It’s Possible: Reliable Onsite Power that Helps Reach your Decarbonization Goals

The energy industry is experiencing significant changes and challenges impacting reliability of power. Increased frequency of severe weather events, the retirement of large, central-sited baseload fossil-burning generation facilities, increasing levels of intermittent renewable resources, and changes in the energy policy at the state and federal level are all driving changes in the energy landscape.

Many energy managers are pivoting to find secure reliable onsite power solutions while also staying in line with their decarbonization goals. Luckily, there are many options available today. Technology advancements, regulatory changes, and market mechanisms to encourage more reliable generation, coupled with innovative commercial structures provide customers with many more choices than purchasing a traditional standby diesel generator. Onsite power systems can provide the support the grid needs to help the transition to more renewable energy, while also providing backup power when power outages occur.

In this edition of Customer Insights, we’ll provide information on how the composition of generation resources on the grid are impacting reliability, the different types of onsite power sources available and how utilizing resiliency as a service can benefit your business.

How is the composition of generation resources on the grid impacting reliability?

The trends we see in the generation mix across the various Regional Transmission Operators (RTOs) in the U.S. are shifting away from fossil-based generation as there is more political and consumer pressure to deploy more renewable, carbon-free sources of generation.

New wind and solar installations dominate the interconnection queues, and the pressure to shut down coal, oil, and gas-fired generation continues. This trend will only continue with the Inflation Reduction Act of 2022, what some call the most significant single piece of legislation that has ever been passed to encourage a transition to a cleaner environment..

Innovations in the energy market are helping facilitate the shift from large-scale, traditional fossil power plants to a system with more sources of distributed energy resources. In September 2020, the Federal Energy Regulatory Commission (FERC) passed Order 2222 to help promote competition in electric markets by removing barriers preventing distributed energy resources from competing on a level playing field in organized energy markets run by RTOs. Traditionally consumers installed diesel-powered backup generators to provide emergency power to critical electric loads. These generators are an expense to the organization and are maintained and tested periodically, however they cannot be turned on when the cost of electricity is high due to environmental permitting limitations. These units do not provide any support to the grid during periods when the grid is most strained, therefore not helping to support the transition to more renewable resources. FERC Order 2222 is intended to help encourage more sources of distributed energy resources.

Reliable Onsite Power Sources with Decarbonization Goals in Mind

Many organizations are focusing their efforts on how they can reduce their carbon-based emissions. One doesn’t need to choose between reliable and clean power for the answer, as there are ways you can get both to meet the totality of your organization’s goals.

Cost, responsiveness, and environmental impact are the main attributes to consider when selecting reliable sources of onsite power. If environmental impact takes priority over cost, and if compliance with local zoning requirements for responsiveness suffices, the best solution will be different than if cost is a priority and environmental impact does not factor into the decision-making process. Listed below are the various types of onsite power sources and the advantages of each.

• Natural Gas Generators – Natural gas generators have several advantages and many view them to be a great complement to intermittent renewables. Gas generation can easily be sized to meet a wide range of onsite power needs as they are extremely flexible and can start and stop quickly. These units are efficient and the emissions are cleaner compared to diesel-fueled alternatives. There are also options on the fuel supply to power the gas generators. In addition to traditional pipeline natural gas, renewable natural gas and hydrogen are other options to consider. More information on fuel types can be found here.
• Battery Energy Storage – Battery energy storage can provide the most responsive backup systems for a business. They help critical loads navigate power quality disruptions, such as voltage swells, swags or momentary outages that can occur when a fault occurs on the distribution system.

Traditional uninterrupted power supplies (UPS) maintain high power quality, however, they are usually intended to provide backup power for a short time until a generator can start and synchronize with the load. As battery technology advances and the wholesale power market needs evolve through new market opportunities such as those encouraged by FERC Order 2222, and federal tax incentives now available to battery storage under the Inflation Reduction Act of 2022, battery storage will continue to play an increasing role in onsite backup power, as well as providing grid support. Batteries are very responsive and can provide frequency regulation to the power grid, a demand that will only grow as more renewable, intermittent resources are deployed.

• Microgrids – A microgrid is a way multiple technologies can be combined to help achieve your goal. Commonly used technologies in microgrids include solar, battery energy storage, fuel cells and natural gas generators. The “brains” of the microgrid, also referred to as the microgrid controller or the conductor of the system, directs which sources of generation serve the electric load. If the sun is shining brightly, perhaps the solar and battery system can meet the needs. The natural gas generator may need to be called upon to help carry the load if needed. Combining multiple technologies is a way to deliver resiliency in a way that will depend less on burning fossil fuel. Onsite solar coupled with a battery energy storage system can provide superior responsiveness and minimize environmental impact. If longer-duration backup power sources are needed, a natural gas generator can be added to provide the power needs if the solar and battery systems cannot meet the needs.

Resiliency as a Service

Changes in wholesale power markets, changes in the federal regulatory arena, and shifts to more distributed generation are creating opportunities for energy companies, such as AEP OnSite Partners, to provide resiliency as a service. So, what are the benefits of resiliency as a service?

• No upfront capital – In some cases, the energy company providing this service invests their capital in distributed generation projects, oftentimes with no upfront capital required to be invested by the organization. The investor recovers their investment through a long-term contract with the company by providing backup power as a service.
• No maintenance – An organization like yours can benefit by not having to utilize capital to purchase the equipment or be responsible for the maintenance, testing, and upkeep of the backup power system, including emission monitoring and air permit compliance obligations.
• Generate revenue – Sophisticated entities that are also engaged in the wholesale power markets can generate revenues in the market, which helps to reduce the total cost of the backup power system to the company receiving the resiliency benefits. These entities have the resources to constantly monitor the energy markets to ensure the resources are turned on when the market sends the price signal to do so.
• Compliance to offset emissions – If the business owns the generation equipment, these emissions would be classified as Scope 1 emissions, which is when emissions are directly created by the organization. Scope 1 emissions are typically more difficult to offset due to environmental requirements or corporate sustainability goals. However, if a third-party owns the generation equipment, the emissions are considered Scope 2, which can be more easily offset via the purchase of Renewable Energy Certificates (RECs) and comply with environment requirements.

To learn more about reliable, onsite power sources, please contact your AEP Energy Sales Representative, they will happily provide more information about these solutions. Not currently working with an AEP Energy Sales Representative? Click here to request more information.

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