The R&D Tax Credit Aspects of Microgrids
Microgrids
Microgrids are becoming a growing force in
the energy sector. Sales for this emerging technology are
estimated to surpass $3 billion within the next few
years. Microgrids are local electric grids that can be
controlled to connect or disconnect from the traditional
electric grid. Usually a microgrid is powered by the main
grid, however, in the case of a power outage it is able to
function individually.
The flexibility of this
technology provides many benefits including reliability and
efficiency for users. Microgrids can be used as a backup
in the event of power outage emergencies, as well as provide
energy for small locations and cut down costs. These
systems maintain a significant role during the case of an
outage in buildings such as hospitals, military bases, and
universities. This new technology can also be combined with
renewable resources to create power and reduce the amount of
pollutants and greenhouse gases.
In addition, the
application of microgrids decreases the stress load on the
main electric grid system during peak periods. With new
developments in microgid technology, the application of these
systems will only keep increasing around the
world. Federal and state R&D credits are
available for companies involved in microgrid development and
innovation efforts.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 19, 2014 President Obama signed the
bill extending the R&D Tax Credit for the 2014 tax year.
As of this writing, proposed tax extender legislation would
extend the tax credit through December 31, 2016.
The Power of
Microgrids
There are several rising power sources for
microgrids including generators, batteries, and
renewable resources. Many microgrid systems utilize solar,
wind, geothermal and combined heat and power (CHP)
systems.
Renewable energy sources
such as solar and wind do not produce the same amount of
energy each day so consistent control over these systems and
continuous forecasting are needed in order for the system to
run smoothly.
Electricity generation
and storage when main grids are not functioning are
significant features offered by microgrids. Frequent power
outages over the past few years have resulted in increased
microgrid applications. Back up grid systems for critical
facilities, such as military bases, are particularly
important.
An Inside Energy study
revealed that the average amount of outages over a five year
period has doubled every five years. From 2000-2004 there were
about 44 outages each year which has jumped to a steep
increase of 200 power outages per year during 2010-2013.
Several of these incidents have occurred from weather
associated events such as hurricanes and snowstorms.
Microgrid Funding
State Incentives
Certain states have
created incentives for companies developing microgrids due to
the increasing amount of power outages. Several states,
including Connecticut, Massachusetts, New York, New Jersey, 
Maryland, and California have already created
microgrid incentive programs. Connecticut is presently up to
their third round of funding since 2012 and is offering up to
$30 million for microgrid developers.
California has developed
an energy storage program which encourages the use of
microgrids. In 2014, the state offered $26.5 million in grants
for integrated microgrid and renewable resource systems.
The California Energy Commission also issued a program for
projects that included low-carbon systems for vital buildings
and high penetration renewable energy systems. Those who
want a higher chance of qualifying for funding should adhere
to the standards for each project. The creation of these and
other state incentives encourages companies to develop
microgrid systems.
Department of Energy
In support of microgrid
research and development, the Department of Energy (DOE)
focuses on microgrid planning and design, as well as
operations and control. The DOE has announced the distribution
$8 million to seven participants involved in improving
microgrid systems which are less than 10 megawatts (MW).
Each group received $1.2 million in project funding from the
DOE. The seven participants include:
- ALSTOM Grid, Inc. who will use the
funding for researching and designing community microgrid
systems in Philadelphia, PA.
- Burr Energy, LLC is designing and
building a system for the Maryland Town Center to utilize
in the case of an outage.
- Commonwealth Edison Company
(ComEd) of Illinois is developing and testing a microgrid
controller, which manages two or more interconnected
systems.
- The Electric Power Research
Institute (EPRI) is creating a standardized microgrid
controller. This device will allow for continuous power
during critical loads.
- General Electric Company (GE) is
developing a microgrid control system with new factors
which will help support critical loads in Potsdam, NY.
- TDX Power, Inc is engineering,
designing, simulating and building a microgrid control
system on Saint Paul Island, Alaska. The microgrid will
include different energy resources, which will lead to a
cleaner environment.
- The University of California,
Irvine (UCI) has created a program called the Advanced
Power and Energy Program for developing and testing a
generic microgrid controller to be used for managing a
variety of microgrid structures.
Microgrid Projects
New York University
New York University was
initially powered by an oil fired cogeneration plant, however
chose to transfer to a natural gas fired CHP facility. The
system cost was $126 million and was lowered due to tax exempt
bonds. The microgrid is made up of two 5.5 MW gas turbines to
produce electricity combined with heat recovery steam
generators and a 2.4 MW steam turbine.
The equipment is
normally attached to ConEdison’s main grid, but can function
individually as well. During Hurricane Sandy, the structure
proved capable of standing on its own. Since switching
to this new system, the university has received economic and
environmental benefits. The college saves around $5-8 million
per year on energy costs, has achieved a 68% decrease of
pollutants, and seen a drop of 23% in greenhouse gas
emissions.
Clarkson University
Clarkson University has
recently received almost $1 million in fundign from the
National Science Foundation to develop a microgrid. This large
investment was given to the college in order to improve
disaster response activity. The funding will assist with the
development of a smart scheduler application, which will be
targeted at prioritizing the system’s performance during
emergencies.
Clarkson University’s
School of Engineering, Business, Arts, and Sciences are
involved with the project, along with National Grid USA and
the Electric Power Research Institute (EPRI). National
Grid will own the underground distribution network and EPRI
will work on the project design, data collection, and
analysis.
Borrego Springs
San Diego Gas and
Electric Company (SDG&E) has installed a microgrid system
in Borrego Springs, CA. For this development, distribution
assets are owned by the utility and the energy resources are
owned by the customers. Companies in support of the project
include Lockheed Martin, IBM, Advanced Energy Storage, Horizon
Energy, Oracle, Motorola, Pacific Northwest National
Laboratories, and the University of San Diego.
Project funding included
$7.5 million from the DOE, $4.1 million from SDG&E, $2.8
million from CEC, and $0.8 million from other partners.
The microgrid features about 4 MW of capacity, consisting of
two main 1.8 diesel generators, a 500 kW/1500 kWh battery,
three 50kWh batteries, six 4kWh/8kWh home energy storage
units, 700 kW of solar PV , and 125 residential network
systems.xi SDG&E will conduct a cost benefit
analysis of the project to determine the economic,
reliability, environmental, security, and safety benefits.
The Borrego Springs
project is the largest utility-scale microgrid in the U.S
providing up to 26 MW of power. The solar powered microgrid
system was tested in a community over 8 hours and residents
only lost electricity when the power was switched between the
grid and the microgrid. Due to this problem, SDG&E are
trying to develop control devices, which would be able to
control the system and maintain power when the source is
switched between grids. During lower energy usages,
especially during the winter, this system alone would be able
to support residents with up to 48 hours of electricity. With
the successful results of this project, SDG&E is working
on several microgrid systems to service other locations.
New Technologies
Homer Energy
Homer Energy was created
by the National Renewable Energy Lab (NREL), a
subsection of the DOE. Homer Energy’s Hybrid Optimization of
Multiple Energy Resources (HOMER) model is a software platform
designed to assist users in creating the most beneficial and
efficient system. The HOMER platform allows users to analyze
the feasibility of using various technologies by evaluating
the cost, electrical load, and energy resource
availability. The HOMER software is beneficial for
companies who want to invest in new microgrid technology and
are unsure where to begin.
Siemens
Siemens Corporation has
been a leading company in the innovation of new microgrid
technology. The company is highly confident that the amount of
microgrids in use will increase over the next few years. Due
to this, Siemens has developed software, which allows
users to easily maintain and run their distribution system.
The Spectrum Power
Microgrid Management System (MGMS) control system provides
owners with reliability, efficiency, security and
sustainability. The MGMS can determine which times are the
best to purchase power from the main grid system and how the
system can be most efficient. Owners can also choose to
generate their own energy. The MGMS gathers
information pertaining to power generation and storage, energy
consumption and energy exchange with the main grid. This data
allows users to further analyze by utilizing supervisory
control and data acquisition (SCADA), forecasting and real
time optimization features.
Schneider Electric
Schneider Electric,
Oncor, and S&C Electric Company have partnered to create a
four part microgrid. S&C and Schneider Electric built the
structure over a 6 month period, which was designed to combine
energy storage and renewable resources with modern
software to create an efficient system. The structure consists
of four microgrids powered by two solar PV groups, a
microturbine, two energy storage units, and four
generators. Two batteries for energy storage are
provided by S&C and Tesla Motors.
The system is able to
function at a peak load of 900 kW for two hours. The supplied
energy during nighttime hours then decreases to 550 kW. A
microgrid split into four sections allows each part to be
individually controlled as separate units or as one whole
unit. A four part design also makes it more reliable in the
case of a power emergency.
Powerhive
Rural areas in East
Africa are experiencing a new wave of technology with the
utilization of microgrids. In remote areas, public entities
are usually in charge of distributing energy. Powerhive Inc.,
based in California, has created a system to generate and sell
electricity to the public. The pay-as-you-go energy
service allows customers pay a base fee and choose from
different service levels offerings. Powerhive uses a unique
mobile payment system provided by M-Pesa and takes advantage
of other technologies to provide the most efficient services.
Powerhive’s Site Wizard
software for Analysis, Reconnaissance, and Mapping (SWARM) was
developed to analyze optimal locations for microgrid
placements in order to produce the most power. Once a
location is chosen, a smart meter is built for tracking the
system. The Asali smart meter device connects to Honeycomb, a
cloud platform, which is used to manage and monitor the
system’s activities. Such activities include equipment
performance, energy consumption, price information, load
balance, and optimal sites during a failure. The network
sensors track how much energy is generated and how much
is being consumed by each customer.xv The system can also
control energy distribution by using the network sensor data.
Powerhive has created innovative and interconnected solutions
to provide energy for a wide range of customers.
Conclusion
On a global scale, many companies are
noticing the benefits of incorporating microgrids into the
traditional grid. The growth of renewable energy and energy
storage in combination with microgrids has created more
reliable and affordable microgrid systems. Federal and state
R&D Tax Credits are available to companies developing and
integrating these innovative microgrid systems.
