Thursday, January 24, 2019

Microgrids Seek Path out of Regulatory Limbo

By Michael Brooks

BALTIMORE — The drafters of the 1935 Federal Power Act could not have imagined modern distributed energy resources, let alone a small network of them that can operate independently of the grid.


FERC Commissioner Cheryl LaFleur addresses the Microgrid 2.0 conference in Baltimore. | International District Energy Association

“The phenomenon that I think FERC confronts and other agencies in Washington confront is that there’s been a lot more technological change than there’s been legislative change for a whole bunch of reasons that are above my pay grade to diagnose,” Commissioner Cheryl LaFleur told attendees of Microgrid 2.0 at the Hyatt Regency Baltimore Inner Harbor last week.

FERC Commissioner Cheryl LaFleur | International District Energy Association

“We’re trying to solve 21st century problems using … a 1930s law.”

How microgrids should be regulated was a central topic at the third annual conference held by the International District Energy Association (IDEA), which advocates for distributed generation, district heating and cooling, and combined heat and power.

Christopher Berendt, Drinker Biddle & Reath | International District Energy Association

“The reason we’re here talking about this today, probably more than anything else, is that consumer demand is driving us, and that we’re seeing more and more people say, ‘We want to see mixed-use, multi-customer microgrids because we want the variety of benefits that can come out of them,’” Christopher Berendt, counsel to IDEA’s Microgrid Resources Coalition, said during a panel on market design and policies.

Regulatory risk, he said, “acts kind of like repellant to private capital.”

“There is more capital waiting to flow into microgrid investment right now [that] you would not believe,” said Berendt, a partner with Drinker Biddle & Reath. “There is more capital chasing fewer good projects, and what is really needed to unlock those loads of capital and get more good steel in the ground is not the desire to deploy it, but the regulatory frameworks that support project financing.”

Without any direction from Congress, however, regulators must work with what they have. During her luncheon keynote speech, LaFleur pointed to the complications of DER aggregation, which the commission has been working on for nearly two years. (See FERC Rule Would Boost Energy Storage, DER.)

“It seems quite clear that distributed resources can be aggregated and bid into the market and contribute great value. But since they’re, in many cases, behind the meter, what do the states figure out? Who gets the first bite of the value?” LaFleur asked. “How are we going to figure out who pays what to whom in a sensible way? I think our staff has made a lot of progress in thinking about it. I think it can be worked through, but it’s a little more complicated than some of the … issues we usually deal with because of the number of different uses, and because although it acts wholesale when we see it in the markets, it’s actually at the distribution level.”

Commissioner Richard Glick told the Energy Bar Association last week he hopes the commission will act soon to encourage aggregation of DERs in wholesale markets. (See related story, Nearing 1-Year Mark, Glick Rejects ‘National Security’ Grid Risk.)

Dan Dobbs, Anbaric Development Partners | International District Energy Association

The industry also faces challenges at the state and local levels over siting rights of way and whether microgrids are defined as public utilities. “One thing all jurisdictions in this country have in common is that they’re not set up for microgrids,” Berendt said

Dan Dobbs, vice president of distributed energy for Anbaric Development Partners, pointed to New York’s Value of Distributed Energy Resources tariff as “a start.” (See NYPSC Takes Subway into Value Stack.)

“It’s not perfect, but it’s a good attempt at getting that value,” he said. But “you really need to be able to value power that comes in and goes out equally. That’s at the retail level, and you need to be able to do that similarly at the wholesale level when you are aggregating resources.”