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The Distributed Future

March 1, 2016
The movement toward widespread use of distributed sources of power, from small rooftop solar systems to community and campus microgrids, is gaining momentum and giving shape to the power systems of the future.

The future is coming on fast in the world of electric power. We’ve talked over the past two years in these pages about the potential disruption to come from distributed energy resources (DER) or distributed generation. Over that time, some of the what-ifs have become real world transitions and new what-ifs have become a little more compelling. Recent news reports and research publications give some hints of what a future rich in distributed generation options might look like.

The story a couple of years ago was that distributed generation would be hugely disruptive to power companies, pushing them over the brink and into a death spiral based on their existing business models. The idea was, as prices came down for rooftop solar and storage systems and then other limited-scale sources of power, an increasing number of utilities’ customers would cut the cord and defect from the grid, leaving the utilities to spread the cost of their infrastructure investments across a smaller base of rate payers, leading to more defections, leading to more price increases and so on down the slope into the collapse of their business.

The utilities have not been sitting around wringing their hands since then. Some have been moving to place obstacles in the road of distributed generation’s growth by opposing net-metering policies (where owners of DERs can sell power back to the grid) and advocating for fees on solar power systems to defray the costs involved in adapting the distribution grid to handle intermittent supplies and a two-way flow of power. Others have moved through acquisitions, partnerships and expansions to embrace the change so that they might play a role in shaping its future course. For these utilities of the future, it looks likely that they will have a greatly diversified mix of resources to work with in operating the grid, and a future in which they become much more dynamic providers of power.


Battles at the state level over net metering policies are pretty active right now, and their outcomes and future evolution will play a deciding role in where distributed generation flourishes. Net metering is the transaction by which small DER owners are able to sell their excess power back to the grid operator. Essentially, spinning the meter backwards. For more on net metering, including the decimation of Nevada’s solar industry last year and market-based solutions such as Minnesota’s Value of Solar innovation, go to

While some utilities such as those in Nevada are celebrating successes in stopping the spread of distributed generation, others have been looking at the changes underway and developing strategies to make distributed power a key component in their business.

NRG Energy, Houston, was an early adopter and vocal advocate of this strategy, buying and building business lines to embrace distributed generation and solar in particular. But after a stock-market pummeling last year and the firing of its CEO David Crane, the company’s green initiatives may be at a turning point, if not a dead end.

Other utilities continue to push that direction, however. Southern Co., the huge power company based in Atlanta, last month agreed to buy PowerSecure, Wake Forest, N.C., a distributed generation specialist offering utility infrastructure design and construction, energy efficiency and solar engineering, procurement and construction operations. Southern said it wants to increase the customized energy products it can offer customers.

“As energy technologies and customer expectations continue to evolve, the electric utility business model is increasingly expanding beyond the meter,” says Southern CEO Tom Fanning in a company release. “With the addition of PowerSecure ... we’re extending our commitment to create America’s energy future by tapping into industry-leading expertise to deliver cutting-edge solutions to energy consumers nationwide.”


Meanwhile, the industry has been learning a lot about distributed generation in the real world, and the lessons tell a lot about the future prospects for onsite power.

Commercial and industrial microgrids. Large industrial plants, corporate campuses, schools and universities, data center complexes and government and military installations are all seeing a boom in interest in integrating large distributed energy systems behind the meter, in the form of microgrids.

The trend has captured the attention of the electrical industry’s biggest manufacturers. Schneider Electric, ABB, General Electric, Siemens and Eaton all have major initiatives to build this market.

Microgrids use all manner of generation sources, and in many cases use more than one source. Combined heat and power (CHP) systems using gas turbines and heat exchangers provide heat for industrial processes as well as power. Gas microturbines, fuel cells, small wind turbines and solar photovoltaic panels are all part of the mix and there’s increasing discussion around making more use of liquefied natural gas which, given the slumping price for gas and the proliferation of LNG processing facilities and terminals on the coasts in the United States makes an intriguing potential source. Modern microgrids typically also incorporate energy storage options including batteries as well as pumped hydro, compressed air and others depending on the site and needs.

Microgrids have become the preferred way to test and develop smart grid technologies, and thus are involved in evermore elaborate demonstration projects that push the boundaries of efficiency, production, maintenance and control. The companies building these systems for customers are increasingly using them to power their own facilities.

Texas transmission and distribution company Oncor developed its own microgrid to power its System Operating Support Facility (SOSF), a 100-acre site with buildings designed to service transformers, meters and other equipment, as profiled in an upcoming issue of our sister magazine, Transmission & Distribution World.

“The central feature of the parking lot is a solar PV array that also provides shade for parked cars.  Glancing around one also sees a Tesla battery bank and further investigation reveals a second smaller PV array, a micro turbine, and an electric vehicle charging station … The facility does represent the next logical step in Oncor’s strategic vision.”

The system, which also incorporates diesel and natural gas powered generators, lives behind one primary voltage meter and is divided into four separate microgrids that can be operated separately or in unison. There is sufficient distributed generation available to allow the 1.25 MW system to operate completely isolated from the utility grid if necessary.

This 8kW ground mounted solar set enables engineers at Oncor to gain a better feel for how to integrate solar into the grid.

“Oncor knows that neither they or anyone else has all the answers about the future but they feel that their microgrid and TDEC (Technology Demonstration and Education Center) gives them the opportunity to explore that future and communicate what they find to key stakeholders,” T&DW Strategic Director Rick Bush wrote in the story.

Schneider Electric, which served as a partner in building Oncor’s system and supplied its microgrid controller, is now busy building a microgrid of its own to power its new Boston One Campus headquarters in Andover, Mass. The system includes a 400 kW photovoltaic rooftop and carport solar system with Schneider’s inverters as well as an existing gas-fired generator and a 1MW EcoBlade lithium-ion storage system integrated by way of Schneider’s StruxureWare software. In all the campus uses about $8 million of Schneider gear.

“The Boston One Campus was built to showcase the connectivity, sustainability, efficiency, reliability and safety innovations at the heart of Schneider Electric,” said Laurent Vernerey, president and CEO of Schneider Electric’s North American Operations. “Deploying Schneider Electric technologies across the Boston One Campus creates a living laboratory at our North American R&D hub that will drive global innovation in efficiency and energy management solutions.”

Given the active development in this space, the decline in component costs, improvements in management and control and evolving incentives, microgrids are likely to become a more common feature of large construction projects in the future.

Over the next five years, the cumulative operational capacity of microgrids in the U.S. is expected to more than double, from 1,283 MW in 2015 to 2,855 MW by 2020, according to the latest figures from GTM Research.

Community microgrids. The Obama Administration last year launched the National Community Solar Partnership to provide access to solar for the nearly 50% of households and businesses that are renters or do not have adequate roof space to install solar systems. This move raised the visibility of another side of the developing microgrid market, where neighborhoods, apartment blocks, homes associations and other communities install a shared distributed power system, often involving use of solar power and storage.

Many state-level initiatives are adding to the incentives for community solar, and methods of financing including energy bonds, tax deductions, tax credits, credit enhancements and direct cash payments add to the growth of this category.

New York is among the leaders in community microgrids and its creation of the $40 million NY Prize for microgrids that offer resiliency for critical facilities and surrounding communities promises to keep microgrids growing in the Empire State. New York utility Con Edison is actively involved in building out pilot microgrids such as its Brooklyn/Queens Demand Management Program, or BQDM, that it hopes can defer the cost of building a $1 billion substation.

Rooftop solar and storage. We explored the solar market in some depth last month (see “The Solar Surge” via, looking at the surge of growth already building following the extension of the income tax credit for renewables at the end of last year.

Solar, especially when combined with storage, leads the wave of transition to DER in most markets with declining component and installation costs and improving incentives. A new study from Park Associates found that customers are increasingly interested in solar and storage as a packaged offering.

Along that line, a new offering from SolarCity in the Hawaii market goes a long way toward establishing complete DER solutions for the residential market. The SolarCity program combines solar photovoltaic rooftop panels with Tesla storage, a Nest thermostat and high-efficiency hot water heater in a single package available by lease at $0.26 per kWh or $4.50 per watt if purchased. Though this system is tailored to meet the terms of Hawaii’s new Customer Self-Supply (CSS) solar tariff program, which replaced net-metering last year, it may well become a prototype for system sales elsewhere.

Virtual power plants. The rise of distributed energy resources as a growth market has attracted quite a bit of attention from the technology sector, which sees opportunities for using information technology to get more value from DERs. The idea of virtual power plants (VPPs) is more than a decade old and faces continuing regulatory hurdles, but the idea of DER owners being able to exchange electrons directly and bundle surplus power into salable resources continues to grow.

A recent Navigant white paper proposed that energy storage-enabled VPPs are expected to invade energy markets, serving as highly networked systems and precursors to a fully functional Energy Cloud. “The energy storage industry began to noticeably scale in 2015,” says Anissa Dehamna, principal research analyst with Navigant Research. “Looking to 2016 and beyond, it is expected that the energy storage industry will resolve persistent issues such as standardized contracts and modular system design, embrace new business models such as residential storage and virtual power plants, and begin to see pressure and interest from the IT space.”

In a quintessentially futuristic move, there’s a recent flood of theorizing about using the blockchain – the public transaction register developed for Bitcoin monetary transactions – to streamline and authenticate transactions among distributed resources. A recent white paper from IBM looked at how a blockchain-based system call ADEPT for controlling connected devices can make simple appliances self-regulating and semi-autonomous, allowing them to optimize the use of distributed generation systems without user intervention.


The focus now is on new installations and looking for the most effective solutions, but it won’t be that long before the maintenance, repair and operating (MRO) opportunity reaches significant size, which makes it prime terrain for traditional electrical distributors. The established systems will one day require upgrades and retrofits as further technological advances improve the efficiency and economics of distributed generation.

The impact of DER also affects several tangential areas of interest to the electrical industry. It promotes the use of energy efficiency technologies of all kinds because it makes sense to reduce loads before sizing the power system. This supports low-voltage lighting and control systems that in turn offer a backbone of control for Internet-enabled devices.

On the power side, the future is beginning to look far more colorful and varied than the past. As the market for distributed generation continues to evolve we expect to see a proliferation of rich niches for the electrical industry to explore.