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Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
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Page 8
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
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Page 9
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
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Page 10
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
×
Page 10
Page 11
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
×
Page 11
Page 12
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
×
Page 12
Page 13
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
×
Page 13
Page 14
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
×
Page 14
Page 15
Suggested Citation:"Chapter 2 - Background." National Academies of Sciences, Engineering, and Medicine. 2018. Microgrids and Their Application for Airports and Public Transit. Washington, DC: The National Academies Press. doi: 10.17226/25233.
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7 The advancement of DER has had a large role in making microgrids technically feasible. Reductions in solar panel and turbine costs have made on-site generation feasible and, in some cases, even cost-competitive with utility grid power. BESSs are experiencing similar down- ward cost trends. Reductions in natural gas prices have prompted an increase in popularity of on-site combined heat and power (CHP) and fuel cells. State-mandated clean energy targets and corporate sustainability goals also have helped facilitate these movements. Microgrids encourage the implementation of renewable energy systems and are helpful in mitigating issues related to high penetration intermittent energy sources on the distribution grid. Types of Microgrids Microgrid types can be described as grid-tied or remote and as basic, intermediate, and advanced. Grid-tied microgrids interconnect with a larger utility grid through access points and can operate either in connection with the larger grid or in a separated, “island” mode. Remote microgrids may be completely unconnected to a larger grid or may interconnect with an unreliable grip, so they typically operate in island mode most of the time. This section of the synthesis presents a basic description. A discussion of the evolution of microgrid technology (including microgrid types, variations, system components, applications, and market share) also will be available in the DOE’s Microgrid Playbook for Decision Makers (final version under review and pending release on the DOE website). Figure 2 presents examples of the primary technology associated with each type of microgrid, along with its functions, goals, and cost/revenue attributes. Microgrid Applications and Deployment Figure 3 shows operational microgrid power capacity market share by segment. Airports and public transit entities generally are grouped within the commercial/industrial and community categories. Figure 4 shows that North America is followed by the Asia–Pacific region with regard to built microgrid capacity. As seen in Figure 5, however, North America represents only 29% of all new microgrid projects and, according to Navigant Consulting, Inc. (2017), most planned/ proposed microgrid capacity is found in the Asia–Pacific region. Figure 6 shows that globally, diesel generation remains prominent; however, the trend is declining market share in favor of solar PV and CHP, the latter of which holds the greatest market share in North America (Navigant Consulting, Inc. 2017). C H A P T E R 2 Background

8 Microgrids and Their Application for Airports and Public Transit Developing a complex, advanced microgrid system requires considerable time, financing, resources, and cooperation. Many microgrids can be developed in incremental steps, however, transitioning to a fully capable microgrid over several phases of system integration. Microgrids also can easily be built in a modular fashion, leaving physical space and connections for future system extensions. Current State of Microgrids The microgrid market is currently experiencing unprecedented growth across a number of energy-related sectors. GTM Research, the market analysis and advisory arm of Greentech Media, generates daily reports and articles on the electrical industry and green technology. Predictions of microgrid capacity growth by GTM Research were exceeded in 2015 by actual installations, as shown in Figure 7. Projections now suggest that microgrid capacity will more than double the 2015 figures by 2020 (Chen 2016). Microgrid popularity has seen a surge due to several factors, including increased natural and man-made disasters, new business models and revenue streams, the advancement of DER, and increased emphasis on business resiliency and continuity. Figure 2. Microgrid variation attributes (Arup 2017).

Background 9 Remote 39.7% Direct Current 0.4% Operational Microgrid Power Capacity by Segment, World Markets: 2Q 2017 Commercial/Industrial 24.2% Community 5.1% Utility Distribution 8.0% Institutional/Campus 16.8% Military 5.8% Figure 3. Operational microgrid power capacity market share by segment (Navigant Consulting, Inc. 2017, adapted by Arup 2017). Figure 4. Operational microgrid power capacity market share by region (Navigant Consulting, Inc. 2017, adapted by Arup 2017).

10 Microgrids and Their Application for Airports and Public Transit Figure 5. Planned microgrid power capacity market share by region (Navigant Consulting, Inc. 2017). Other: Technologies such as geothermal, offshore wave energy, steam generation, natural gas, generators, and others. - 500.0 1,000.0 1,500.0 2,000.0 2,500.0 3,000.0 3,500.0 Diesel CHP Solar PV Wind Energy Storage Fuel Cell Biogas Hydro Other Total Microgrid Power Capacity by Technology and Region, World Markets: 2Q 2017 North America World totals Figure 6. Known global and U.S. microgrid power capacity by technology (Navigant Consulting, Inc. 2017, adapted by Arup 2017).

Background 11 Natural and Human-Made Disasters One major catalyst to project growth has been funding in response to natural disasters such as Hurricane Sandy (often called “Superstorm Sandy”). Microgrids provide resiliency and opera- tional capacity when utility grids are down. Natural disasters and extreme weather conditions continue to cause significant power disruptions that are growing in size and frequency. Of the 3,879 U.S. outages reported in 2016, 1,279 (33%) were attributed to weather-related causes and falling trees. Total outages were up 9% from 2015 (see Figure 8), and weather and tree related outages increased by 32% between 2013 and 2016 (Eaton 2016). Extreme heat also poses a threat to electrical power systems by limiting transmission capacity while increasing consumer demand through air conditioning loads (Bartos 2016). Therefore, microgrids can act as a climate adaptation strategy both to overcome climate change issues and to actively mitigate climate change by allowing adoption of less carbon-intensive generation technologies. Physical, cyber, and coordinated attacks also pose risks, with some utilities experiencing many attempted cyber attacks daily. As reported by Trabish (April 2017), however, no attacks in the United States have yet succeeded in causing substantial damage. 1543 MW 156 MGs 26% 39% 17% 10% 4%1% 1%2% CHP Natural Gas Diesel Solar Wind Hydro Power Fuel Cells Energy Storage Figure 7. U.S. microgrid capacity growth projections (GTM Research 2016). Figure 8. U.S. electrical power outages by month, 2008–2016 (Eaton 2016).

12 Microgrids and Their Application for Airports and Public Transit The National Oceanic and Atmospheric Administration (NOAA) has recorded billion- dollar weather events through July 2017. As Figure 9 shows, the 2016 level was just shy of the 2011 level. Between July and November of 2017, five additional billion-dollar disaster events were recorded—a trend that suggested, at time of writing, that the 2017 level would likely exceed the 2016 level and that 2017 would represent the fourth consecutive year of increasing billion- dollar weather-related disaster events. Merits and Advantages In this increasingly digital age, lack of electrical supply has a greater impact on business down- time losses. With so many operations depending on power from the electrical grid, many cus- tomers have begun to see microgrids as necessary to increase the robustness of their electrical NJ Transit found that an initial microgrid proposal (which was considered and rejected) would have removed utility redundancy by reducing their 30+ grid connections to 1 to 2. NJ Transit San Diego International Airport benefited from increased redundancy by joining their separately served campus areas through a private distribution system. The whole facility is now connected to three distinct utility substations. San Diego International Airport Figure 9. Billion-dollar U.S. disaster event types by year (NOAA 2017).

Background 13 systems and to eliminate costly downtime. Additional benefits and advantages of microgrids can be summarized as follows: • Resiliency: Resiliency refers to the ability of a system to adapt to changing conditions and withstand and recover quickly from disruption (DOE 2016). Microgrids offer a robust on-site electrical system that can provide a seamless backup power supply to utility power. • Reliability: Reliability refers to the ability of a system to continue operating through a disturbance without instability, uncontrolled events, or cascading failures. It includes the ability to tolerate disruptions from outside the system as well as unanticipated failures of system elements (DOE 2016). A microgrid with in-built redundancy provides this type of reliability. • Utility cost savings: Energy cost savings for the customer can be realized through differing revenue streams and avoided energy costs (Quashie, Bouffard, and Joos 2017). • Capital cost savings: For certain projects, up-front costs may be lower to create a local microgrid when compared with the costs to establish a traditional grid connection. Capital cost savings relate to new developments where interconnection to the existing grid could require a significant investment because of distance or other complications (Navigant Research 2017). • Benefits to utilities: Utilities can benefit from microgrids because they can delay or eliminate the need for costly upgrades to utility infrastructure (Stadler et al. 2016). • Flexibility: A well-designed microgrid system is flexible to increasing capacity. Increasing the capacity of a utility supply can be costly and time consuming, and may not be possible without significant utility upgrades. Microgrids also can be built out in convenient phases. • Clean energy: Advanced microgrids can improve the performance and return on investment (ROI) of on-site renewable energy systems, encouraging their uptake (Stadler et al. 2016). • Control: On-site assets allow customers to be in control of their own power supply. Quality, effective equipment O&M can be ensured (NEMA 2014). • Remote locations: In some cases, a utility connection is not viable either economically or physically. A microgrid can be the only option of delivering power to certain places (Quashie, Bouffard, and Joos 2017). • Monitoring capabilities: An advanced microgrid includes sophisticated measurement and monitoring equipment to track many facets of on-site energy generation and energy use. Ideally, a resilient power system includes a diversity of power generation sources, multi- ple connection points to the macrogrid, redundancy, and a localized backup power source (NEMA 2013). A microgrid incorporating renewable and non-renewable on-site generation, a robust connection to the main utility grid, ESSs, and advanced controls provides a resilient power system for mitigating the effects of extreme weather, natural disasters, and man-made incidents. NJ Transit calculated storm recurrence intervals (RIs) based on historical frequency and intensity. They then used the FTA Hazard Mitigation Cost Effectiveness Tool to determine total annual service delay costs of more than $73 million without added resilience and $12 million with a resilient power system and microgrid. During the period between 2011 and 2013, NJ Transit recorded 49 power outages affecting rail operations (excluding outages caused by Hurricane Irene and Hurricane Sandy). NJ Transit

14 Microgrids and Their Application for Airports and Public Transit Microgrid Ownership, Revenue Streams, and Funding This section of the synthesis report presents an abbreviated summary of key points about microgrid ownership models, revenue streams, financing, and funding. The DOE has drafted a Microgrid Playbook for Decision Makers (final version pending release). When the Microgrid Playbook becomes available, readers are encouraged to consult the DOE document for more information. Who “owns” the microgrid system determines who will operate and maintain it and who will own any value created by it (i.e., any revenue streams). Microgrids may be owned by private or public end users; by private or public utility companies; by third parties (including developers); and by combinations of these entities working in cooperation. The implications of the various ownership models can be complex; however, many airport and transit system properties are sufficiently large and contiguous to allow the establishment of microgrids within existing rights- of-way, which can mitigate ownership issues. Potential revenue streams from a microgrid can affect not only the ownership decision, but also the project’s financing options and the ultimate size of the system. Revenue streams associated with microgrids may include: • Bilateral agreements; • Capacity markets/forward capacity markets; • Contracting or retail services and ancillary services; • Demand/response arrangements; • Distribution utility services or contracts; • Independent System Operator/Regional Transmission Organization (ISO/RTO) services or bulk (wholesale) power markets; • Public Utility Regulatory Policies Act (PURPA) contracts (for qualifying facilities); • Solar renewable energy certificates/credits (SRECs); and • Tariffs. Eligible producers and suppliers also may be able to offset capital costs and boost existing revenue from microgrid projects through federal or state tax credits and incentives, including the federal ITC, SRECs, production tax credits (PTCs) for wind-based power, integrated storage, and emissions trading (state cap and trade). The various ownership structures provide pathways to funding and financing based on the respective owners’ authorities, expertise, and access to capital. Eligible microgrid projects also can apply for grant funding or financing from federal or state energy finance initiatives. The case examples provided in Chapter 8 include some discussion of financing; however, at this time little concrete data exists concerning the long-term economics of microgrids. For any project, analysis of the ownership structures and business models proposed will be necessary to evaluate the potential investment returns of various sources of capital and to determine the viability of the available options. Recent research suggests that PPAs are the primary source of capital for microgrid projects, followed by owner financing for smaller projects (Asmus 2016). The DOE’s Microgrid Playbook for Decision Makers (final version pending release) is expected to include a detailed table that matches ownership type to potential sources of capital, including: • Clean energy tax credits; • Commercial property assessed clean energy (C-PACE); • Federal or state grants or loans; • Performance-based contracts; • PPAs;

Background 15 • Public or private debt; • Public or private equity; • Public taxable/non-taxable bonds; • Service agreements; and • State energy resiliency banks or “Green” banks. In recent years, extreme weather events have unlocked a number of funding mechanisms such as state- and federal-funded microgrid feasibility studies, tax incentives for system pur- chases, and grants for microgrid project design and construction. Considerable attention has turned to developing business cases, revenue streams, and revolving funds to get projects off the ground. Policy makers, utilities, and independent system operators (ISOs) are working (in varying degrees in different states) to determine the benefits, opportunities, and barriers of integrating microgrids into their systems.

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TRB's Airport Cooperative Research Program (ACRP) and Transit Cooperative Research Program (TCRP) have released a joint report, ACRP Synthesis 91 / TCRP Synthesis 137: Microgrids and Their Application for Airports and Public Transit. The report describes microgrids that airports and public transit agencies can implement to increase resilience of their critical infrastructure. A microgrid is described as a collection of loads, on-site energy sources, local energy storage systems, and an overarching control system. Developments in control technologies have seen advanced microgrid controllers expand microgrid functionality to create new value streams and revenue opportunities, increasing microgrid viability to many more sectors. This synthesis describes the benefits, challenges, costs, revenue streams, and ownership structures relevant to airports and public transit entities.

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