Islands in The (Revenue) Stream: Energy Storage Adds Value and Resiliency to Microgrids

As scientists and explorers throughout history have seen, there is no better place to study evolution than on islands. Their boundaries and isolation create unique circumstances that often result in unusual species, evolving over time to best adapt to their habitat. Islands are truly laboratories for discovering the next stage of development.

Although this observation may refer to the natural world, it is equally true of the 21st century energy landscape. Across the globe there are hundreds of islands that are electrically disconnected from mainland grids, dependent on a mix of generation systems from fossil fuels to renewables and combinations thereof. Diesel-powered generators are ubiquitous — with well-known drawbacks: costly fuel, maintenance-intensive operation, emissions and noise. In some of earth’s most pristine environments, the only discordant note is the sound of diesel engines, providing critical power for local facilities and their residents.

This 20th-century island energy model is changing, however.

Image: Graciosa Island — 4 MW battery system combined with 4 MW of wind and 1 MW of solar PV on an island of 4,500 inhabitants. Island microgrid enables up to 100 percent renewable energy use, reducing diesel operation by two-thirds. Credit: Younicos. 

From Grenada to Greece, Nantucket to Necker, island power providers and government agencies are working on the next evolution of electricity systems to enable greater use of renewables like wind and solar PV, to reduce or eliminate diesel generation, or to avoid buildout of costly transmission lines. These new breeds of energy systems have one thing in common: they are all enhanced by energy storage.

Rocky Mountain Institute, the independent non-profit environmental research organization, issued a report in late 2015 profiling 10 island communities with microgrids. The report underscored the benefits of storage:

Energy storage is a key component of largely renewable island and remote community microgrids. Generally speaking, renewables like solar and wind can be integrated into diesel-based island and remote community microgrids at penetrations around 10 to 15 percent of annual electricity consumption without causing operational challenges. Above 20 percent, it is often necessary to curtail renewable generation, implement demand response or load-shifting programs, or incorporate energy storage. However, as penetration of renewable energy increases, energy storage—alongside smart controls to enable load shifting—becomes an important component of any community’s transition. 

Why the shift? Three good reasons: renewables, resiliency, and revenues.

Renewable energy technologies continue to drop in price. With natural energy sources like wind, water, and sun, free and abundant, on-island clean power generation can be readily implemented. Fast-responding battery storage provides a buffer to smooth out intermittencies, while longer-duration storage can deliver power when the wind slows or sun sets. In the case of Nantucket Island, Massachusetts, energy storage combined with efficiency and demand reduction programs will enable the local utility to delay or avoid entirely the need for an additional transmission cable from the mainland, saving millions of dollars for ratepayers.

Resiliency for island microgrids can sometimes be a matter of life and death. Hospitals, clinics, shelters and other vital infrastructure assets are vulnerable to power outages during severe weather events. Distributed renewable energy resources are less susceptible to disruptions than centralized systems. With the addition of energy storage, microgrids can switch to local island mode and provide critical support during times of greatest need.

On the revenue and savings side, diesel fuel must be transported to islands, costing several times the mainland price. This means there are immediate financial benefits to on-site clean energy generation. Many diesel generators are decades old, requiring constant maintenance while consuming enormous amounts of fuel. A combination of renewables, storage and diesel generators — carefully sized, integrated and intelligently controlled — can yield the lowest-cost solution based on levelized cost of electricity.

Island microgrid success stories abound. Here are a few examples:

  • Younicos conducted a study for the Greek island of Tilos which found that the island could boost the share of renewables in its energy mix to more than 80 percent by installing battery storage. Furthermore, storage would dramatically reduce costs for diesel-generated electricity, which is delivered to Tilos via an undersea cable from a neighboring island. Neither of the two islands is interconnected to Greece’s mainland grid, and thus rely mainly on diesel.
  • On Graciosa Island in the Azores, the standalone island-mode capability of an intelligent battery system there will enable up to 100 percent spontaneous renewable energy generation for 4,500 residents when the project goes live in 2017. Intelligent energy storage will make it possible for the island to replace an average of 65 percent of its fossil-fuel power with cheaper and cleaner renewable energy — saving millions of euros and tons of CO2. This system can be easily replicated on other islands with the same kind of benefits.
  • The island of Ta’u on American Samoa, population 600, is now powered by a solar PV and storage-enabled microgrid. The system can supply nearly 100 percent of the island’s power needs from renewables, providing a cost-saving alternative to diesel, adding resiliency and effectively eliminating outages.

Islands on the Mainland

Energy storage-enabled microgrids, however, are not limited to deployment on (literal) islands. The same technologies can be used to support mainland microgrids, which operate in similar fashion to ocean islands. These systems typically consist of a load center, such as a commercial or industrial facility, renewables, storage, intelligent controls, and a primary grid connection. 

Mainland microgrids with storage can provide different combinations of capabilities and benefits, depending on several factors:

  1. Critical loads that need backup
  2. Revenue-generating grid services
  3. Local electricity rates and structure, e.g. time of use rates and/or demand charges
  4. Available incentives for distributed power provision. In each case, financial modeling can assess opportunities, value streams, and ROI

For utility-scale systems, combining, for example, solar plus energy storage can transform a large-scale PV system into a dispatchable reliability asset for the grid. Pairing solar and storage can smooth out grid fluctuations and provide the foundation for demand response, ancillary services and other revenue-producing power programs. This type of multi-value resource — offering predictable clean energy, local resiliency, and revenue potential — is the goal of a system being developed by Younicos in Denver, Colorado, at a company’s operations center.

The market potential is huge — and at the start of its growth curve. A Q4 2016 tracking report from Navigant Research tallied nearly 1,700 microgrid projects worldwide, representing 16.5 MW. In a separate forecast, Navigant predicts that the worldwide market will exceed $30 billion within eight years. Clearly, island microgrids will be in the revenue stream.

The English poet John Donne famously wrote:

No man is an island, Entire of itself; Every man is a piece of the continent, A part of the main.

This meditation on the need for connectedness might once have applied to our centralized power grid. With today’s distributed energy technologies enabling clean, secure and profitable standalone power grids, both on and off islands, this belief can now surely be cast away.

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Stephen L. Prince is the Chief Revenue Officer at Younicos.  

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