In the power sector world, Arizona is notorious for vitriolic — and political — battles over rooftop solar policy.

But despite being enmeshed in ongoing debates over rooftop solar — and its proper compensation — its utilities are also in the forefront of deploying new technologies to satiate demand for the two R’s of the power sector: a resilient grid and reliable energy.

Part of that process includes investing in microgrid projects to reel in technology companies interested in a more sustainable mode of operating. Arizona Public Service Co. is a prime example.

In 2016, APS announced it would build a 63 MW microgrid with Aligned Data Centers, as part of the utility’s push to build the “grid of the future.” While Aligned paid for part of construction, APS will recover the remaining costs from ratepayers.

A year later, the microgrid stands complete. The microgrid, constructed on top of the roof of a converted building, illustrates how the utility is finding ways to relieve congestion on transmission lines, leverage grid services and boost the resiliency of the grid.  APS in May took Utility Dive on a tour of the microgrid, showing the benefits of building such a facility in a fast-growing metropolitan area like Phoenix.

First, what goes into a microgrid

A microgrid is typically built to isolate, or island, a facility in cases of outages. Each facility is unique, and therefore, a microgrid must be designed to meet that specific need.

“When you look at the microgrid projects...you don’t see a standard design,” said Ben Kellison, director of grid research at GTM Research. “[It] depends on site and need.”

For APS, the need was to provide a service for a large customer, while supporting the utility in case of a disruption.

“When there is a fluctuation outside of the norm, these machines will automatically turn out and support the grid...as well as securing the site,” Dave Morton, energy innovation program consultant for APS, told Utility Dive.

The microgrid can, in times of outages, take the load from the data center offline to provide 24/7 power. It also provides a way to relieve the transmission line from congestion when the utility is operating its lines at full capacity.

“We're in a densely populated area [and] we’re also in an industrial area where more and more people are coming for economic opportunities,” said APS spokeswoman Annie McGraw. “It's cheap to build here and people want to live here and...you have APS and utilities that are willing to work and look at what they can do to make it easier for you to have backup generation.”

To help provide these services, APS is also building a 69-kV enhanced-capability, bidirectional substation, which is not common for most substations, DeGraw said. This allows the microgrid to take energy from the main grid, while also letting it flow back. The microgrid also runs on diesel generators — not a fuel source of choice for clean energy advocates, but the best one to ensure the microgrid does what it’s supposed to do, APS Director of Technology Innovation Scott Bordenkircher told Utility Dive.

“The thing that we’re really watching is the renewable [energy] piece because that's a big part of this as companies want 100% renewables,” Bordenkircher said. “Which, from a planet standpoint is great — except physics tend to dictate things like that don't work at night so also making sure that we retain our ability to retain its resource mix [is key].”

However, the microgrid was constructed with renewable energy and storage in mind. If Aligned Data Centers wants to run on 100% renewable energy, APS can swiftly convert the microgrid to use those resources, backed up with energy storage.

“What we've done is actually built in the ability to add batteries, to add PV very quickly, very easily,” Morton said.  “Everything is already there, it's plug and play at that moment.”

The future of microgrids

Microgrids are popular with facilities such as hospitals that need reliable energy apart from the grid. New York, for example, has rolled out initiatives to invest in microgrids, especially in the wake of Hurricane Sandy.

A 2016 GTM Research report said the cumulative microgrid capacity in the U.S. is expected to reach 4.3 GW by 2020. Microgrids are not built on a standard design, but rather conform to the specific needs of the facility and its load profile, experts told Utility Dive.

“It’s a focused versus general purpose type of system, consequently...the different types of loads vary from customer to customer,” said Greg Mowry, a professor at St. Thomas School of Engineering.

Financing a microgrid is also complicated. Some utilities have turned to private-public partnerships as a financing tool. Other utilities are hoping to ratebase part of the cost. Pennsylvania lawmakers crafted a bill to allow utilities to earn a rate of return on microgrids.

But, much like establishing a standard for microgrid design, how to finance a project appears subject to the developer and utility.

“This is an area that’s developing,” said Navigant analyst Peter Asmus. “It’’s very much in the jurisdiction of PUC (Public Utilities Commission) by PUC and utility and utility.”

APS's investment was a risky maneuver. Recovering costs for new technologies through the rate base can be controversial, as seen in California and other states. But Arizona regulators have approved a number of such programs for APS in the past, including an in-house rooftop solar program. 

Policy objectives are often another hurdle, especially when it comes to design. 

Microgrids have typically used diesel generators to provide reliable backup. But some advocates push for a cleaner resources for microgrids as one way to meet renewable energy and carbon obligations. 

“It’s worth bifurcating how carbon regulations will impact microgrids versus renewables,” Asmus added. “In this increasingly distributed grid, there’s certainly demand for microgrids — [which can] increasingly become green and can reduce emissions. Most policies — whether it’s a policy pushing a carbon tax and RPS’s — are good things for microgrids.”

It’s clear for utilities like APS that microgrids provide services beyond just serving a customer. Indeed, as Arizona temperatures heat up and capacity thrums at nearly 100%, these technologies can help APSs bypass infrastructure upgrades like transmission lines and, for the most part, substations.

“Aligned obviously gets what they need from the standpoint of backup power which is obviously you know their primary concern and us serving their load is one of our primary concerns,” Bordenkircher said. “But when it's not being used for that, it gives us an opportunity to use it for other things on the grid. So it's a great benefit to the general customer base and obviously it exactly fits the bill Aligned needed to fit its [need.]”