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2018 Edition, 2018

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State Regulatory and Policy Considerations for Increased Microgrid Deployment

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Executive Summary

Some of the most significant barriers to microgrid deployment are created by policy and regulatory environments that were not designed to enable microgrids. Microgrids are small electric distribution systems that utilize distributed energy resources (DERs) to power a one or a small number of customers (Figure ES-1). Microgrids are usually connected to the local electric grid (or “macrogrid”) but can operate independently, as well. A variety of regulations do not anticipate the interaction of microgrids with the macrogrid and can have unanticipated effects on microgrid ownership, operation, and design. In general, barriers exist because existing policy regimes have not been efficiently adapted to make use of microgrid capabilities and to maximize the benefits of microgrids for all stakeholders. The resulting regulatory barriers inhibit microgrid deployment in three ways: by prohibiting the deployment of microgrid technologies, by imposing additional planning and design costs, and by preventing microgrids from operating in the most economically efficient way. Although various solutions to these barriers exist, uncertainty about which solutions will be ultimately chosen inhibits microgrid planners from making choices and investments in specific technologies today.

Underlying all microgrid policy barriers is the set of incumbent assumptions about how to account for and distribute the costs and benefits of electricity generation and distribution infrastructure. Microgrids entail new costs and also supply new benefits. Together, these changes challenge the assumptions underlying existing regulations and raise the question of how to fairly assign those costs and benefits to the various stakeholders. These questions must be addressed by state legislatures and regulators, as they are best equipped to consider the desired balance of interests.

Benefits of microgrids include improved reliability and resilience to disruption, reduced emissions and environmental costs, increased penetration of distributed renewables, and the ability of utilities to defer capacity upgrades to transmission and distribution infrastructure. Microgrids may also be able to offer ancillary services such as voltage/reactive power/frequency regulation support, load shedding, or a load increase, depending on how the microgrid is interconnected and on the state’s market structure. Costs include the planning and engineering costs (including compliance costs), capital costs, and operating and maintenance costs (including fuel costs and purchased energy costs).

This study evaluates the six most significant categories of barriers affecting microgrid deployment in four target states: California, Illinois, Tennessee, and Vermont. Table ES-1 outlines the barriers identified in this study, as well as the potential solutions identified in case studies and literature sources.
ANSI/NEMA MW 1000, 2014