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Special Edition: Microgrids, From Utility Challenger To Asset With Peter Asmus from Guidehouse [an Energy Central Power Perspectives™ Podcast]

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The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. Each two weeks we’ll connect with an Energy Central Power Industry Network...

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The early days of the electric power industry began with the installation of small microgrids that connected energy consumers with nearby sources of generation, but as the industry grew the economies of scale dictated that central power plants and massive webs of interconnected grids was the best way to industrialize and grow. In recent years, however, energy sector thought leaders have been pushing forward the value that can come from re-integrating microgrids in conjunction with our established modern grid system. With an eye towards increased reliability, clean energy, and consumer empowerment, microgrids have become one of the hottest topics in utility spheres today.

To tap into that momentum, the Energy Central Power Perspectives Podcast is thrilled to welcome this week’s guest, Peter Asmus, Research Director at Guidehouse Insights. Peter has been researching, writing, and sharing about the future of the grid for decades, and he’s been a long-time member of the Energy Central community where he’s shared insights about how and why this microgrid revolution should come into being. As such, host Jason Price and producer Matt Chester thought it was finally time to bring Peter onto the show to speak directly to the Energy Central Community about the microgrid trends he’s seeing today and provide advice for the utility leaders looking to stay one step ahead moving forward.

A special thanks to Guidehouse Insights for supporting this edition of the Energy Central Power Perspectives Podcast. Note that there's also an exclusive bonus clip just for registered members of Energy Central at the bottom of this post.

https://soundcloud.com/energycentral/special-edition-microgrids-from-utility-challenger-to-asset-with-peter-asmus

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https://soundcloud.com/energycentral/special-edition-microgrids-from-uti...

Key Links:

Peter Asmus’s Energy Central Profile: https://energycentral.com/member/profile/peter-h-asmus

Guidehouse on Energy Central: https://energycentral.com/o/Guidehouse

Once Laggards, C&I Customers Are Now Microgrid Leaders: https://energycentral.com/o/Guidehouse/once-laggards-ci-customers-are-now-microgrid-leaders

 

Transcript

Jason Price:
Hello and welcome to the Energy Central Power Perspectives Podcast. This is the show where we bring thought leaders from across the utility industry to share their expert insights on what's shaping the power sector today and tomorrow. I'm your host, Jason Price of West Monroe, coming to you from New York City. And joining me once again from Orlando, Florida is Matt Chester, a community manager and podcast producer. Matt, today we have with us one of the preeminent minds in the field of microgrids. How about you take a moment and define for our listeners what exactly is a microgrid?

Matt Chester:
Sure, Jason. Well, as far as I understand it, and I certainly don't know as much as our guest today, a microgrid is essentially a smaller version of a grid. It's able to island itself and take it off of operation from the main grid while also typically having that interconnection to the main grid. And it utilizes some form of a self-generation, some distributed generation as well. Is that right?

Jason Price:
I believe so. And certainly our next guest can, of course, correct us should we have gotten any of it wrong. So, as you described, microgrids touch upon many of the hottest trends in the utility sector, from reliability to distributed energy, to clean energy and more. And the common factor that brings them together is the use of microgrids. Specifically, we're going to look at micro grids through the lens of the utility, where microgrids once viewed by utilities as, I don't know, a curiosity, or something abstract to support government assets, or even a boondoggle for the rich, or at a minimum, a headache, and even a distraction to utilities due to right of way issues, interconnection issues, and required backup, today, the mood has changed.

Jason Price:
Utilities have seen the light and recognize the value that microgrids bring to the utility and its customers. So, with helping us understand the advances in the field of microgrids is our guest today, Peter Asmus, Research Director at Guidehouse. You have likely read the works of Peter Asmus, who brings over 35 years of industry experience and numerous trade journals in popular press publications. His writing covers topics like microgrids and virtual power plants.

Jason Price:
In fact, Peter has been among and around the energy central community dating back to 2003, long before even the advent of podcasts. So, given that history and stature, it's well beyond time that we've had Peter join us in the virtual podcast booth. However, before we bring in Peter, let's give a quick thanks to Guidehouse for making today's episode possible. Guidehouse is the premier market research and advisory firm covering the global energy transformation. And we're always thrilled to have them as a partner providing expert insight to the Energy Central community. So, with that, let's bring in our guest, Peter Asmus. Welcome to today's episode of the Energy Central Power Perspectives Podcast.

Peter Asmus:
Nice to be here.

Jason Price:
Peter, take us on a history lesson of utilities and microgrids. While the early days back during the time of Thomas Edison started with the microgrids, that didn't last and the more modern utilities were not always keen on the prospect of microgrids. Why was this the case?

Peter Asmus:
Well, you're right. The whole electric industry here in the US did start with microgrids. In fact, they started with direct current microgrids when electricity was a total competitive, deregulated market. So, it's a little bit ironic that in some ways some people might argue we're trying to go back to the days of Thomas Edison. But back then a direct current couldn't really transfer electricity very far and so what you had is you had all of these wires and poles, it looked very haphazard.

Peter Asmus:
You just had all of these individual systems. And so ultimately folks like Edison, and Samuel, and Saul instead came up with the idea of the utility monopoly and also charging for electricity per kilowatt hour. But what that did is we went with alternating current. And so then the whole idea was economies of scale, larger power plants. Bigger was better.

Peter Asmus:
And so now though what's happening is at Guidehouse, our forecast show that beginning this year, more DERs, distributed energy resources, are coming online than centralized generation. And so what that means is we're going to need things like microgrids. You mentioned virtual power plants, DERMS. We're going to need these platforms to help orchestrate all that. But the reason why utilities were not enamored with microgrids, I started on microgrids about 11 years ago, was... Of course, you mentioned some of the issues. Is this going to impact their revenue? Does it really makes sense to have redundant infrastructure?

Peter Asmus:
So, there was a lot of issues. And then would these new systems wreak havoc with the larger grid? So, there were a lot of concerns about that. So, I think that's where I started when I did my first report, talked to quite a few utilities. Most of them would say something along the lines of like, "The whole grid was set up not to allow everyone to have islanding system." But flash forward to today and a lot of things have changed. And so I'll pause there.

Jason Price:
Yeah, absolutely. And I appreciate the history lesson. So, bring us to today. The relationship is far more positive and utilities are installing and investing in microgrids in far greater numbers. So, share with us what has changed.

Peter Asmus:
Well, I'd say one of the things that's changed is the DER resources that typically go into a microgrid. And it's not just solar and storage, although that's the hype today, and those are the two technologies where the costs have declined dramatically. You mentioned I'd been around for a while. So, I remember 30, 35 years ago, everyone said, "Hey, solar PV is great. It works great in space stations in outer space, but it's so expensive. It doesn't make sense down here on earth."

Peter Asmus:
Well, today, solar PV a lot of people are predicting will end up being the cheapest source of power. So, one is just pure economics. The other is as those DERs, as I mentioned, are declining in costs, at the same time, power outages keep going up. And it started more on the east coast. I think it was Connecticut that passed the first microgrid law in 2011 after Superstorm Sandy.

Peter Asmus:
But since that time, we just had a major power outage in Texas earlier this year. Here I am in California where wildfires are becoming unfortunately annual events. We even have utilities shutting off the grid as an emergency response to these wildfires and high winds with the public safety power shutoff. So, what's changed is the DERs have come down, power outages have gone up, and people are looking for solutions. They're looking essentially for greater reliability and resiliency.

Jason Price:
Let's talk for a moment about the utilities, their role, and eagerness to get involved. So, are there certain characteristics that certain utilities have that make them more inclined to participate? Like this is a private versus public? Are you seeing vertically integrated or not? Or is it a geographic condition? Share with us what are the insights telling you.

Peter Asmus:
Well, all of those things make a difference. And there's one little surprising fact I should point out. So, when I said utilities 10 years ago weren't interested in microgrids, I should clarify. I'm talking about the lower 48 states here. So, the number one state for microgrids in the US is actually Alaska. And there, most of those microgrids are run by utilities, but they're complete remote systems, because they don't really have a traditional grid.

Peter Asmus:
And actually, the utilities have deployed lots of microgrids on island nations, but those are a whole separate category where there isn't traditional infrastructure. But if we talk about let's say the lower 48, there is a big difference. So, private utilities, especially large investor owned utilities have run into some regulatory issues. In some ways, one might argue that a public utility, a small or medium sized municipal utility for example is more self-governing.

Peter Asmus:
So, it's a little bit easier to justify investing in a microgrid in a certain community, or whatever they are. As I said, the more self-governing, so they have that flexibility. A vertically integrated utility, generally speaking, isn't going to be probably as interested in a microgrid compared to let's say a utility operating in a deregulated environment. And I mentioned early monopolies. The truth of the matter is the utility monopoly has been chipped away considerably. We already have independent transmission system operators and some states utilities cannot own distributed energy.

Peter Asmus:
So, there's a lot of differences. But I would say generally, municipal utilities, which can be very progressive or very conservative in some ways, maybe it's a better fit. Not always. I'd say probably vertically integrated may have a little more difficulty justifying a microgrid. And then geographically, the hotspots have been more the coast, particularly the east coast in California. One reason being higher retail rates, the other being more outages. On the east coast, it's more hurricanes than the west coast. Obviously, I mentioned wildfires.

Peter Asmus:
Also the earthquake threat is another driver. And then you have a center of the country, which still has microgrids, but there the costs are lower. The emphasis on renewables is more on large wind farms as opposed to behind the meter solar. And so all of those factors impact grid growth. But that being said, there are companies very active in the southeast. In some ways, one might argue one of the least attractive markets. For example, Southern Company, a large investor owned utility, vertically integrated, did purchase a microgrid company called PowerSecure.

Peter Asmus:
And that PowerSecure does a lot of microgrids for utilities. They tend to be fossil based, but that's one example. Another quick example in Texas is a company called Enchanted Rock, which built its whole model around the market structure in Texas, and basically provides resiliency for grocery stores, but then are called upon to help balance wind power, because Texas has so much wind power.

Jason Price:
That's great. I want to understand more of the trends, but also are any of the trends reflecting or leaning towards renewable generation to power microgrids? So, share with us what you're seeing out there in the marketplace.

Peter Asmus:
Well, that is definitely a trend. So, the traditional solution for resiliency has been diesel generators. If you go to military bases, that's always been their first response. Hospitals are actually mandated by federal regulation to have diesel generators, but what's happening now is with climate change becoming more evident, I think the general public would even agree over the last few years with the extreme weather... We are having hurricanes, tornadoes, snow storms that... We've always had snow storms, but at different times of the year.

Peter Asmus:
And so the weather is just becoming more variable. They're having more outages. And so that's raising interest and means that you can't rely on those diesel generators that often. Historically, well, we might use them once a year, maybe once every other year, because there were so few outages. And what's also driving that is now the investment community. That's my biggest surprise is the investment. The investors are saying to utilities and large corporations, including the big data center companies like Google, Facebook, et cetera, that they have to reduce climate risk.

Peter Asmus:
They can't just keep their diesel generators and buy renewable offsets to offset that. They want to see less risk. And so that's what's going on. So, a lot of those data centers, for example, are going with fuel cells as an incremental step forward. Fuel cells can be part of a microgrid. And we're seeing much more emphasis on clean energy microgrids, particularly here in California where actually the state government will not pay any money towards a fossil fuel generator installed in a microgrid. So, that's one example, but of course, California does have carbon reduction mandates, has aggressive renewable goals. So, that's part of the policy driver there.

Jason Price:
Can the generation get sold back into the ISO?

Peter Asmus:
Yeah. So, that's the other big trend. Why utilities are less opposed to microgrids is I think what's happened is they realized even if they don't deploy a microgrid themselves, that microgrid can serve as a demand response resource. In fact, San Diego Gas & Electric asked the Miramar microgrid, it's a Marine base, to island three times. I believe it was last year when there was a shortage of power on the grid and just taking off a certain amount of megawatts enabled the utility to share those resources with other customers.

Peter Asmus:
Same thing once happened with another microgrid in the San Diego area called the University of California San Diego Microgrid where allegedly a swing of just three or four megawatts kept the whole grid up and running. And so these are the kinds of stories that then make utilities think, "Well, wow, those microgrids could provide value. They could be a demand response resource." And with FERC Order 2222 basically enabling resources as small as a hundred kilowatts mixed aggregation to sell all the way up in the wholesale markets, that's just going to accelerate this trend. And that's where I say the microgrid can become a virtual power plant. The moment that microgrid sells a service back to the utility, then I say it becomes a virtual power plant.

Jason Price:
Yeah, yeah. So, there's some messaging here that we need to make to the public, because my next question is really about perceptions. Still stuck on the fact that utility may build microgrids and be passed onto the rate base. And that doesn't seem right. Or how do we change the perspectives that the rate base value in such investments, even though they may never directly, or even didn't directly benefit from them? What do you say about that?

Peter Asmus:
Yeah, well, that's a key question where a lot of investors on utilities have actually had regulators reject proposals for rate basing. I know Baltimore Gas and Electric several years ago ran into that and a few other utilities have had a similar situation. And you're right. The whole regulatory system was based on this idea of equity. Basically the same price of energy for everyone. Well, not for everyone, but tiered pricing and basically one size fits all kind of energy service.

Peter Asmus:
And so the microgrid in some ways totally goes in the opposite direction where we're saying you can have different levels of service. How much resiliency do you want? Do you want three days of resiliency, four hours? Et cetera. So, that is the challenge. Now that being said, there have been utilities that have been quite successful. And probably surprisingly one of the most successful has been Duke Energy, a very large investor in utility, has customers in multiple states, so you can imagine if someone's going to build a microgrid in one state and the utility serves four states, how could you justify that?

Peter Asmus:
Well, one reason they've been successful, and this is also the case with the Borrego Springs microgrid in San Diego, is that that cost of the microgrid was lower than a traditional transmission upgrade. So, in that case, and that's not always the case, all rate payers benefit because they are going to be charged less for providing that service, even though that service is a small cluster of customers. And so that's where utilities have had the most success. In terms of the US, it's these non-wired alternatives.

Peter Asmus:
Now Duke also has created some microgrids. They call them contingency microgrids. I believe there's one in Indiana where the assets actually serve a larger grid, sell into the ISO, but when there's an outage, it provides resiliency to a National Guard facility. And so in that sense, that microgrid, I think the rate basing component was just the switching that enabled the islanding. And so that's another way. Do you rate base the entire microgrid, or do you just rate base the key components that you can argue benefit a broader array of customers?

Peter Asmus:
Because a lot of utilities can't own DERs anyways. And so I think that's going to be the interesting challenge is how can you develop a hybrid public private partnerships, also depending on the structure of the utility, leveraging private industry, or even community organizations, or local governments and the utilities. And we're just starting to go down that road.

Jason Price:
That's fascinating. That's a great insight, Peter. I also want to bring all this to the topic of digitalization and artificial intelligence, a current area of focus for the Energy Central community. So, how are digital and AI tools enhancing the capabilities of microgrids within the utility sector?

Peter Asmus:
Well, that's also one reason that those technology advanced. So, 10 years ago, people weren't talking about AI. Now you read about it all the time. And just like anything, it's probably over-hyped a little bit as to what can be done, but that being said, it's essentially machine learning AI is that the system learns as it's deployed. And just the performance gets better all the time. And that's what's particularly important when you have a mixture of DERs, maybe a mixture of fossil, renewable, different kinds of batteries, even EVs. Another hot topic.

Peter Asmus:
Electric vehicles being plugged into microgrids, because as we electrify, of course, if the grid keeps going down, that means you're not only impacting electricity service, you're impacting transportation services. So, it's really about the controls. And that's where the other interesting thing has been, there's a lot of advances in controls. A lot of the early microgrids, a lot of the larger established vendors just tried to use what they used on the big grid and just said, "Well, we just shrink it down to the microgrid."

Peter Asmus:
Well, that works fine with a CHP, a combined heat and power type microgrid, which is in some ways still like a centralized system for a microgrid. But if you're adding more solar, maybe you even have a couple kinds of batteries, and maybe you have a diesel generator, and a CHP system, it's just more sophisticated. And so now there is a lot more software companies with AI saying it's more of a bottoms up putting out the intelligence to the device level. And so they don't need a master telling them all what to do, they just react in real time.

Peter Asmus:
And then you have a higher brain that does that longer term thinking. And that also fits into this idea of FERC Order 2222 as these microgrids need to interact with the larger grid, respond to market signals. That's where a lot of the advances are. More on the virtual power plant side. Just where if you have, for example, a VPP, you could have a thousand residential homes with storage, solar, EVs, that AI will learn the characteristics of all of those homes over time. We'll know which ones respond to certain signals, which one are better at providing frequency regulation versus some other service.

Peter Asmus:
And that the performance will just get better over time. And so ultimately, it's because of AI and machine learning, where the idea that the more diversity you have, the more resilience you have. Well, 10 years ago, people would say, "But there's a greater failure rate, because what if all those devices can't talk to each other?" That's what's changed is that the AI and the machine learning make all that promise actually reality.

Jason Price:
Yeah. Yeah, for sure. Well, it's a fascinating topic and it's going to continue to evolve no doubt. So, Peter, thanks for highlighting on this for us. Now, it's time for a lightning round. If you've listened to any of our sessions in the past, we're going to throw a handful of questions at you, give the audience a bit more of an insight into who Peter Asmus is. So, you'll answer each question with one word or phrase. Are you ready?

Peter Asmus:
Sure. Fire away.

Jason Price:
Okay. What would have been your second career choice if not the energy field?

Peter Asmus:
Well, believe it or not, rock musician.

Jason Price:
Who tends to leave the lights on the most in your household?

Peter Asmus:
Definitely my wife.

Jason Price:
If it could be anyone, real or fictional, who would you invite your dinner party?

Peter Asmus:
How about Nikolai Tesla?

Jason Price:
What game show would you choose to be on?

Peter Asmus:
Well, I have to admit I'm a Green Bay Packer fan, so I'm going to say Jeopardy, because their catcher was on there recently.

Jason Price:
And what are you most passionate about?

Peter Asmus:
I would say the natural world. Well, this is longer than one answer, but I live here on the coast in northern California above San Francisco. I live basically in a nature preserve, so I really enjoy that and it balances out this work we all do sitting in front of a computer. So, I like to get out and get some fresh air.

Jason Price:
Very nice. Well played. All right, so as reward for your flawless performance, we'll give you the last word in today's episode. So, if you can leave the utility leaders listening in on today's episode with a single reminder, or suggestion, or a piece of advice, what would it be?

Peter Asmus:
Well, I would say don't put your head in the sand and ignore the world that's changing around you. We've seen corporations in the past that have done this. We've seen what's happened with telecom and how deregulation reshaped things, and those that anticipated the change were eventually able to profit from it. So, I think that's what utilities have to start. Thinking outside the box, developing fresh relationships, and viewed this growth in DER and microgrids, virtual power plants, DERMS as an opportunity, not as a defensive posture, but a way to move forward and to deliver better value to their customers.

Jason Price:
Wonderful. Peter, we want to thank you for your time today and for sharing some really insightful perspectives with us. As microgrids continue to gain steam, we'll have to keep in touch and perhaps have you back to update us. So, thank you so much for joining us today.

Peter Asmus:
No problem. Glad to come back whenever you call upon me.

Jason Price:
You can always reach Peter through the Energy Central platform where he welcomes your questions and comments. And on behalf of the entire Energy Central team, thanks everyone for listening today. Once again, I'm Jason Price. The most relevant conversations of the utility industry today are happening in the Energy Central community. So, we look forward to you joining us and sharing your insights at energycentral.com. And we'll see you next time on the Energy Central Power Perspectives Podcast.

 


About Energy Central Podcasts

The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

The ‘Energy Central Power Perspectives™ Podcast’ is the premiere podcast series from Energy Central, a Power Industry Network of Communities built specifically for professionals in the electric power industry and a place where professionals can share, learn, and connect in a collaborative environment. Supported by leading industry organizations, our mission is to help global power industry professionals work better. Since 1995, we’ve been a trusted news and information source for professionals working in the power industry, and today our managed communities are a place for lively discussions, debates, and analysis to take place. If you’re not yet a member, visit www.EnergyCentral.com to register for free and join over 200,000 of your peers working in the power industry.

The Energy Central Power Perspectives™ Podcast is hosted by Jason PriceCommunity Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

If you want to be a guest on a future episode of the Energy Central Power Perspectives™ Podcast, let us know! We’ll be pulling guests from our community members who submit engaging content that gets our community talking, and perhaps that next guest will be you! Likewise, if you see an article submitted by a fellow Energy Central community member that you’d like to see broken down in more detail in a conversation, feel free to send us a note to nominate them.  For more information, contact us at community@energycentral.com. Podcast interviews are free for Expert Members and professionals who work for a utility.  We have package offers available for solution providers and vendors. 

Happy listening, and stay tuned for our next episode! Like what you hear, have a suggestion for future episodes, or a question for our guest? Leave a note in the comments below.

All new episodes of the Energy Central Power Perspectives™ Podcast will be posted to the relevant Energy Central community group, but you can also subscribe to the podcast at all the major podcast outlets, including:


Thanks once again to Guidehouse for making this episode possible. 

 

See Below for an Exclusive Bonus Clip: Available only on EnergyCentral.com for our Community Members

https://soundcloud.com/energycentral/bonus-clip-from-special-edition-mic...

 

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