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Minnesota Report Assesses Drivers and Obstacles to Microgrid Implementation

March 20, 2014
Utilities view microgrids as a competitive threat.

Smart microgrids face a number of regulatory obstacles, but policymakers should work through these because of the potential benefits, according to a report prepared for the Minnesota Department of Commerce’s Division of Energy Resources.

The report, Minnesota Microgrids: Barriers, Opportunities, and Pathways Toward Energy Assurance, describes a number of factors that are driving microgrid solutions in the U.S. and around the world, including:

  • Demand for a stable, reliable energy supply, particularly at mission critical facilities during times of wide-scale outages and natural disasters
  • Public policy goals for increasing renewable energy and energy efficiency while reducing GHG emissions
  • Efficient, low-cost energy drives economic development
  • Distributed generation and energy storage technologies are becoming more cost-effective for a wider range of applications.

However, the report notes that microgrids pose a number of challenges to current policy. This is particularly true of microgrids that can generate enough of their own energy to function for extended periods of time as an island while also connecting to the macrogrid at non-islanding times.

Utilities view distributed-generation resources as a competitive threat, and current utility connection tariffs are written almost exclusively to protect the utilities.

Moreover, retail utility rates, which are approved by the Minnesota Public Utilities Commission, are designed to allow utilities to recover their costs of providing services. These costs are bundled into the rates. Initiatives that would reduce kWh sales or encourage third-party generation are at odds with the financial interests of investor-owned utilities. As a result, investment for microgrids is likely to be driven by investment from building owners rather than private utilities.

The report concludes that the state should develop a microgrid roadmap to address what it sees as an inevitable, long-term industry trend. Such a plan would clarify the role of microgrids in state policy, establish a statutory framework to support microgrids, and initiate a microgrid pilot program in Minnesota.

The full report is available here.

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