Ask anyone if there’s value to the resilience provided by indefinite renewables-driven backup power, and they’ll answer, “Of course, yes.” Ask them to quantify this value, and they’ll have no answer. In practice, the result is that renewables-driven resilience has been valued at zero.
Because we lack a value-of-resilience (VOR) standard, the market for microgrids has remained sluggish — despite increased interest in microgrids for resilience due to ever-frequent disasters, including storms, wildfires and now even viral pandemics. Given that resilience is often the main driver for installing a microgrid, we need a way to quantify its value.
To fill this gap, the Clean Coalition, a California nonprofit, has developed a straightforward VOR methodology: VOR123.
Electric loads are not created equal
People often ask, “What’s the VOR for a school or fire station compared to the VOR for a hospital?”
The VOR123 approach simplifies the answer to this question by establishing a straightforward process of tiering loads that have standardized values:
- Tier 1: Mission-critical, life-sustaining loads that warrant 100% resilience — usually about 10% of a facility’s total load.
- Tier 2: Priority loads that should be maintained as long as doing so does not threaten the ability to maintain Tier 1 loads — usually about 15% of the total load.
- Tier 3: Discretionary loads that should be maintained only when doing so does not threaten Tier 1 and Tier 2 resilience — usually about 75% of the total load.
The VOR for each load tier is exactly the same across facility types, on a per kWh basis. For example, the VOR for a kWh of Tier 1 load at a school, hospital, and fire station is exactly the same. From a VOR perspective, the only difference between facilities is the sizing of Tier 1 and Tier 2 load. While hospitals often have a high percentage of Tier 1 load, on the order of 50%, fire stations and most other facility types have a Tier 1 load percentage around 10% and a Tier 2 percentage around 15%, with the remaining 75% being entirely discretionary Tier 3 load.
An important assumption of the VOR123 methodology is that Tier 1 loads will be provisioned with 100% resilience, meaning these loads will be maintained indefinitely. This assumption differentiates solar microgrids, because diesel generators are sized for short-duration outages and cannot definitely rely on the ability to resupply, and natural gas generators are dependent on inherently non-resilient natural gas pipelines.
The percentage of time that Tier 2 and Tier 3 loads can be maintained will depend on the sizing of the solar microgrid relative to the loads. The load tiering approach is gaining traction, including with the California Public Utilities Commission, which recently referenced it in a Concept Paper for the microgrid proceeding that is tasked with implementing California’s SB 1339 microgrid legislation.
What is resilience worth?
The VOR123 methodology yields a typical overall adder of 25%. In other words, a site should be willing to pay 25% more for its electricity for the benefits of indefinite solar-driven backup power to Tier 1 loads, along with solar-driven backup for Tier 2 loads a majority of the time and for Tier 3 loads a significant percentage of time as well.
The 25% adder is derived by determining the VOR multiplier for each of the three load tiers, as follows:
- Tier 1: 100% resilience — indefinite energy resilience for critical loads — is worth 3 times the average price paid for electricity. Given that the typical facility’s Tier 1 load is about 10% of the total load, applying the 3x VOR Tier 1 multiplier warrants a 20% adder to the electricity bill.
- Tier 2: 80% resilience — energy resilience that is provisioned at least 80% of the time for priority loads — is worth 1.5 times the average price paid for electricity. Given that the typical facility’s Tier 2 load is about 15% of the total load, applying the 1.5x VOR Tier 2 multiplier warrants a 7.5% adder to the electricity bill.
- Tier 3: Although a standard-size Solar Microgrid can provide backup power to Tier 3 loads a substantial percentage of the time, Tier 3 loads are by definition discretionary; therefore, a Tier 3 VOR multiplier is negligible and assumed to be zero.
Taken together, the Tier 1 and Tier 2 premiums for a standard load tiering situation yields an effective VOR of between 25% and 30%. Therefore, 25% is the conervative choice as the typical VOR123 adder.
Validating the 25% VOR adder
The Clean Coalition has resolved on the 25% adder after conducting numerous validation approaches, including the following four:
- Cost-of-service (COS): This is the cost that suppliers will charge to offer the Solar Microgrid VOR across the Tier 1, 2, and 3 loads. As evidenced by a case study of the Santa Barbara Unified School District (SBUSD), a COS that reflects a 25% resilience adder is sufficient to attract economically viable Solar Microgrids at larger school sites.
- Department of Energy (DOE) Multiplier: The DOE researched VOR and determined that the overall value of critical load that is missed due to grid outages over an annual period is $117/kWh. While the Clean Coalition stages solar microgrids to provide indefinite solar-driven backup power to critical loads, and considers 30 consecutive days to be a proxy for indefinite, we assumed a conservative annual cumulative outage time of 3 days for the DOE Multiplier VOR validation analysis. The table below shows the DOE Multiplier VOR at three prototype SBUSD schools, which yielded an overall average 30% VOR adder to the 2019 electricity spend.
- Market-Based: This is essentially the market price, at which supply meets demand. The Solar Microgrid for Direct Relief, a nonprofit based in Santa Barbara, provides a case study. Direct Relief has deployed a 320 kW PV and 676 kWh battery energy storage system (BESS) solar microgrid, and while the solar is purchased via a roughly breakeven PPA, the BESS is leased at an annual cost of $37,500. The Direct Relief solar microgrid is similar in size to the San Marcos High School Solar Microgrid, and the cost of resilience is comparable.
- Avoided Diesel Generator Cost: This approach is analogous to the cost-of-service (COS) approach, except it calculates the adder needed for a diesel generator to fulfill the VOR123 level of resilience — using 30 days as a proxy for indefinite backup and assuming such a grid outage occurs once per year, during which the loads need to be maintained according to the standard VOR123 profile. The result, for a diesel backup system sized for a 1 million kWh/year site in Santa Barbara, is a 21% adder to the electricity bill. These calculations do not include the serious environmental and health costs of diesel generators. The Clean Coalition’s Avoided Diesel Calculator may be downloaded here for details and to manipulate assumptions.
Load management and optimizing BESS
Effective load management is fundamental to realizing VOR123. Although there are multiple potential load management configurations, the approach that tends to optimize the required functionality with cost is the critical load panel (CLP) approach.
In the CLP approach, a smart CLP is used to maintain Tier 1 loads indefinitely and to toggle Tier 2 loads as needed. Tier 3 loads are toggled as a group by toggling power to the main service board (MSB) and supplying power to all Tier 3 loads or none of them, depending on energy availability at any given time. Here is an example circuit-flow diagram for the CLP approach at one of the SBUSD high schools:
Also fundamental to realizing VOR123 is optimizing the BESS for both economics and resilience. For a solar microgrid to optimize economic performance while always being ready to provision indefinite renewables driven-backup power to Tier 1 loads, the solar microgrid must always be ready to operate in these two fundamental modes:
- In normal operations, with the exception of a minimum BESS state of charge reserved for resilience (SOCr), the entire usable BESS energy capacity should be available for cycling in pursuit of economic optimization, as illustrated in the figure below. To maximize economic performance, the SOCr should always be minimized, and highfidelity SOCr values should be calculated regularly, based on load and solar forecasts. The Clean Coalition’s SOCr algorithm updates every 15 minutes.
- In emergency operations, during grid outages, a solar microgrid is the only source of energy and the solar and BESS are dedicated to serving targeted loads according to the specified tiering prioritization.
A solar microgrid operator must be able to override SOCr settings to between 0% and 100% of the daily usable BESS energy capacity. For example, if preferences increase for everyday economic optimization, then the site can reduce SOCr levels. Conversely, in the face of coming storms and/or grid outage warnings, SOCr levels can be increased to prepare for the higher likelihood of grid outages and associated resilience needs.
Craig Lewis is executive director of Clean Coalition.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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