Page 47 - CARILEC CE Industry Journal_Oct_2019

Instead of diesel generators sitting idle in parking lots the centralized scenario, we assumed that the benefits of
waiting for the next outage, islands could take advantage the energy generation were only captured by the asset
of the fact that renewable generation and storage are owner. So, when the grid is down, the asset owner could
already part of the island’s plans for the future grid. Such not receive benefits from the solar or storage system. On
assets can be distributed throughout the grid, and a the other hand, in the distributed scenario, the benefits of
portion of these can be co-located with facilities that the asset are shared between the asset owner and the
provide critical services. RMI, with its government and critical facility across both normal operation and under a
utility stakeholders, has found that a percentage of grid outage (see Figure 1).
generation assets will likely be distributed or
decentralized sources to achieve the objectives of each The analysis illustrates that the cost premium for
particular island in their energy transition. Distributing distributing the assets is roughly eight percent of the
electricity generation resources in different locations capital cost of the system. Most of this cost premium is a
allows for a more diverse set of resources to be utilized result of increased equipment cost (four battery
and minimizes single points of failure, while efficiently converters instead of one for example), increased labor
using available land. cost, some additional logistics costs, and additional
interconnection costs of distributing the assets across four
It may be counterintuitive for a utility to distribute what separate sites. However, the cost premium is outweighed
would normally be centralized generating assets, kept by the decreased cost of leasing land (or roof space) from
behind the utility’s fence line, into smaller projects at or a critical facility and by the additional revenue of selling
near critical facilities. This approach would add a cost electricity to a critical facility when the grid is down (with
premium and surely add complexity around ownership, an annual outage average of 1 percent—see Figure 2).
operation, and regulation. However, if these DERs were
used as part of the utility’s daily operations and provided The cost value of distributing the assets across four
seamless redundancy and resiliency to serve the island’s critical facilities is the same as centralizing the assets at
most critical services, then, as analysis presented in this one utility-owned location.
paper shows, the additional costs are outweighed by the
collective value these resources provide to the grid and the
co-located facility. Furthermore, these new “distributed”
utility operated assets, would give CARILEC utilities a
perfect opportunity to expand their service offerings for the
greater good and update their business model.

Comparing the costs of centralized vs distributed
energy assets

To better understand the tradeoff between the cost
premium of distributing renewable generation assets,
RMI completed a 15-year net present cost (NPC) analysis
to compare two scenarios: Figure 2: Net present costs of distributed vs centralized assets
1 A 1 MW solar photovoltaic plant and a 1 MWh under different outage scenarios
battery asset that is centralized
2 The same assets, decentralized to four smaller Although customers, like critical facilities, may
projects located at critical public facilities experience grid outages less than 1 percent of the time in
a given year, the prolonged grid outages from the 2017
This analysis considered land costs, capital costs, and hurricane season illustrate how quickly that can change
operation and maintenance costs for the two scenarios. In when faced with a powerful storm. Furthermore, this
analysis does not attempt to capture the additional
benefit to island society from critical facility services
during a grid outage, which would heavily favor the
distributed scenario.

As is the case in most energy projects, the devil will be in
the details. Land cost or lease rates and grid outage
projections affect the ability to make up the cost premium
for distributing renewable and storage assets. In addition,
there is an active debate on whether utilities or customers
(or both) should own and operate DERs. But regardless,
Figure 1: Benefits for the asset owner and the critical facility this initial analysis illustrates that it is worth exploring the
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during normal grid operation and during a grid outage costs and benefits of these projects for CARILEC utilities .

CE INDUSTRY Journal 45