IEEE Electrification Magazine - March 2014 - 100

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capable of islanding, there are
recurring annual costs for cuselectricity Costs.
tomers to operate and mainCustomer annual energy use
240,000
kWh
tain their microgrid.
These costs vary greatly
X
Customer's electrical rate (Illinois average)
0.08
US$/kWh
but draw out an important
= Total annual electricity costs in Illinois
19,200
US$
reason why microgrids are
Customer annual energy use
240,000
kWh
not harming utilities: economies of scale. The typical
X
Customer's electrical rate (Hawaii average)
0.33
US$/kWh
investor-owned utility has a
= Total annual electricity costs in Hawaii
79,200
US$
median of 400,000 customers
Customer annual energy use
240,000
kWh
with an average of 34 customers per mile. To deliver power
X
Customer's electrical rate (United States average)
0.13
US$/kWh
to these customers, utilities
= Total annual electricity costs in the United States
31,200
US$
have invested in an infrastructure that requires conbenefit here that helps the customer
tinued operation and maintenance.
may produce smaller savings than the
save money and really helps the utiliOver the past 100 years, utilities
diesel would provide because of varyty defer capital costs. If customers can
have become experts at this and
ing levels of efficiency.
reduce their load during peak periods,
have entire asset management
On the other hand, diesel has varithe cost of losing that potential revegroups devoted to maintaining their
able costs that vary depending where
nue from the customer is minuscule
infrastructure. Because of the scale
you are in the world. In the United
compared to the savings utilities realof the typical utility's system, econStates, one barrel of diesel fuel costs
ize by not having to purchase peaking
omies of scale fall into place with
about US$125. If we assume that a
generation or invest in spinning
utilities able to leverage their size to
microgrid has two 150-kW diesel genreserve. Thus, the ability for customlower the costs of equipment, pererators operating on full load, they
ers to use the DG in their microgrids
sonnel, and other resources needed
would consume 21.8 gal/h of fuel. This
to reduce their peak loading actually
to maintain their system.
would consume about 2.8 barrels of
helps utilities in the long term.
When you look at a microgrid, the
oil per day and cost the microgrid
costs for ongoing operation and mainowner US$350 per day, or about
Cost of fuel
tenance fall to the customer. These
US$127,750 annually, to peak shave.
We have already calculated the energy
costs take away from the annual cost
This does not take into account
savings operating a DG can have, but
savings of operating a microgrid.
restrictions on emissions that may
these savings are defrayed by both
Worse yet, if a customer decides to
cause additional costs in taxes or
fixed and variable costs. Fuel is a variforgo maintenance of their microgrid,
require the microgrid to run the genable cost and a major factor that chips
the wear and tear of operation can
erator below peak load.
away at the economics of microgrids.
take its toll on the equipment, causing
These are extremes, but the enerThe range for the cost of fuel varies
it to fail and negating any benefits.
gy mix within a microgrid and the
based on where you are, what fuel
fuel used to support it are critical facwhat Is the Cost of Reliability?
source you are using, and the efficiency
tors that typically deter customers
We have looked at how to calculate
of your DG resources. Without calculatfrom using anything that has high
the savings customers can realize by
ing it, we want to highlight this number
consumption costs.
using their microgrid to become more
because it feeds into the total variable
Operation and
efficient and offset the power they
cost of operating a microgrids DG.
Maintenance Costs
demand from the utility. To balance
let us take two extremes, solar
next time you look at your electric
that equation, we have accounted for
power and diesel generation, and look
bill, you will see an additional cost
the annualized cost of the system as
at the differences the cost of fuel can
added to your energy use that covers
well as its operation and maintenance.
play in whether it is economical to
the utilities' costs to operate and
as you may recall, one of the
use on-site DG instead of utility sourcmaintain the infrastructure necesqualifying criteria for a microgrid is
es. With solar, there is US$0 in variable
sary to provide electricity to your
the ability to island itself from the
fuel costs to operate that source of
home. a microgrid is no different.
grid. The U.S. electric grid is 99.9%
generation. Therefore, solar power
Outside of the direct costs for the
reliable, but reliability numbers differ
does not subtract anything from our
implementation of DG and controls
among states, regions, and countries.
savings from operating it, although it

TAble 3. Comparison of electrical Rates in the United states to Total

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I E E E E l e c t r i f i cati o n M agaz ine / MARCH 2014

Table of Contents for the Digital Edition of IEEE Electrification Magazine - March 2014