Catching the Microgrid Wave: An Interview with Peter Lilienthal

Image Credit: Piqsels

In recent years, there has been significant growth in solar microgrids as a partial remedy for electricity sector challenges in countries where grid coverage is low, and as part of resilience planning in areas at risk of natural disaster. Indeed, interest in microgrids is growing globally and is rising in the Middle East.

To get a better understanding of these emerging dynamics we spoke to Dr. Peter Lilienthal, former Senior Economist at the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) and head of Homer Energy by UL, whose focus is distributed energy resources.

Tell us about your work on microgrids.

We have done a lot of work on islands: there are literally tens of thousands of islands around the world all burning diesel, where renewables are most cost effective, and where non-renewable resources are most expensive.

We created a reputation for ourselves doing microgrids and distributed generation in remote areas, including Alaska and other places where it was cost effective. Now that PV and solar have gotten so inexpensive, this same concept is cost effective in grid-connected places, where energy prices are particularly high such as California and Germany, and where there is a concern about resilience.

With a resilient system, if the main grid goes down you can continue to operate. The impacts of significant natural disasters such as hurricane Sandy and the recent wildfires around the world, the disaster in Puerto Rico and even the latest outage in Argentina and Uruguay, have shown the loss of power for extended periods of time is a real problem. With cost effective microgrids possible, we now have a solution. We have been doing this for 25 years, starting at NREL and then as a private company in 2009 and now since December 2019, as a subsidiary of UL. During that time, we have had over 200,000 people use our software, so we are a de-facto global standard for alternatives to traditional power.

So you have been waiting a long time to surf this wave, so to speak, and it’s finally here.

That’s a good metaphor. If you are too far in front of the wave it doesn’t work. You have to time it just right and that is tough, because the utility industry can move slowly.

You have spoken about the concept of resilience for critical infrastructure as being something vital for both industrialized economies and fragile states. Can you elaborate?

It would be interesting to compare Iraq and the US, they are very different of course, but everybody needs to be resilient. Here in the US, we rely on power and don’t really know how to function without it. If the power is going to be out for a couple of weeks, that will affect food storage. In Iraq, I suspect this problem is more common.  It is a huge problem that impedes their development and of course, hospitals without power becomes a health and safety issue, with lives at risk.

In recent years because the oil price has been rising, Iraq has seen a wave of consumer spending, with a number of shopping malls springing up. These sites will have their own backup generators. Some of these are very large mall developments, using huge amounts of subsidised diesel. With oil prices so low now, is there an opening there for microgrids?

This is very common throughout the developing world where power is unreliable and everyone who can afford it has a backup generator. A lot of these oil producing countries, even Egypt, which is not an oil producer of course, subsidise the price of fuel. The real beneficiary of what we do is more the Ministry of Finance or the power company. Private companies provide their own backup power with subsidised fuel, so of course for the private company this is very attractive and the Ministry of Finance funds that.

The problem is incredibly widespread. Even the Alaska Energy Authority subsidises remote villages. The State has caught onto this and is retrofitting diesel plants into wind-diesel plants. But the issue is the folks in a Ministry of Finance probably don’t know anything about energy because it is not their remit.

Before they accept the idea that microgrids will save a lot of money, they have to understand it. And that is a totally different field for them. This is a challenge worldwide. It would not surprise me if it is a bigger challenge in Iraq because of general turmoil.

So what you are saying is, in emerging economies when it comes to something like installing microgrids for a hospital or mall, speak to the government stakeholders first, because they’re the ones that are losing potentially billions a year.

Yes, even if the price of crude oil is very low there can still be the challenge of importing refined diesel fuel. That also becomes a balance of trade issue.

If subsidised fuel is really cheap, the shopping mall is perfectly happy with their diesel generator. But even if diesel is cost effective, people want to move towards these hybrid systems with renewables and storage because of the noise and aggravation of maintaining a diesel generator. Diesel generators need constant maintenance. It’s not highly skilled maintenance, but you have to change the oil and pay attention to it all the time. So, it’s not strictly an economic question. Sometimes people feel the need to reduce their carbon footprint, I suspect that’s not the case yet in Iraq where there may be more immediate priorities.

Reducing pollution in Iraqi cities would be a major step forward; generator pollution and traffic pollution combine with dust into a horrible smog. But there is some rooftop solar in Iraq, and while these small developments won’t power air conditioning, technology is progressing, things that were not possible even seven years ago are entering the realm of the possible. Are you seeing this impact interest in microgrids?

With regards to something like air conditioning, here in Colorado it’s a dry climate, and we use evaporative coolers. This could be very effective in parts of Iraq where the climate is also dry. There is a huge range of less energy-intensive options that are cost effective. But again, if energy is heavily subsidised it’s going to be hard to promote. Ideally, you would want to see some of that subsidy money diverted to fund cleaner alternatives. But that presents a bureaucratic battle, which is unfortunate because one of the things I like about this microgrid field is it offers a way to bypass bureaucracy. You can go to a village or an individual commercial entity, and if they are enthused by the idea, you don’t have to battle as much bureaucracy.

One of the big problems with many development projects has simply been sustainability. In one example, expensive equipment was donated to a hospital in Africa but the donors did not consider whether the power was reliable enough to run it, and children died. How do you view the issue of sustainability?

I think the failure to consider sustainability has haunted countless development projects but I would tentatively say we’re seeing improvement now, towards cost effectiveness. And that is what we focus on, an optimisation model that finds the least-cost system to serve the load.

But 10 or 20 years ago, most of the interest was philanthropic, involving grants. They just wanted to do something and they weren’t looking at the problem in a commercial, replicable way. This was led by engineers who wanted to test new technology and they were not thinking like business people, as in, what is actually cost effective?

The funding agency, whether it was a foundation or other agency, mostly just wanted a photo op of a ribbon cutting ceremony. Years ago, this was very common, projects were installed with no thought to support for the project with maintenance, etc. They would fail for very avoidable reasons, for example, an animal chewed through a wire. But the local people didn’t know what to do, there was no phone number to call. So, they would go back to what they always did. Now we have remote monitoring and new ways of sustaining projects, and greater attention to this problem.

With rural microgrids, projects face the challenge of economic sustainability. If you look at the expansion of microgrids in Africa, the funding is almost entirely from the World Bank or African Development Bank. Perhaps one could make the argument that where the project economics are challenging, this should not be a case of relying on either government funds or the private sector, but a mixture of sources?

Well, we work very closely with the World Bank. They have to work through the government of course, it is not “either or” with development. But aid agencies and government aid agencies are doing a lot, particularly DFID in the UK, and GIZ, the Dutch and the Swedes are involved in this. The US is still involved, but less so than before.

But people are still doing good things under the radar. Really, the goal is to motivate private capital, but the aid agencies are providing the needed jump start because this is such a new area. We are also doing more and more with grid-connected microgrids now, especially where the grid is really unreliable. Even there, you probably want to be connected to the grid when it works and use it when you can.

There are two very different kinds of microgrids, grid-connected or not. With rural, from a strictly technical perspective, this is a slam dunk because its cost effective. But what makes it challenging and what really undercuts that argument is the development cost. You’ve got to have the community on board, and you can’t just do one installation. If you are going to do this in a cost-effective way, you need a portfolio that can be efficiently supported, a cluster of microgrids.

For example, a technician needs to be one day’s drive on a motorbike from each maintenance job. They don’t need much maintenance and service, it’s not like a diesel generator that might need an oil change every 300 hrs, but you can’t ignore it. And you need to collect money from the users. So, setting up the business to manage and service it has been the biggest challenge. It’s still new and not really at scale yet. And some development agencies are not moving as fast as they could be.

Developers say that there appears to be plenty of money and promises of support, so they gear up to build 15 microgrids. When they get funding for just one, they don’t have a viable business with only one microgrid. They need to have the whole financial package for it to take off. So, developing microgrids requires a level of patience, which is hard for small businesses.

Guest Contributor | + posts

Dr. Lilienthal was the Senior Economist with International Programs at the National Renewable Energy Lab (NREL) from 1990 – 2007. Currently, he is the CEO of HOMER Energy. He was the lead analyst and one of the creators of NREL’s Village Power Programs. He has a Ph.D. in Management Science and Engineering from Stanford University. He has been active in the field of renewable energy and energy efficiency since 1978. This has included designing and teaching courses at the university level, project development of independent power projects, and consulting to industry and regulators. His expertise is in the economic and financial analysis of renewable and micro-grid projects.

This person is a guest contributor and is not associated with the Iraq Energy Institute.