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NRG Energy Selected By N.Y. Utility for Proposed Microgrid Project

May 26, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

NRG Energy has been selected by Central Hudson Gas & Electric for a microgrid demonstration project under Central Hudson's proposed Reforming the Energy Visions demonstration projects.

Central Hudson has executed a letter of intent with NRG and several customers to develop the microgrid demonstration project, Central Hudson said in a REV demonstration project report. Central Hudson's microgrid demonstration project is expected to involve several customers spanning more than fifty buildings.

"As currently envisioned, the project will deploy an optimized mix of clean, reliable, resilient, and efficient on-site generation, coupled with energy storage and an integrated control system. Central Hudson, with its partners, will also facilitate and structure a contractual arrangement among the parties whereby the participating customers will enter into a set of agreements, including an energy services agreement, for an agreed upon payment structure to appropriately compensate service providers, including Central Hudson, for designing and implementing a resilient microgrid that meets participating customer needs, delivers value in the form of improved service reliability and added capabilities, and achieves customers' sustainability goals," Central Hudson said

"Central Hudson's Microgrid Demonstration Project is entirely supported by revenues from participating customers to third party providers and Central Hudson through reasonable and agreed upon cost recovery mechanisms," Central Hudson said.

"Customers that choose to participate in Central Hudson's Microgrid Demonstration Project will pay for the costs of the Project, including a reasonable return for Central Hudson and its third party partner. Traditional rate base rate of return customers will not pay the costs associated with Microgrid Facilities. In this regard Microgrid Demonstration Projects represent a new revenue stream and market for utilities and competitive service providers," Central Hudson said.

"Central Hudson will submit the Microgrid Demonstration Project to New York Prize [which is awarding funding to proposed microgrids] to recover feasibility costs. Failure to receive feasibility study funding from New York Prize for the Microgrid Demonstration Project may jeopardize the Project," Central Hudson said.

In separately filed comments on the report, NRG said, "The expected use of third party capital from participating microgrid customers and/or NRG, which is fully prepared and interested in owning and operating the microgrid system, will prove out the commercial viability of the project and minimize the risk to rate base customers."

"In the process of designing the project, Central Hudson and NRG will work together to devise new contract structures to appropriately capture the value being provided by each party and to compensate each party for these value-added services. These efforts should be applicable to future projects both in terms of deal structure and for informing the establishment of the value of products and services that are currently not separately identified, valued, and/or priced," Central Hudson said.

"Central Hudson's Microgrid Demonstration Project will test the demand in the competitive market for a resilient, multi-customer microgrid. It offers customers the ability to partner with each other, their local utility and third party service providers to customize, develop and deploy solutions that may best suit their needs. This Microgrid Demonstration Project is an attempt at market development. If successful it will help identify supply and demand market opportunities for all stakeholders, including the value streams that can be quantified and captured by the parties, and commercial structures, terms, and standards that may be replicated and used to engage additional customers. Specifically, it is hoped that niche markets for Microgrid facilities development may be identified," Central Hudson said.

"Central Hudson's Microgrid Demonstration Project may also show that even when customers share costs associated with Microgrid Facilities, and DG in particular, that the costs are a barrier to microgrid development and, therefore, require utility investment with cost recovery achieved through the traditional regulatory model. Until the cost of DG is equal or less than the cost of traditional generation it is likely that subsidies, directly or through utility investment, will be required," Central Hudson said.

Central Hudson, "expects that its Microgrid Demonstration Project will demonstrate a number of important technical and commercial capabilities that may be applicable to subsequent microgrid projects. These commercial capabilities include: (1) deploying a modular, integrated microgrid control system and software platform to optimally coordinate local resources (conventional and renewable generation, energy storage, and controllable loads) based on real-time stochastic models paired with data-driven forecasting models; (2) optimization of dynamic system and economic parameters in operating modes with various objective functions, including frequency regulation, voltage control, demand response, pure economic dispatch, and islanded; (3) intelligently prioritizing critical and non-critical loads to balance supply and demand on an existing grid network; and (4) leveraging smart inverter capabilities and utilizing battery storage to multi-task as a resource capable of supporting renewables integration, frequency regulation, voltage control, Volt/VAR optimization, demand response, and reliable back-up power."

Case Cases 14-E-0318

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