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Micro-Grids and Demand Response: Taking a Holistic Approach

November 26, 2012 By Luke McAuliffe

Luke McAuliffe

Recently, I was fortunate to speak on a panel hosted by Agrion that discussed Micro-Grids and how Demand Response is playing a pivotal role in the proliferation of this potential new smart grid paradigm.

Agrion defines micro-grids as “self-sustaining power networks within the larger grid system that provide a higher level of local reliability than what is provided by the entire power system as a whole.” For example, a micro-grid could be a large commercial building in NYC that has an ice thermal storage system, solar panels, and a Co-Generation unit and which also participates in various Demand Response programs.

The motives for having these systems and programs in place can vary, but the more popular reasons include an effort to keep energy costs down, reduce a facility’s carbon footprint (be green), and mitigate operational risks by supplying alternative power if there is grid failure.   Regardless of the motivation, the building in my example has systems in place that not only relieves stress on the local grid, but also provides a high level of reliability to their tenants.

As you can no doubt tell, this is a pretty complicated topic, and it lent itself well to good conversation. On the panel, we covered a wide array of topics that included:

  • What are the key drivers behind micro grid development? -  Location, aging infrastructure, type of business, and reliability concerns were among the key points surfaced by panelists and attendees.
  • Obstacles to micro-grid development – Cost of systems, utility cooperation, location, and regulations were among participants’ most common answers.

Finally, the role of Demand Response was discussed. As many folks know, Demand Response programs pay businesses to reduce energy in response to grid system needs.  Depending on the type of program each facility is enrolled in, this can include emergency, economic, or other types of signals from the ISO/RTO or utility.

What I find interesting is that many of my co-panelists who work at firms offering micro-grid type products are starting to use their systems to leverage Demand Response revenue streams to drive the ROI down on their respective products.  For example, a thermal energy storage unit of 1MW can bid this capacity into the market for a one year period in NYC, which would return about $96k. A controls company can pre-program a buildings system to participate in Emergency, Economic, and Synchronous Reserve Demand Response programs from the NYISO while also participating in the local Con Edison programs. This can all be done on a small level while bringing in, potentially, hundreds of thousands of dollars annually.

Which got me thinking. Here at World Energy, we use a simple equation to look at how we can minimize a customer’s total energy spend:

E = P • Q – i

(Where “E,” the total cost of energy = P (the Price of energy) multiplied by Q (the Quantity of energy used), minus i (available incentives)

Focusing on a customer’s total energy spend is crucial here.  At the conference , we focused on Demand Response (a type of incentive; the “i” in the equation above) as well as on products or technology that would reduce energy use (think “Q”). However, there was very little, if any, conversation around the “P” or price of energy during the discussion.

My big takeaway from the panel: there are some excellent opportunities ahead for partnering among the many dynamic and creative companies who have excellent products and want to make “micro-grids” a more common term in the energy field.   By combining expertise across the E = P • Q – i value chain, I believe we can provide a more holistic and compelling energy management solution at the lowest price points possible.

This is a very exciting time in the energy management field, and I am personally excited to participate in helping grow the emerging micro-grid segment of the industry!

Luke McAuliffe is vice president of demand response for World Energy.



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