Policymaking Microgrids: Economic and Regulatory Issues of Microgrid Implementation

Technically, microgrids are emerging as an outgrowth of dispersed on-site and embedded generation via the application of emerging technologies, especially power electronic interfaces and modern controls, and, similarly, microgrid economic and regulatory analysis is generally rooted in the same approaches used to evaluate distributed energy resources (DER). As in the economics of many traditional on-site generation projects, the economics of heat recovery and its application by combined heat and power (CHP) systems is central to the evaluation of microgrids, and integration of this capability is a key requirement whenever CHP appears as an option. The recovery of waste heat offers a key advantage to generation close to loads but at the same time adds significantly to analysis complexity because of the need to simultaneously meet requirements for electricity and heat, plus the inevitability of storage, both active and passive, entering the equation. More novel is the economics of power quality and reliability (PQR), which in microgrids can potentially be tailored to the requirements of end uses in a manner only considered to a limited degree in utility-scale system; e.g., by interruptible tariff options. The economics of microgrids arises from evaluation methods for on-site generation from the customer perspective and from the traditional utility economics of expansion planning from the utility perspective. Both of these areas have received considerable attention, so a growing toolkit exists, but methods need reinforcement in some key regards. Central to public policymaking will be consideration of the societal impact of microgrids, especially since their adoption may change macrogrid requirements. While partially explored, this topic is still in need of rigorous analysis.