kerosene. within other developing countries. Creating 10 We will also determine the greenhouse gas emis- VREM projects within India for similar-sized sions associated with both resources. Finally, we village clusters could lead to over half a million will compare the costs of extending the current users in India alone in 10 years.10 Expanding grid infrastructure with the cost of implementing the project outside of India in other developing the VREM. A key economic indicator will be the countries could lead to millions more. lower costs associated with procuring electricity Depending on the business model adopted — from the VREM project, and a key environmental either a stand-alone microgrid serving only the indicator will be the lower or avoided greenhouse village cluster or a microgrid connected with an gas emissions. industrial power plant — the VREM may fund The sustainability of our project is dependent part of its own expansion. With major reliance on how well we integrate members of the village on government incentives for distributed genera- cluster, by empowering them to play an active tion projects in rural areas,11 scaling beyond India role in the development, maintenance, and on- will require capital needs that may be fi nanced going management of the VREM project itself. through international organisations and/or par- We expect a number of social benefi ts: increased ticipating countries. Depending on the available agricultural productivity, greater food security, capital funding, the rate of expansion could be improved health and sanitation, employment adjusted upwards. generation (both as a result of the VREM project Following the same business model outlined in itself and related economic development), all of section 4, fi nancing 22 VREMs across developing which contribute to this empowerment. In ad- countries would require US$ 2.5 billion in capital dition, we expect improved waste management investment. We see opportunities to engage pri- techniques in the village cluster, as we plan to vate sector capital in each of the funding streams: utilise various waste streams with gasifi cation • International community funding could and/or anaerobic digestion technologies in the come from one of the multi-lateral banks, the VREM. United Nations Development Programme, or the Global Environment Facility; Endnotes • Participating countries could provide bank loans with sovereign guarantees; 1 http://www.iea.org/index_info.asp?id=1847 • Village clusters could take on some private 2 Goal 8F UN Millenium Goals http://www. debt in later years, assuming increased un.org/millenniumgoals/ energy usage as economic development 3 Goal 7 UN Millenium Goals http://www. increases. un.org/millenniumgoals/ Since this is a renewable energy-based project, 4 See additional information on North Carolina the potential for Clean Development Mechanism State University duckweed projects at:

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http://www.biofuelswiki.org/bin/kinosearch/ 2010. South Asian Energy Unit, Sustainable De- Home/WebSearch?search=duckweed&web=H velopment Department. The World Bank. ome 10 10 village clusters of 60,000 each = 600,000. 5 Rahimatpur (20,000), including the eight Moreover, expanding this project in India could villages with approximately 5,000 people in each. double the current per capita energy consump- 6 “Empowering Rural India: Expanding Elec- tion of about 734 kwh to close to 2000 kwh in tricity Access by Mobilising Local Resources.” less than ﬁ ve years — a number not quite at the 2010. South Asian Energy Unit, Sustainable De- consumption level of the developed world, but a velopment Department. The World Bank. ﬁ gure that could represent a lower-middle class 7 Ibid. level of electricity consumption. 8 Average household requires 30 kwh/month 11 Such as the Rajiv Ghandi Grameen Vidyu- at 8 hrs/day. For 24 hrs for one year would be tikaran Yojana initiative for rural electrifica- about 1000 kwh. tion, and other incentives available through the 9 “Empowering Rural India: Expanding Elec- Ministry of Non-Conventional Energy Resour- tricity Access by Mobilising Local Resources.” ces.

82 Chapter 4. Socially Responsible Business Models. Villages and Energy Cooperatives

Energy for Freedom

Fedor Lukovtsev Institute of Northern Asia and Integration Processes [email protected]

Power industry of the XX century was the and geopolitics. Economic globalisation, space engine of industrial development, including the information technologies, increasing virtualisa- construction of nuclear and hydro power plants, tion of fi nancial markets, climate changes and the formation of powerful territorial production environmental disasters raise new requirements clusters. The large-scale power industries — with for energy policy in different countries. paternalistic governance — are on the verge of The XXI century power, fi rst of all, should moral and physical deterioration, and at the be a tool for increasing the comfort and quality same time are faced with a global challenge to of human life. Now, the power industry has to provide knowledge-based economy with energy come to a point where the life of the mankind resources. is easy and comfortable. In today's world, space People tend to live in places that have higher and place lose their key value for realisation of concentration of industries, factories, the places people’s personal potential. More precisely, now where mineral resources are available for devel- a human should not be dependent on the exist- opment. The man is closely connected with the ing infrastructure so much. But a person is truly energy infrastructure. When the state of world free in his choice only if he has such an ability to markets change, minerals are exhausted, com- choose. panies go bankrupt, a problem of demographic Here we can also see people’s initiative: with shifts appears. In Russia’s Far East and Siberia their own resources and creative cooperation en- regions, abandoned villages and the deplorable thusiasts from different countries provide fi nance condition of infrastructure of large and municipal as a private charity and introduce modern energy energy, are becoming a widespread phenomenon technologies in the Russian regions of North Asia. of today. Failure may be observed everywhere: As regards the environmental dimension en- people, nature, government, the economy and ergy, large-scale power industry is not focused business. on environmental issues, which are always sec- However, life does not stand still and the world ondary, and, unfortunately, a residual priority. is changing. New intelligent technologies lead Distributed, alternative, "green" energy therefore local power systems to a new level, make them should break into the energy space. The main fl exible and adaptive to the use of renewable or mission of humanity is to preserve the nature! local primary energy resources, help managing Another challenge is that the globalisation the consumption schedule, provide a new level of assimilates ethnic diversity. There are social reliability in any territory and climate conditions. groups — indigenous peoples — that take this is- Innovative local power will provide sustainable sue as critical given that it is intertwined with the development of remote and insular areas, will be preservation of their national identity. Culture, a key factor to address the problems of backward- traditions and language can be stored in a tradi- ness in social and economic development. The tional way of life. Energy supply, in this respect, main advantage of the widespread implementa- is the key factor in shaping the living conditions. tion of new energy systems based on microgrid Nowadays, the industrial development of north- technology is the increasing role of the consumer. ern territories should have the motto "From the The philosophy of life is changing along with development of land to the development of life" It the scientifi c, technical and socio-cultural prog- means that the North should be considered as an ress. Now it already affects the macroeconomy area of life where the man will deploy innovative

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technologies in energy, communications, trans- the areas of their historical residence. Desirable portation, and will build new types of autonomous deliverables include launching of pilot infrastruc- communities, new systems of production. In gen- ture projects in remote, insular, inaccessible rural eral these are new approaches to the organisation areas of developing APEC economies. Not only of life with due account of the traditions of the private owners and enthusiasts locally, but the indigenous peoples. government must have a stake in the development APEC members will benefi t from defi ning the of these projects. It is worth outlining a plan for relevant ideology, working together on public future collaboration in APEC. policy measures, facilitating technological and Small-scale distributed and alternative energy fi nancial assistance to local communities to en- — is energy for freedom, featuring the free man able them implementing local power projects in and the natural world.

84 Chapter 5. Microgrids and APEC Agenda

Microgrids: APEC and Global Context

Kirill Muradov National Research University Higher School of Economics [email protected]

Relevance of the Microgrid Concept APEC Context: From Early Village Power Applications to Smart Communities Energy systems across the world gradually evolve toward a new paradigm where two-way APEC members reviewed off-grid remote en- power fl ows and greater reliance on distributed ergy systems as early as in November 2002 when generation encourage new technology develop- the 20th EGNRET meeting in Korea focused on ment. Some forms of distributed generation — economy-specifi c Village Power opportunities especially variable renewable resources such as and challenges. solar or wind — create a greater need for smart The follow-up activity, the APEC Village Power grid solutions, such as microgrids. Workshop, was organised in 2004 in Canterbury, Peter Asmus from Pike Research explains that New Zealand. The Workshop built on the NREL Microgrids are really just miniature versions of the Village Power Programme and NREL/World larger utility grid (localised smart grid network), ex- Bank global village power conferences in 1998 cept for one defi ning feature: when necessary, they and 2000 and pursued the following objectives: can disconnect from the macrogrid and can continue (1) to introduce and explore renewable energy to operate in what is known as “island mode.”1 technology options and solutions for village An important case is remote microgrids that power applications; (2) to share information on never connect to a larger grid and develop in renewable energy for village power applications several key segments including village power sys- (lessons learned, best practices, experiences); tems, weak grid island systems, industrial remote and (3) to explore establishment of a regional mine systems, and mobile military microgrids. network of village power champions, proponents, A relevant and useful description is provided by and practitioners. the Alliance for Rural Electrifi cation: “A mini- The workshop provided an opportunity for grid (also sometimes referred to as a micro-grid representatives of APEC member economies to or isolated-grid) provides electricity generation obtain information and learn about the current at the local level, using village-wide distribution status of various renewable energy technologies networks not connected to the main national grid. for rural off-grid or remote locations. The work- The production is managed by an operator who shop helped to expose APEC representatives to can take different legal forms and who supplies the experiences and lessons learned by village electricity to several distinct and autonomous power practitioners and experts in the fi eld. The end-users against payment or participation.”2 experts represented government, public and So microgrid defi nition may indeed vary de- private sector energy service providers, non- pending on the context, but it may be already con- governmental organisations, and fi nanciers who cluded that microgrid is a critical technology for have been involved in energy sectors related to (1) smart and effi cient integration of intermittent rural development, agriculture, water and small renewables an (2) supply of electricity to remote, and medium enterprises.3 off-grid areas. This APEC project in fact focused It was concluded that many APEC economies on remote microgrids that are especially relevant supported rural electrification, though more for vast disadvantaged territories of many APEC than 1.5 billion people continue to lack access to developing economies. electricity. Renewable energy has the potential

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to make a signifi cant contribution to providing renewable energies and energy management and increasing access to modern energy services approaches in buildings and industry.” Further, for those unserved and underserved, and to do Japanese Prime Minister Kan and U.S. President so in a way that enhances economic and social Obama announced the Energy Smart Communi- development. ties Initiative (ESCI) on the occasion of the APEC The Workshop revealed that for some APEC Leaders meeting in Yokohama in November 2011. economies including Indonesia, Korea, and the ESCI includes pillars for smart power grids, smart Philippines, there are thousands of inhabited buildings, smart transport and smart jobs and islands in each. In Indonesia and the Philippines education. The smart power grid pillar includes decentralised use of renewable energy systems tasks on smart grid road maps and a smart grid is expected to be an important source of clean test bed network. fuels and electricity; in Korea the hybridisation Formally, the ASGI includes four components: of solar, wind, and biomass energy electric power (1) Survey of Smart Grid Status and Potential in systems with existing diesel generators can reduce APEC member economies; (2) Smart Grid Road the long-run costs of diesel minigrids and reduce Maps; (3) Smart Grid Test Beds; and (4) Smart their unit greenhouse gas (GHG) emissions. Grid Interoperability Standards. In Australia, Chile, China, and Mexico, where The actual outputs of the ASGI are series of most of the populations have grid electricity, studies, reports and workshops on various appli- there are signifi cant programmes for bringing cations of smart grid technological innovations. modern energy services to the remaining off-grid A distinctive feature of the ASGI is ongoing communities, using a mix of renewable and fossil coordination of activities with the International fuel-based technologies. Vietnam is developing a Smart Grid Action Network (ISGAN) that was national renewable energy programme, including established through a Clean Energy Ministerial a component for off-grid rural communities. (CEM) process, inaugurated in Washington in The APEC Village Power Workshop therefore July 2010 to link together the smart grid activities extended and deepened the APEC network of of the G20 and other major economies. A joint village power practitioners and related organisa- APEC-ISGAN initiative is the proposal of a Smart tions and programmes. However, the proposed Grid International Research Facility Network APEC regional Village Power Network did not (SIRFN), an Annex to the ISGAN Implementing evolve into a viable undertaking. One reason Agreement, which can draw upon the road maps might have been that the awareness of the rel- and test bed network established through ASGI evant microgrid technology development and and ESCI. The founding parties agreed to ex- market readiness were not yet mature enough to change more detailed information on planned and support these smart proposals. Besides, the only ongoing testing activities in six areas: Renewable APEC-wide umbrella that could provide the nec- and Distributed Energy Resources Integration, essary policy support was the APEC 21st Century Buildings Automation, Electric Vehicles Integra- Renewable Energy Development Initiative that tion, Microgrids, Distribution Automation, and primarily focused on renewable energy genera- Cyber Security.4 tion not smart communities or consumers (one of Implementation of Russia’s project proposal the activities under the initiative addressed Dis- “Piloting Smart Microgrid Projects for Insular and tributed Resources and was led by New Zealand). Remote Localities in APEC Economies” led to the It was not until 2010 that microgrid-enabled introduction of a Road Map for Development of distributed generation moved again to the focus Microgrids in the ASGI Smart Grid Road Maps of APEC members’ deliberations on energy. The pillar. However, this section of the ASGI is yet to topic re-emerged as a part of the APEC Smart be fi lled with specifi c activities and deliverables. Grid Initiative and the Energy Smart Communi- Up to date, ASGI or ESCI has not produced ties Initiative. The Fukui Declaration from the reports that explicitly focus on microgrid tech- Ninth Energy Ministers Meeting in June 2010 nology or project development. However, the instructed EWG “to start an APEC Smart Grid report on “Using Smart Grids to Enhance Use Initiative (ASGI) to evaluate the potential of smart of Energy-Efficiency and Renewable-Energy grids to support the integration of intermittent Technologies”, prepared for the EWG by the

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Pacifi c Northwest National Laboratory (US) and delivering innovative energy supply solutions to released in May 2011, briefl y reviewed microgrid the energy-poor. deployment across the Asia Pacifi c as a part of the larger smart grid framework. The report surveyed Individual Projects and Policies in APEC APEC economies, described the status of smart Economies grid activities and identifi ed APEC economies that are actively pursuing smart grid capabilities to ad- Unlike smart grids, microgrids are not entirely dress environmental and economic sustainability new and have been wide spread in the energy sys- goals. Finally, the report explored the potential tems of APEC economies. These were old style application of smart grid capabilities to resolve autonomous diesel-fuelled generating facilities that renewable integration and energy-efficiency supplied electric power to the many isolated areas. concerns (such as variability and uncertainty in For example, Korea at the EGNRET 20th meeting amount of renewable wind or solar generation). (2002) reported that it had over 3,100 inhabited In certain cases, the report used the term “smart islands and all had power supply, mostly via diesel micro-grids” to describe the progress in indi- mini-grids. This has been common for the remote vidual APEC economies.5 areas with no access to centralised electricity net- The report reviewed microgrid in relation to work. More recently, microgrids intelligently com- smart grid development and recognised its village bined power from multiple local sources, including or rural applications: both diesel and renewable power, into smarter and “Micro-grid concepts can be applied at a village cleaner localised energy systems. level to balance limited generation resources or As explained by Peter Lilienthal6, off-grid or variable resources, such a solar and wind, with remote microgrids are more typical for develop- storage technology and basic, but smart, control ing economies where most common applications technology to balance supply and demand in a include daily energy supply to islands, mines, prioritised manner. Incremental steps such as this village power and, recently, ecotourism. Devel- also can lend themselves to the development of oped economies typically design microgrids for a weakly- connected transmission network that emergency services, military bases, campuses may interconnect multiple micro-grids so that and to integrate renewables and electric vehicles. they can share energy during some portions of the Hence, the drivers for microgrid development are day, but then should the overall system become somewhat different in developing and developed unstable, each micro-grid can disconnect and economies. Varied policies or approaches to service its own territory in the best way possible. microgrids and existing demonstration projects In this way, such economic regions can gain from clearly exemplify this. smart grid micro-grid enhanced real-time opera- Indonesia considered a smart micro-grid pilot tions effi ciencies.” (P.3.26-3.27). project on the island of Nusa Penida to the South- Importantly, in the concluding section, the east of Bali. The grid on Nusa Penida is powered report stressed the need for specialised roadmaps, by a series of diesel generators with a peak load of including for off-grid locations: 1.2 MW. In 2005 the state owned electricity com- “Specialised smart grid roadmap development pany, PLN Indonesia, established a renewable can be oriented to types of application, such as energy park on top of a hill in Kelumpu village, off-grid or micro-grid, grid connected rural, and in the highest Puncak Mundi area of the island. grid connected urban environments. A charac- Seven wind turbines were erected in the park, terisation of economies by types can be used to each capable of generating 80 kWh and a solar identify a range of smart grid decision-making plant able to produce 32 kWh. The turbines were and roadmap development tools, depending on installed to reduce the diesel fuel consumption of economy characteristics (e.g., highly developed/ the island and their electric power output used agrarian, rural/urban, central/federated, techni- to pump up underground water thus providing cal level of labor pool, etc...).” (P.5.4-5.5). cheap healthy water for the community. Wind The report implicitly acknowledged that re- power was reported to supply about 14 per cent mote renewable or hybrid microgrids in an off- of the total generated power, but its intermittency grid environment may be an important case of has caused grid instability.7

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PLN Indonesia has also come up with the service the local logging industry. Unlike its newer “1000 Islands Scheme” targeting one thousand counterpart in Batu Laut, however, the microgrid islands in Indonesia to be powered by solar en- in Kalabakan is underperforming due to improper ergy by 2014. Several projects have already been maintenance and lack of management expertise.10 commissioned in Pulau Panjang, Pulau Balang China realises that microgrids are an impor- Lompo, Pulau Tankake, Pulau Kelang and Pulau tant part of the country’s smart grid programmes Bunaken where integrated hybrid solar systems and are also related to national development were installed.8 strategies. Government support for microgrid de- In the Philippines, the Alliance for Mind- ployment provides additional incentives to bring anao Off-grid Renewable Energy (AMORE) Pro- social and economiec benefi ts to remote regions, gramme is a partnership of governments, prin- thus extending reliable energy to its citizens. cipally of the United States through the United China is dedicated to renewable energy ex- States Agency for International Development pansion and has 8 completed pilot projects, with and of the Philippines through the Department many more underway. One such project was of Energy, and private sector partners from the completed in Zuo’anmen at Beijing City, where energy industry such as the former Mirant Phil- 50 kWp PV, 30 kW microturbines, 72 kWh en- ippines Foundation and Sunpower Corporation. ergy storage was installed. Other microgrids were The island of Mindanao has more than a third installed in the Henan Province, in Tiajin City, of the landmass of the Philippines and is home Mongolia, Foshan City, and Foshan Island. These to one-fourth of the country’s population. The projects are reported to have had tremendous suc- AMORE Programme energises poor, remote, and cess and focused mainly on PV and wind energy, mostly confl ict-affected communities that can- as well as storage.11 not be connected to the power grid using clean More developed APEC economies have also and indigenous stand-alone renewable energy embarked on microgrid development to augment systems such as solar and microhydro. The rural their electricity grids to remote and isolated ar- electrifi cation programme is administered by eas. Late 2010 Chinese Taipei unveiled plans for Winrock International, a US-based non-profi t an 8MW offshore wind demonstration project organisation.9 to be operational by the end of 2012 on and off Malaysian government supported the instal- the Penghu Islands where the capacity for wind lation of remote microgrids with varied success. power generation proved to be high. In March The village of Tanjung Batu Laut on a small 2011 a fi ve-year, US$273.6 million project to turn island off the coast of Malaysian Borneo houses Penghu into a world-class low-carbon island was a hybrid microgrid that has been successfully formally launched. Renewable energy will ac- feeding electricity to approximately 200 people count for 56 per cent of the county’s total energy in the village for two years. In the control center, demand by 2015 and when the wind turbines computers manage power coming from the solar produce excess electricity, it will be transmitted panels and from diesel generators, storing some and sold to Chinese Taipei via an underwater of it in large lead-acid batteries and dispatching cable. A key feature of the plan is to invite the the rest to meet the growing local demand. Before Penghu County government and local residents the tiny plant was installed, the village had no ac- to become stakeholders in the project. They are cess to reliable electricity, though a few families expected to acquire a 55 per cent of the company had small diesel generators. Now all the residents that will operate the wind farm, with the rest open have virtually unlimited power 24 hours a day. to outside investors. A less cheerful example is the village of Ka- Penghu will also play a major role in Chinese labakan, located in a remote part of northeast Taipei’s efforts to harness ocean energy, a high Borneo. The village had no proper paved road priority for the government and their Industrial until a few years ago, and residents made do with Technology Research Institute (ITRI). The na- a couple of hours of electricity at night. Three tional target is for a 200 MW installed capacity by years ago, the Malaysian government funded a 2025. According to ITRI, studies have shown that microgrid there, and power demand skyrocketed. the north-east offshore region has wave potential New customers included a pair of sawmills that of several hundred megawatts, while the east

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coast’s Kuroshio path and the Pescadores Chan- Ltd to install a shore-based device to capture nel (off Penghu) have tidal current energy that wave energy was awarded $ 2.16m in July 2010 could theoretically be tapped at gigawatt scale.12 under the government’s Marine Energy Deploy- Interestingly, such a small economy as Sin- ment Fund. The project will see the construction gapore with virtually no remote areas is in the of an oscillating water column to power two 110 process of implementing a smart micro-grid with kW Wells turbines. The device will be installed on clean and renewable-energy technologies. Pulau the southwest coast of Chatham Island and will Ubin is a 10 km2 island, located northeast of Sin- be able to supply another quarter of the island’s gapore, where “off-grid” and the new micro-grid electricity needs.14 infrastructure will replace the diesel generators Korea launched a national smart grid pro- currently being used on the island. Currently, gramme to help it become a low carbon economy Pulau Ubin does not draw electricity supply from and a society capable of recovering from climate the main power grid. It is not economical to lay change. The fi rst phase of the project has been power transmission cables from mainland Singa- to build a Smart Grid Test Bed on Jeju Island. pore to Palau Ubin due to its modest electricity The overall programme and Test Bed have fi ve consumption of around 2,500 MWh per annum implementation areas: 1) smart power grid, 2) with maximum demand estimated at 1.7 MW. The smart consumers, 3) smart transportation, 4) Energy Market Authority (EMA) has embarked smart renewables, and 5) smart electricity ser- on a pioneering project to transform part of Pulau vice. The goal of the smart renewables sector of Ubin into a model ‘green’ island powered entirely the project is to build smart renewable-energy by clean and renewable energy. Aside from solar generation across the nation using micro-grids to panels and using waste as fuel for energy gen- enable houses, buildings, and villages to be energy eration, electricity could also be produced from self-suffi cient with the desire that 30 per cent of a hydrogen fuel cell plant, biofuels or turbines households are energy self-suffi cient by 2030.15 powered by wind or waves.13 There is also a “Green Village” ongoing project Chatham Islands represent a well known case that encourages the creation of energy indepen- of hybrid local power system development in dent villages which only uses renewable energy. New Zealand. Chatham Islands Electricity Ltd Local governments make proposals with grouping seeks sustainable options to augment or replace of at least 10 households and the central govern- existing network distributed diesel generation. ment evaluates those to decide on the support Key objectives are to lower current costs, provide The target is to have 200 sites covered under the long term price security, and reduce environ- project until 2020.16 mental cost. Wind and hydro options have been Japan has taken action to reduce existing evaluated and the commissioned report consid- energy costs for residents of remote islands. The ers both stand-alone and integrated generation regional utilities are required to provide elec- systems. Because wind is a plentiful resource and tricity to every customer at the same price. The micro-hydro plant more site specifi c, there were high cost of supplying power to remote regions strong drivers to prioritise wind development. In is therefore shared equally within their service July 2010, CBD Energy completed its renewable territories. In 1999, the Okinawa Electric Power energy project with installation of two 225kW Company developed the world’s fi rst seawater wind turbines and associated control systems, pumped-storage facility. The system consists of a which it has integrated with the local electricity reservoir with a storage capacity of 564,000 cubic grid and diesel generation plant. The turbines meters 150 meters above sea level. The power sta- are expected to supply 47 per cent of the islands’ tion is located 136 meters below the reservoir, and electricity, reducing diesel use by around 300,000 can produce up to 30 MW of electricity, which is litres each year. around 2 per cent of the maximum power demand In May 2009, The Department of Conserva- for Okinawa Island.17 tion and Telecom New Zealand installed a 5.8 kW New Energy and Industrial Technology De- photovoltaic solar electricity generation system velopment Organisation (NEDO) leads systemic that was integrated into the local grid. A proposal microgrid project development and research. put forward by Chatham Islands Marine Energy In 2003-2007, NEDO implemented at least 4

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microgrid projects in various locations across and deployment in the United States. To date, the Japan. Test Projects for Next-generation Energy bulk of the US Department of Energy’s work has and Social Systems are planned for 2011-2014 and been on microgrid demonstrations. Key drivers centre around major cities, including Kyoto, Yo- are reported to include ensuring energy security kohama. NEDO’s microgrid projects are typically and reliability, integrate renewables and address more complex and feature many on-grid elements costs (peak load reduction, demand charges). such as electric vehicle charger stations.18 The applications include military installations, In Canada, the federal ecoENERGY for Ab- hospitals and other critical facilities, universities. original and Northern Communities Programme, However, existing active players which have an initiative through Aboriginal Affairs and effectively employed microgrid innovations are Northern Development Canada (AANDC), pro- rural energy cooperatives, totaling more than vides funding up to $250,000 for the planning 900 across the US. Some of the more successful of renewable energy projects and up to $100,000 cooperatives with highest renewables penetration for the design and construction of energy projects originate from Alaska rural communities.20 integrated with community buildings. Since 2007, Among American developing APEC members, the ecoEnergy project has provided close to $10 Chile has been very active in deploying microgrids Million in grants to over 125 projects. for energy supply to off-grid communities. These AANDC is actively working with Aboriginal include Robinson Crusoe Island in the Juan Fer- communities that are not grid connected to ex- nandez Archipelago, Chiloe Archipelago, Ollagüe amine sustainable alternatives to diesel fuel gen- village. eration for the purpose of enhancing economic Russia has only recently begun exploring development opportunities. These solutions may smart grid and microgrid concepts to enhance include community-owned renewable energy an augment its mostly large-scale generation and projects or grid connection (where feasible). Dur- centralised grid. Inadequacy of energy supply is ing interviews, AANDC highlighted efforts made observed in the scarcely populated Russian Far by the Strategic Partnerships Initiative to improve East where rural areas are fi ve times energy- energy infrastructure for remote communities poorer than urban centres. High costs of diesel in Ontario and BC (provinces with the highest transported far from other parts of Russia is the numbers of off-grid Aboriginal communities) for principal driver behind the move toward alter- the purpose of creating favourable conditions for native and renewable energy. Republic of Sakha economic development. AANDC is working with (Yakutia), one of the most isolated and remote 25 Aboriginal communities in Northern Ontario regions of Russia, saw its fi rst wind turbine of to examine long term sustainable solutions, such 250 kW installed in 2007. It is estimated that as a regional transmission line and renewable after 5 years in operation, it produced 328 thou- energy projects. The Strategic Partnership Ini- sand kWh of green electricity and saved 84 tons tiative is also working with off-grid Aboriginal of diesel fuel. communities in British Columbia to assist them In 2011, the fi rst solar power plant was built in transferring the operations and management with capacity of 10kW to produce electricity in of their off-grid generators to the regional utility, parallel with diesel generators. For one year in BC Hydro. This will allow the communities to take operation it produced about 10 thousand kWh advantage of the subsidies offered by BC Hydro that helped save 3.4 tons of diesel fuel. There as well as to upgrade and properly maintain their are plans for further expansion of both wind and diesel generators, maximising efficiency and solar facilities are, but grid connection and load lowering the overall cost of energy production. management are an issue.21 Communities will also have enhanced opportu- Overall, microgrids represent an energy gen- nities for the development of community-owned eration and distribution model that can have var- renewable energy projects through supports from ied applications to the circumstances of all APEC BC Hydro’s ‘Remote Communities Electrifi cation’ member economies. It offers an intelligent way programme.19 to combine different power sources and therefore Federal programmes, institutions, and the pri- to offset the intermittence of renewable energy. vate sector are increasing microgrid development It also encourages energy independence and,

90 Chapter 5. Microgrids and APEC Agenda

importantly, consumer responsibility and self- an technology innovation with promising future, organisation. As some analysts elegantly phrase but also a commercially demanded product. it, microgrids are starting to draw comparisons to cell phones in the developing world, where Global Context many poor people never had landlines and went straight to mobile.22 A signifi cant part of the global population is According to Pike Research, for a variety of reported to lack electricity — half billion to one reasons North America (and especially the United billion people according to available estimates.24 States) still represents the best overall market Most of these are rural dwellers in developing for microgrids for most application segments — countries. In India, for example, 268 million even the most lucrative remote/off-grid segment, people are without electricity in rural areas, but thanks to Alaska. Key factors include pockets only 21 million in cities.25 As of 2012, some fi ve of poor power quality scattered throughout the million Chinese people living in remote villages United States and the structure of markets for in mountainous or border areas are currently DER. The latter has stimulated creative aggrega- without electricity26, but this may be a moderate tion possibilities behind the meter at the retail estimate. level of power service. Instead of being driven The International Energy Agency has estimat- by grid operators, which is the case in Europe, ed that in order to reach the objective of achieving the microgrid market in the United States is universal access to modern energy by 2030, the customer-driven. Microgrids can offer a quality solution for some 60 per cent of the global popu- and diversity of services that incumbent utili- lation currently lacking access to electricity is ties have not been able to offer up to this point likely to be a combination of mini/micro-grid and in time. Still, due, in large part, to the superior off-grid technologies, with an emphasis on micro- revenue profi les of remote microgrids, the Asia grids. Meanwhile, many countries with existing Pacifi c region actually leads the world in terms micro-grid infrastructure are adding renewable of total revenues.23 energy generation to offset high fuel costs.27 The chart below estimates the vendor revenue In their attempts to address accessible energy from microgrid distributed generation in North issues, many regional and international institu- America and Asia Pacifi c, that together roughly tions therefore included microgrid research and equal APEC, at around two thirds of the world development in their programmes. United Na- total. This suggests that microgrids are not only tions Environment Programme (UNEP) launched

Source: Pike Research http://www.pikeresearch.com/author/peter-asmuspikeresearch-com

91 Chapter 5. Microgrids and APEC Agenda

the Sustainable Energy for All initiative in 2011, on Smart Grids (ISGAN, http://www.iea-isgan. led by the UN Secretary General (http://www. org). However, this organisation is only tak- sustainableenergyforall.org). This is a multi- ing initial steps toward specifi cally supporting stakeholder effort that aims to achieve the follow- microgrid project development and cooperates ing broad ojectives by 2030: (1) ensure universal with APEC in that area as indicated earlier in access to modern energy services; (2) double the this paper. global rate of improvement in energy effi ciency; Recognising that Asia is perhaps home to the and (3) double the share of renewable energy in majority of people without access to electricity, the global energy mix. The initiative succeeded Asian Development Bank has been very active to bring in more than 50 developing countries, in supporting appropriate solutions. ADB estab- mobilise more than $50 billion from the private lished the Energy for All Initiative (http://www. sector and investors and encourage multi-lateral energyforall.info) to provide reliable, adequate, development banks in Asia, Europe and Latin and affordable energy for inclusive growth in a America to commit tens of billions of dollars for socially, economically, and environmentally sus- the relevant projects. tainable way. Within the core initiative, an Energy As part of Sustainable Energy for All, the Unit- for All Partnership was formed by the in 2008 to ed Nations Foundation launched a global Energy build platforms for cooperation, exchange, in- Access Practitioner Network in 2011, which now novation, and project development for solutions has more than 630 institutional and individual to widespread energy poverty. ADB brought to- members. The Network focuses on market-based gether key stakeholders from business, fi nance, sustainable energy applications, emphasising government, and NGOs for a singular purpose: mini- & off-grid solutions, and catalyzing energy to drive action towards a goal of providing energy service delivery at country level towards achieving access to 100 million people in Asia and the Pa- universal energy access. In a recent survey of the cifi c Region by 2015. members, 43 per cent of respondents reported The Energy for All Partnership includes a mini- working on decentralised solutions and mini/ grid working group that focused on providing micro-grids. knowledge about fi nancially viable mini-grid mod- In September 2012, a full-day workshop els, sharing experiences and expertise in this area under the auspices of Sustainable Energy for and developing systems with the potential of scale. All brought together experts from the OECD The group acknowledges that in archipelagos and and developing countries to explore state-of- island nations, it is economically more attractive the-art business models, technologies, policy to promote mini-grids that can provide electricity and legal frameworks for facilitating universal 24/7 even to small remote communities. Com- energy access through the enhanced use of mini/ pared to individual solutions such as solar home micro-grids. systems, mini-grid systems can easily power both World Bank does not have a dedicated pro- household and local business applications. gramme to address microgrid development op- One particular ADB project pushed forward portunities, but supports renewable and hybrid through the Energy for All Initiative will promote power through its International Finance Corpora- energy security and access to clean energy in Lao tion (IFC). A recent IFC publication “From Gap People’s Democratic Republic. The proposed to Opportunity: Business Models for Scaling Up project will assist the Government of Lao PDR Energy Access” looks at all aspects of Energy in pursuing its ambitious target of electrifying Access: devices, mini-grids and grid extension, 80 per cent of villages and 90 per cent of house- outlines case studies of successful companies, holds by 2020. The project will implement 5.5 provides wide range of reference materials.28 MW of distributed off-grid capacity with (i) solar International Energy Agency (IEA) created photovoltaic (PV) home systems; and (ii) mini- a mechanism for multilateral government-to- grids powered by RETs (PV, micro/pico-hydro government collaboration to advance the de- and mini-wind). It will also include institutional ployment of smarter electric grid technologies, and benefi ciary capacity building in procure- practices, and systems through its Implement- ment, operation and maintenance (O&M), and ing Agreement for a Co-operative Programme monitoring.

92 Chapter 5. Microgrids and APEC Agenda

Concluding Remarks: What APEC Areas and Islands in APEC Region” (Vladivostok, Should Do? Russia, October 15-17, 2012) was a good example of such result-oriented activity where the partici- A brief analysis in this paper suggests that ini- pants learnt the basics of the modelling of hybrid tial political support, public awareness, technical renewable microgrids. and economic expertise exist in APEC region and worldwide to promote smart microgrid-based Endnotes solutions. Besides, the potential market for clean off-grid solutions is tremendous, according to 1 Peter Asmus (2012). CHP, Solar PV Move the IFC.29 Microgrids into the Mainstream. Peter Asmus Remote microgrids indeed appear as a stand- blog, October 16, 2012 — available at http://www. alone, ultimate case of decentralised electricity pikeresearch.com/blog/chp-solar-pv-move- and a way towards energy independence. Many microgrids-into-the-mainstream. of these microgrids are designed to reduce diesel 2 Alliance for Rural Electrifi cation (2011). fuel consumption by integration of solar photo- Rural Electrifi cation With Renewable Energy. voltaics, a technology that is the primary driver Technologies, quality standards and business for remote microgrids over the next 6 years. Pike models. Brussels: Alliance for Rural Electrifi ca- Research forecasts that the global remote mi- tion. P.27. crogrid market will expand from 349 MW of gen- 3 APEC Energy Working Group (2004). Tech- eration capacity in 2011 to over 1.1 GW by 2017, nical Workshop To Support Village Power Ap- an amount that equals or perhaps even surpasses plications. Proceedings from a workshop held all other microgrid segments combined that are in Canterbury, New Zealand on 7–9 November in the current planning stages or have already 2004. P.40. been deployed. 4 APEC Energy Working Group (2012). Progress But the challenge is to fi nd business models Report on the APEC Smart Grid Initiative (ASGI). that would be commercially viable and could 43rd Energy Working Group Meeting document be confi gured to meet specifi c requirements of No. 2012/EWG43/039, March 2012. individual economies and communities. APEC 5 APEC Energy Working Group (2011). Using which brings together developed and developing Smart Grids to Enhance Use of Energy-Effi ciency economies and ensures the presence of both gov- and Renewable- Energy Technologies. Report ernment and businesses at the discussion table, prepared for the APEC Energy Working Group is well positioned to effectively address this task. by Pacifi c Northwest National Laboratory. P. 3. Thanks to its scope and cross-cutting nature, 6 Peter Lilienthal (2012). The Economics of APEC Energy Smart Communities Initiative pur- Hybrid Renewable Microgrids, in Microgrids sues a comprehensive and balanced approach to for Local Energy Supply to Remote Areas and encourage smart energy project development. Islands in APEC Region, APEC S EWG 15 11A Momentum continues to build there and a niche fi nal project report. opens to promote true smart energy communi- 7 APEC Energy Working Group (2011), P. ties at a micro or local level, energy self-suffi cient 3.5; and Global Islands Network — http:// and green. www.globalislands.net/greenislands/index. APEC Energy Working Group should indeed php?region=11&c=37 re-introduce microgrid within the ESCI as a 8 Optimal Power Solutions Blog — http:// core paradigm to build smart communities in a optimal-power-solutions.com/blog/category/ decentralised energy environment. APEC makes hybrid/ distinction for its fl exible, cost-effi cient capac- 9 See Alliance for Mindanao Off-grid Renew- ity building projects, and the members should able Energy offi cial website http://amore.org. utilise APEC approach to foster training and ph/about-us. raising awareness of microgrid project and tech- 10 Kevin Bullis (2012). A Billion People in the nology development. HOMER training that was Dark: Solar-powered microgrids could help bring organised within the programme of the workshop power to millions of the world’ poorest. MIT “Microgrids for Local Energy Supply to Remote Technology Review, 1 November 2012.

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11 ZPryme Research & Consulting (2012). Mi- 21 Dariya Eremeeva (2012). Renewable Energy crogrids: The BRICS Opportunity. P.24. Sources for the Development of Local Energy, in 12 Global Islands Network — http:// Microgrids for Local Energy Supply to Remote www.globalislands.net/greenislands/index. Areas and Islands in APEC Region, APEC S EWG php?region=11&c=39. 15 11A ﬁ nal project report. 13 Global Islands Network — http:// 22 Kevin Bullis (2012). www.globalislands.net/greenislands/index. 23 Pike Research (2012). php?region=11&c=40. 24 Kevin Bullis (2012); and Richenda Van 14 Global Islands Network — http:// Leeuwen (2012). Energy Access Practitioner www.globalislands.net/greenislands/index. Network: The Role of Distributed Systems in php?region=9&c=44. Providing Energy Access. Presentation at the 15 APEC Energy Working Group (2011), P. UNEP Sustainable Energy for All Workshop, 3.5. Presentation at the 2012 DOE Microgrid September 2012. Workshop. 25 Kevin Bullis (2012). 16 DK Kim (2012). Microgrid Activities in 26 ZPryme Research & Consulting (2012), P.24. Korea. Presentation at the 2012 DOE Microgrid 27 UNEP Sustainable Energy for All — http:// Workshop. www.sustainableenergyforall.org/workshop-on- 17 IEA Renewable Energy Technology Deploy- facilitating-energy-access-and-security-role-of- ment (IEA-RETD 2012). Renewable Energies mini-micro-grids. For Remote Areas And Islands (Remote). Final 28 available for download from http://www1. Report. P.204. ifc.org/wps/wcm/connect/topics_ext_content/ 18 Tatsuya Shinkawa (2012). NEDO and Mi- ifc_external_corporate_site/ifc+sustainability/ crogrids. Presentation at the 2012 DOE Microgrid publications/publications_report_gap-oppor- Workshop. tunity. 19 IEA-RETD (2012), P.197. 29 Sean Whittaker (2012). Large Renewable 20 Brad Reeve (2012). Micro-Grids in Alaska, Hybrid Systems for Mini-Grids: Applications in Microgrids for Local Energy Supply to Remote and Business Models. Presentation at the UNEP Areas and Islands in APEC Region, APEC S EWG Sustainable Energy for All Workshop, September 15 11A ﬁ nal project report. 2012.

94 About the authors

Mark Sardella Relations) and his research centers on Russian Mark Sardella is a professional engineer, politics and foreign policy, international relations writer and speaker with nearly twenty years in eurasia, and international politics of energy and experience developing residential, commercial the environment. and community power systems for stand-alone, He published numerous articles including grid-intertie and microgrid applications. His work “Russia’s Network State Strategy: Construc- on energy systems has been featured on CNN, tion of Energy Pipeline Network” (2009), “The presented in keynote addresses at national and International Politics of Climate Change and international conferences, and profi led in the Prospect of U.S.-China Relations” (2011), “Global 2009 book, Voices of the American West. Network Politics of Russia’s Oil and Gas Pipeline Mark is currently Chairman of the Board and Network Construction toward Northeast Asia” Executive Director for Local Energy, a nonprofi t (2012), and also edited several books including organisation that has carried out more than US$ 2 The Challenges of Eurasia and International million in research, education, and demonstration Relations in the 21st Century (2007). projects on energy self-reliance. Prior to founding Local Energy, Mark co-founded the Southwest Irina Ivanova Energy Institute (SEI), where he researched, de- Dr. Irina Ivanova is the Head of the Laboratory veloped and lobbied for energy policies including for Energy Supply to Remote Areas of the Energy net metering, grid-access rights, feed-in tariffs Systems Institute. She has served in that posi- and electricity deregulation. While a director of tion since 2012, and before that was Senior and SEI, Mark worked with the Institute of Electrical Principal Researcher. She has been working at the and Electronics Engineers to develop Standard Energy Systems Institute since 1981. Irina holds 1547, which defi nes the technical requirements Ph.D in Economics form Baikal State University for interconnecting electrical generators to the of Economics and Law in Irkutsk, Russia (2004). U.S. power grid. Prior to his work in energy, Mark developed spacefl ight instruments for weather Alexander Solonitsyn and research satellites at ITT Aerospace and Alexander Solonitsyn graduated from Kharkov for the University of Maryland Department of Institute of Radio Electronics (now Ukraine) in Space Physics. 1979. In the former USSR, he was involved in defense projects. He became an executive offi cer Beom-Shik Shin at a Russian-American JVC in 1993 and turned to Dr. Shin is currently professor of international the local energy business in 2002 when he joined relations at Seoul National University, Korea, and Hydrotex Scientifi c-Production Company and the visiting professor at Henry Jackson School of In- Far East Federal University. ternational Studies at University of Washington Alexander is the author of the basic Concept of in Seattle. He served as General Director (2008- Local Energy Systems (LoES) with maximised use 2009) and Director of Foreign Relations (2004- of renewables for remote territories of Russia. He 2007) of Korean Association of Slavic Studies. is also the chief executing engineer of several pilot He is the Vice-director of the Center for Interna- projects in the territory of Far Eastern Russia. tional Affairs at Seoul National University and will serve as Director of the Institute of Russian Elena Pipko and Eurasian Studies at Seoul National University Elena is a graduate student of Engineering from 2013. He received his Ph.D. in Politics from School at the Far Eastern Federal University. MGIMO (Moscow State Institute of International From 2009 to 2011, she was involved in provid-

95 ing engineering services for the construction of Peter was the Senior Economist with the In- the bridge across the Zolotoy Rog bay in Vladi- ternational Programmes Offi ce at NREL from vostok city. Since 2012, she has been working as 1990 — 2007. He has a Ph.D. in Management an engineer in Local Energy Department of the Science and Engineering from Stanford Univer- Hydrotex Co. sity. He has been active in the fi eld of renewable energy and energy effi ciency since 1978. This has Dariya Eremeeva included designing and teaching courses at the Dariya Eremeeva is an Engineer at the Depart- university level, project development of indepen- ment of Alternative Energy Sources and New Tech- dent power projects, and consulting to industry nologies of Sakha Energy JSC. She is responsible and regulators. His technical expertise is in utility for planning, development of innovations pro- modeling and the economic and fi nancial analysis grammes, hybrid power systems effi ciency analysis of renewable and micro-grid projects. He was the and cooperation with international partners. This lead analyst and one of the creators of NREL’s includes work on wind and solar technologies, de- International and Village Power Programmes. signing, construction and operation of local hybrid power systems, collecting and analyzing the data. Irina Volkova She is the administrator of the Innovator project Irina Volkova is Doctor of Economics, Pro- that allows workers being rewarded for their professor and Deputy Director of the Institute of posals for technology or business improvement. Pricing and Regulation of Natural Monopolies, Dariya holds a specialist diploma in Energy supply National Research University Higher School of from North-Eastern Federal University. Economics in Moscow. Irina has a long experience in teaching, research and consulting activi- Anatoly Chomchoev ties on strategic and innovative development of Anatoly Chomchoev is a military engineer with the power industry — more than 20 years. She higher military education. He served in the Armed has been actively involved in the recent energy Forces of the Soviet Union from 1969 to 1990. development based on the concept of intelligent Since December 1990, he worked as the leading energy systems, including microgrid. Irina is an specialist in the Supreme Council of Yakutia, a expert of the project “Legal and Consumer Market senior researcher of the Institute of Economy Aspects of Smart-Grid Technology in The U.S. of the Siberian Branch of the USSR Academy and Russia”, implemented under the Russia–U.S. of Sciences, head of a district administration of Presidential Commission. Yakutia, a member of the Government — Chair- Irina is the author of more than a hundred man of the State Committee for Emergencies in scientifi c and educational papers, including 4 Yakutia, a member of parliament of Yakutia. In monographs. 1999, he became a top manager of the energy system of Yakutia. Since 2011, Anatoly has been Larry Adams the Director General of the Test Bed of the Cold Larry Adams has more than 30 years of ex- LLC, a small business enterprise of the Innovative perience in design and development of real-time Technologies Centre of the Academy of Sciences, controls for electric power systems. He currently Republic of Sakha (Yakutia). is a Senior Controls and Power Systems Engineer at Spirae, Inc. He designs control algorithms and Peter Lilienthal systems for industrial and utility power gen- Dr. Peter Lilienthal is the President/CEO of eration and provides modeling and simulation HOMER Energy. Since 1993 he has been the services utilising DIgSILENT PowerFactory. He developer of the National Renewable Energy provided the overall design concept and detailed Laboratory’s HOMER hybrid power optimisation control specifi cations for Spirae’s BlueFin Distrib- software, which has been used by over 80,000 uted Energy Management System to directly con- energy practitioners in 193 countries. NREL has trol networked distributed and renewable energy licensed HOMER Energy to be their sole world- resources, to form microgrids or virtual power wide commercialisation licensee for distributing plants, to optimise distribution grid operations, and enhancing the HOMER model. to supply ancillary services, and to intentionally

96 island and resynchronize microgrids with the work with a multi-megawatt zinc bromide fl ow distribution network. battery and a solar thermal demo project to heat As Chief Engineer at Encorp, Inc. he imple- homes for elders in the community. mented a hybrid wind turbine and diesel engine During his career at Kotzebue Electric Associa- generator control system for use in remote location, Brad has successfully procured more than tions such as islands and isolated villages for a US$ 15 million in renewable energy grants. His project funded by a Department of Energy (DOE) honors and awards include an R&D Wind Energy and National Renewable Energy Laboratories Achievement Award from the Cooperative Re- (NREL) research grant. He was the principal search Network; a Utility Leadership Award from engineer in a DOE, NREL, and Gas Research the American Wind Energy Association, and, Institute (GRI) research project for development under his leadership, his cooperative received a of controls and protection to meet the IEEE Community Service Award from the National Ru- 1547 Standard for Interconnecting Distributed ral Electric Cooperative Association, and received Resources with Electric Power Systems. He has the IEEE Alaskan “Company of the Year” award. been awarded a number of U.S. Patents including Brad retired this year after serving 8 years as a method of detecting islanding of an industrial President of the Alaska Power Association Board power source. of Directors, the Alaska statewide association. He Larry received a bachelor’s degree in Electri- is also Chairman of the Northwest Alaska Boys cal Engineering from Wichita State University in and Girls Club Board of Directors. In addition 1974 and a master’s degree in Computer Science he serves on the NRECA Cooperative Research from Colorado State University in 1992 with spe- Council, the Utility Variable Generation Inte- cialisation in operating systems and intelligent gration Group (UVIG) Board of Directors, and machine control. the Denali Commission Energy Policy Commit- tee. Brad holds a Bachelor of Science degree in business administration from Kennedy Western Karen Ubilla University in Cheyenne, Wyoming. Karen Ubilla is in charge of the Territorial and Social Intervention Area of the University of Steven Pullins Chile, is an Engineer of Renewable Natural Re- Steven Pullins is the President of Horizon En- sources of the same University, and is currently ergy Group and has more than 30 years of utility studying Renewable Energies. Hew experience industry experience in operations, maintenance, includes investigation in Local Sustainable De- engineering, and renewables project develop- velopment and Community Self- management. ment. He previously led the nation’s Modern Grid Her past and current work projects include: Strategy for DOE’s National Energy Technology Social Pre-Feasibility for Project Development Laboratory. He has worked with more than 20 of Micro-Net; Profi le Designing and Cadaster utilities in Smart Grid strategies, renewables of Projects of Micro-Net for electrically isolated strategies, power system optimisation with Smart communities; a paper on “Considerations about Grid technologies, operations transformation, projects of energisation with renewable energy and RTO/ISO operational processes. Horizon sources as facilitators of local development on Energy Group is focused on Smart Grid project rural Chilean communities.” deployment, and actively architecting and designing microgrid and energy storage solutions. Brad Reeve Horizon Energy Group was named a Company to Brad Reeve is the General Manager of Kotze- Watch in the book, “Perfect Power” by former Mo- bue Electric Association, a position he has held torola Chairman, Bob Galvin, and former EPRI since 1988. Brad is known as a pioneer and early CEO, Kurt Yeager. Steven is listed as one of the adaptor of wind energy. He implemented the fi rst “Top 100 Movers and Shakers in the Smart Grid utility-grade wind turbines in the state of Alaska. Movement” by GreenTech Media (2009 — 2012). In addition to his cutting-edge work in wind Steven is the vice-chair of the IEEE PES Intel- energy, Brad is currently the project manager of ligent Grid Coordinating Committee, a member several emerging technology projects including of the Smart Grid Interoperability Panel, and

97 the OpenSG (Smart Grid) group. He has advised problem” (2010), “New models of Pension provi- several international utility and government sion need” (2010), “Culture — the main basis of organisations on Smart Grid technologies and the past and future” (2012). operations, microgrid development, integrating intelligence, new power generation, and waste Kirill Muradov to energy issues. He holds a BS and MS in En- Kirill Muradov is International Projects and gineering. Research Coordinator at the International In- stitute for Education in Statistics, National Re- Fedor Lukovtsev search University Higher School of Economics in Fedor Lukovtsev is the Director of the Institute Moscow. He received his Bachelor’s and Master’s of North Asia and Integration Proccesses (Za- degree from the Moscow State University and baykalsky Territory, Russia). He also serves as the completed his postgraduate studies in ASEAN President of Associations of Private Pension Funds economic integration at the same University. of the Far East and Siberia (based in Khabarovsk Kirill was in the Russian diplomatic service before Territory, Russia) and Chairman of the Board of being promoted (in 2010) to the post of Head of Trustees of the Erel Private Pension Fund. International Organisations Branch, Asia & Africa Fedor graduated from the Faculty of Law, Department, Ministry of Economic Development Saint-Petersburg State University. In his recent of the Russian Federation. His experience of publications he reviewed new models of pension overseeing Russia’s participation in APEC spans for the village population of the Russian Far East: more than 5 years. He has been consulting the “Russian village: regional experience of pension Ministry of Energy of the Russian Federation on provision” (2009), “Russian village and pension a number of APEC projects.

98 Abbreviations and acronyms

AANDC Aboriginal Affairs and Northern Development Canada ADB Asian Development Bank AEA Alaska Energy Authority AMORE Alliance for Mindanao Off-grid Renewable Energy (the Philippines) AOC Atlantic Orient Corporation APEC Asia-Pacifi c Economic Cooperation ARRA American Reinvestment and Recovery Act ASEP autonomous sources of electric power ASGI APEC Smart Grid Initiative ASTF Alaska Science and Technology Fund AVEC Alaska Village Electric Cooperative BRP Balance Responsible Party CCPP Cell Controller Pilot Project CE-FCFM Energy Center, Faculty of Physical and Mathematical Sciences (University of Chile) CEM Clean Energy Ministerial CHP combined heat and power plant CMS cell monitoring system CRN Cooperative Research Network (US) DCF discounted cash fl ow DCHP dispersed combined heat and power plant DER distributed energy resources DG distributed generation DNO distribution network operator DPP diesel power plant EGNRET Expert Group on New and Renewable Energy Technologies (APEC) EMA Energy Market Authority (Singapore) EPA Environmental Protection Agency (US) ESCI Energy Smart Communities Initiative (APEC) EWG Energy Working Group (APEC) EWS Entegrity Wind Systems FEFD Far Eastern Federal District (Russia) FIT feed-in tariff FY fi nancial year GeoPP geothermal power plant GHG greenhouse gas GIS Geographical Information System GW gigawatt HV high voltage

99 Chapter 5. Microgrids and APEC Agenda

IPCC Intergovernmental Panel on Climate Change ISGAN International Smart Grid Action Network ITRI Industrial Technology Research Institute (Chinese Taipei) IEA International Energy Agency KEA Kotzebue Electric Association (US) KIC Kikiktagruk Inupiat Corporation (US) kV kilovolt kW kilowatt kWh kilowatt per hour LC NPP low-capacity nuclear power plant LoES local energy system MIS Management Information System MS master synchronizer MW megawatt NEDO New Energy and Industrial Technology Development Organisation (Japan) NRECA National Rural Electric Cooperative Association (US) NREL National Renewable Energy Laboratory (US) OMS Outage Management System PCE power cost equalisation PV photovoltaic PVP photovoltaic plant RER Rural Electric Research (US) RES renewable energy sources RET renewable energy technology RUS Rural Utility Service (US) SC synchronous condenser SCADA Supervisory Control and Data Acquisition SE-FEFU School of Engineering of the Far Eastern Federal University (Russia) SHPP small hydro power plant SIRFN Smart Grid International Research Facility Network SLC secondary load controller TSO transmission systems operator UNEP United Nations Environment Programme US DOE US Department of Energy VREM village renewable-enable microgrid WPP wind power plant WT wind turbine WTE waste-to-energy

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