Microgrid Incentives, Drivers, and Enablers

New Incentives, Drivers and Enablers

The convergence of various drivers and enablers will continue to disrupt the utility industry. These forces will continue to reduce the cost of distributed energy resources (DER’s) and energy efficiency and demand response measures (EE/DRM’s), and increase the relative cost of grid power. Companies that recognize and take advantage of these forces can significantly reduce their energy costs, while those that fail to act are likely to experience significant increases in cost, and less reliable and sustainable energy supply.

Driver/Enabler	Description
Market forces	Low gas prices reduce cost of distributed generation relative to grid energy Low cost of capital reduces cost of energy from new DER’s High cost for renewables and related infrastructure, such as off shore wind (OSW), solar PV, batteries, new transmission lines, increases cost of grid power Fees imposed on electric customers to pay for government subsidies to maintain inefficient legacy generating facilities, such as nuclear plants, increases cost of grid power Expected increases in grid power costs due to state-imposed carbon taxes increase Upward pressure on retail energy costs due to increased deployment of DER’s and EE/DRM’s Continued inefficiencies in utility operations and cost structures create upward pressure on cost of grid power
Utility incentives and enablers	Grants for DER’s and EE/DRM’s lower their costs Tariff incentives for DER’s, such as reduced gas transportation costs for cogeneration, reduce costs Community solar, wind programs allow companies to purchase renewables from third party generation facilities at remote sites within ISO zones, making renewables more accessible Net metering and remote net metering allow companies to offset the retail cost of energy for on-site generation, and for remote facilities within the same ISO zones Demand response programs compensate customers for implementing on-site generation to reduce peak loads
Government Incentives	Immediate expensing allowed under new tax law encourages investment 30% investment tax credits (ITC) for wind and solar 10% ITC for CHP Grants for DER’s and EE/DRM’s, and related studies New state programs and policies, such as NY Renewing the Energy Vision (REV), encourage DER’s and EE/DRM’s
Financing	Innovative funding options such as Property Assessed Clean Energy (PACE), state “Greenbanks,” NYCEEC, etc., reduce cost of capital, and provide funding for projects traditional lenders may not finance Green energy investors
Emerging and improving technologies	Energy storage, including batteries and thermal storage can shave peak loads, reducing demand charges Lower cost for Solar PV and wind, which can be net metered to offset retail energy costs Cogeneration and tri-generation technologies have greater efficiency than most wholesale generators, reducing energy costs Microgrid controllers enable integration of an optimal mix of DER’s in parallel with the grid More reliable on-site generation enhances reliability, while also reducing energy costs

Driver/Enabler

Description

Market forces

Low gas prices reduce cost of distributed generation relative to grid energy

Low cost of capital reduces cost of energy from new DER’s

High cost for renewables and related infrastructure, such as off shore wind (OSW), solar PV, batteries, new transmission lines, increases cost of grid power

Fees imposed on electric customers to pay for government subsidies to maintain inefficient legacy generating facilities, such as nuclear plants, increases cost of grid power

Expected increases in grid power costs due to state-imposed carbon taxes increase

Upward pressure on retail energy costs due to increased deployment of DER’s and EE/DRM’s

Continued inefficiencies in utility operations and cost structures create upward pressure on cost of grid power

Utility incentives and enablers

Grants for DER’s and EE/DRM’s lower their costs

Tariff incentives for DER’s, such as reduced gas transportation costs for cogeneration, reduce costs

Community solar, wind programs allow companies to purchase renewables from third party generation facilities at remote sites within ISO zones, making renewables more accessible

Net metering and remote net metering allow companies to offset the retail cost of energy for on-site generation, and for remote facilities within the same ISO zones

Demand response programs compensate customers for implementing on-site generation to reduce peak loads

Government Incentives

Immediate expensing allowed under new tax law encourages investment

30% investment tax credits (ITC) for wind and solar

10% ITC for CHP

Grants for DER’s and EE/DRM’s, and related studies

New state programs and policies, such as NY Renewing the Energy Vision (REV), encourage DER’s and EE/DRM’s

Financing

Innovative funding options such as Property Assessed Clean Energy (PACE), state “Greenbanks,” NYCEEC, etc., reduce cost of capital, and provide funding for projects traditional lenders may not finance

Green energy investors

Emerging and improving technologies

Energy storage, including batteries and thermal storage can shave peak loads, reducing demand charges

Lower cost for Solar PV and wind, which can be net metered to offset retail energy costs

Cogeneration and tri-generation technologies have greater efficiency than most wholesale generators, reducing energy costs

Microgrid controllers enable integration of an optimal mix of DER’s in parallel with the grid

More reliable on-site generation enhances reliability, while also reducing energy costs