The Impact of Self-Generation and Microgrids

Debbie McCormack Deputy Managing Director Energy & Resources Deloitte Services LP The Impact of Self-Generation and Microgrids

Brad Luyster Vice President General Manager Microgrids North America ABB

ABB Power & Automation - Microgrids Reliable and Efficiency Microgrids Expected evolution of distribution system

Central generation including Microgrids renewables 50-25’000 MW are electricity distribution systems containing loads and distributed energy resources, (such as HV grid a backbone for long distributed generators, distance bulk power storage devices, or transmission at 110-1200 kV controllable loads) that (AC or DC) can be operated in a controlled, coordinated way either while MV grid for a local power distribution at 6-69 kV connected to the main Distributed generation including power network or while renewables islanded. 1-25 MW

LV grid for the “last mile” power CIGRE C6.22 working distribution at 110-1000 V definition Sub-utility generation including renewables 0.005-1 MW Microgrid landscape

Commercial & Institutional & Military Industrial Campus

5 most commonly used classes of microgrids Community & Remote off-grid

Main classes Utility Grids powered by fossil-fuel and renewable energy Diesel microgrids

Residential loads Solar power

Industrial loads

Wind power Diesel generation

Diesel microgrids have the greatest energy cost savings potential Integrating renewable energy into microgrids Secure power generation and fuel cost savings Average Oil Increase in USD$/Barrel is $12.50/year . Diesel fuel cost is volatile and $13,000/kW $133.88 rising over time June ‘13 $94.13 . $7,000/kW Renewable energy cost is far less $5,000/kW volatile and reducing over time $3,500/kW $32/Barrel . Energy source is free

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1,200,000 Diesel Generator - 1.5$/L LCOE: 0.81 $/kWh . Renewable energy is economically Diesel Generator - 1$/L 1,000,000 Diesel Generator - 0.7$/L competitive today Hybrid PV-Wind 800,000 LCOE: 0.64 $/kWh

LCOE: 0.54 $/kWh . Levelized Cost of Electricity 600,000

LCOE: 0.42 $/kWh (LCOE) lower than diesel fuel 400,000

Totalcost ($US) generation 200,000

- 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Year

Sources: 1) US Energy Information Administration – Independent Statistics and Analysis http://www.cleantechinvestor.com/portal/fuel-cells/6422-mining-and-energy.html 2) Alliance for Rural electrification (ARE). Projections made from a case study based in Ecuador with real natural conditions. © ABB Group http://www.ruralelec.org/fileadmin/DATA/Documents/06_Publications/Position_papers/ARE_TECHNOLOGICAL_PUBLICATION.pdf

Renewable energy integration challenges Managing power output fluctuations

. Inherent volatility of renewable energy can compromise grid stability

. The renewable energy integration solution must address requirements traditionally fulfilled by diesel generation (base load)

. Frequency and voltage control

. Sufficient spinning reserve

. Sufficient active and reactive power supply

. Peak shaving and load levelling

. Load sharing between generators

. Fault current provision

. Renewable energy generation capacity should be sized to maximize ROI and fuel savings

Wind/Solar/Diesel Systems Annual Average Peak Contribution Penetration

No Integration 7% 20%

Automated Dispatch (MGC600) 10% 22%

Grid Stabilizing (PowerStore) 50% 100%

Automated Demand Response 60% 100%

Energy Storage 100% 100%

NOTE: General industry accepted figures. All systems are unique and dependent upon the generation mix, load profiles and renewable resource. Microgrids key technologies Energy storage - applications

Frequency regulation Load leveling f [Hz] Load [MW] Absorb power Supply power

60.05 10

Grid 60 59.95 5

Absorb power Supply power t [sec] .t [hrs] Stored energy Stored energy [MWh] [MWh]

ESS

©ABB l Slide 12 Grid stabilizing: PowerStore-Flywheel System SCADA, System Control

Features: ECMS High power; low energy Grid Flywheel 440Vac Converter Converter 440Vac High Duty Cycle 50/60Hz 60-120Hz Grid Stabilizing MG Fixed Variable Scalable & Modular Frequency Frequency Real Real 2.9T Frequency Control Power Power Reactive 1,800 - Voltage Control Power 3,600 RPM Fault Ride Through Spinning Reserve Step Load Capabilities Voltage reference for

renewables only mode Inverters 500– 1,500 kVA 18 MWs Flywheel

PowerStore Grid Stabilising Generator Smooths PV output variations PowerStore Grid Stabilising Generator Mitigates variable wind power output

Wind speed

PowerStore kW m/s

+ = discharge

0kW

- = charge PowerStore Grid Stabilising Generator Loss of diesel genset – Spinning Reserve / Step Load Why are we worried about Power Reliability?

Figure 2.13 Increased Frequency of Natural Disasters

Number of events per year Trends in number 450 of reported events All disasters 400 Much of the increase in the number of Hazardous events reported is probably due 350 to significant improvements in information access and also to population growth, but the number of floods and cyclones being All disasters include: 300 drought, reported is still rising compared to earthquake, extreme earthquakes. How, we must ask, is global temperatures, famine, flood, insect warming affecting the frequency of natural 250 infestation, slides, hazards? volcanic eruption, wave / surge, wild fires, wind storm. 200 200 Earthquakes versus climatic disasters 150 150 Floods

100 100

Cyclones Earthquakes 50 50 Earthquakes

0 0 1900 1920 1940 1960 1980 2000 1980 1985 1990 1995 2000

(Source: Center for Research on Environmental Decisions) ABB Critical Power Power and Automation • Building Automation • Services • DERMS • Software Optimization

• Energy Generation • DCS • UPS • Renewables • Grid Stabilization/Storage

• Hybrid Power Plant Power and Plant • Microgrid Controls • Large ABB content Optimization Solutions Power potential • Efficient and Reliable power

• Integration • DERMS Solutions • Grid support – Societal • ATS Benefit • HVAC • Building Automation • VFD • Transformers • Motors • Entire system can be • MV Switchgear automated • LV Switchgear • Adaptation of new systems Automation of energy generation based • PDU on local resources ABB Microgrid Plus™ System Example Data Center Microgrid Design Market Size: Growth Trends for Microgrid Market Grid-tied microgrids market ~$1.5BUSD, growing to $9BUSD

3,500 Campus Environment/Institutional Segment Stationary Military Microgrid Segment 3,000 Remote Microgrid Segment

Community/Utility Segment

2,500

2,000

1,500 Total Capacity (MW) Capacity Total 1,000

500

0 2012 2013 2014 2015 2016 2017 2018

Campus deployments dominate North American MG current landscape, with utility- owned MGs on the rise in coming decade.

Source: Pike Report Microgrid Value Proposition: End User Ownership Verticals likely to use MG services regardless of ownership

Data Universities Military Government Hospitals Centers

Core MG • Reliability • Reliability • Reliability • Reliability • Reliability Benefits to • Sustainability • Sustainability • Security • Security • Power Quality End Customer • Power Quality • Sustainability • Sustainability • Control While technology Universities use Army and Air Critical Especially after companies tend to MGs to protect Force Bases, often government Hurricane Sandy, site data centers in equipment, but sited more facilities that hospitals are areas of high also as academic remotely than serve health and aware of the reliability and low research and Navy bases, may public safety operational and Value Case power costs, value- teaching tools. not enjoy reliable functions require PR risk of sub- at-risk can Much campus MG power. Sensitive the extremely optimal reliability. sometimes be high infrastructure missions require high uptime that MGs also enable enough to funded via MG reliability MGs can provide. DR and demand necessitate MGs research grants regardless of local charge reduction. grid uptime.

Grid-tied microgrids deployments to date mostly pilots to prove the technology is possible. The primary and most critical customer to ABB is Mission Critical markets like Data Centers, Hospitals and Heavy Industry.

21 CA ISO duck curve

Source -- California ISO Hawaii – tracking changes at the 46-kV level MG Challenges: Regulation and Utility Business Models Slow-moving PUCs and state legislatures reduce potential Summary Description

1 • Within certain deregulated wholesale markets, uncertainty regarding Regulatory Most states lack whether utility can own generation assets. formal definition of • In regulated retail markets, difficult-to-impossible to include microgrid in Uncertainty “microgrid” rate base beyond pilot projects without demonstrating a clear benefit– “prudent investment”

• Bundled, volumetric pricing defers utility investment in options that 2 Existing utility reduce consumption. Utility Business business model • Unbilled fixed costs within rate tiers could result in a cross-subsidy of Model designs do not MGs by those receiving less reliability and power quality improvements. incentivize MGs • Difficulty of providing preferred service in regulated markets violates the premise of the utility monopoly

• Local air quality regulations prohibit extensive use of diesel gen sets 3 Environmental, Many other hurdles except in emergency use. Technical & beyond regulation • Standards for interconnection and islanding not yet defined, including and business IEEE 1547.4. Labor models • Labor laws change for utilities when behind the meter vs. in front, presenting challenges to utilities constructing and/or managing MGs

4 Relationship issues • Few customers that need five “9s” of reliability limits overall utility interest. Existence of and other reliability • Of those that do, many don’t trust their utility to meet their reliability/power quality needs they should already be getting. Other Options options pose barriers • Most utilities don’t consider MGs part of their core knowledge or within their “toolbox” and are thus more comfortable with existing tools Various state and federal regulations and different utility business models across all 50 states and between countries inhibit a one-size-fits-all approach. Confidential © ABB Group Maria Jobin/ October 08, 2008 | Slide 25