Transforming existing solar arrays to microgrids could generate revenue for many customers

Solar-powered microgrids have progressed from generators of electricity in isolated, off-grid locations to key infrastructure for delivering economic and resilient power. The widespread availability of lower cost battery storage has been a key driver in this market.

The increasing popularity of microgrids has created new businesses that offer customers various ways to derive value from them. New York-based SolMicroGrid, has designed an energy-as-a-service business that assumes ownership of solar-plus-storage projects, selling power to customers.

SolMicroGrid CEO Kirk Edelman told pv magazine USA that existing installations of commercial and industrial (C&I) solar provides an excellent opportunity for the company’s “array-to-microgrid” (ATM) model. In an interview, Edelman discussed microgrid opportunities, solar portfolio drivers and how headwinds from Washington complicate solar development. The interview has been edited and condensed.

pv magazine: What makes a microgrid when it comes to solar? Is a microgrid simply an array plus storage, or is there more to it than that?

Kirk Edelman: A lot of purists in this industry get really upset because people throw around the term microgrid pretty broadly. I think the classic definition is a local electrical grid with defined boundaries that can operate entirely independent from the main grid. What that means is you have to have 100% resiliency in your distributed energy resources (DER) system in order to qualify as a microgrid for the purists.

What we find operating around the country is that some people want the resiliency, some people don’t feel it’s necessary, or they want partial resiliency for just some key circuits. And those systems, I guess technically, you’d have to call them DER systems rather than microgrids specifically.

pv magazine: So, there are elements of management and intent in the design of a microgrid? How you manage the power and what the customer plans to do with it? When you set up a microgrid using your energy-as-a-service model I assume that there’s a layer of management and intelligence there that enables the use of electricity at certain times based upon market or the situation. Is that that’s part of what a proper microgrid would be?

Kirk Edelman: You need a smart control system, right. But when you dive down real deep into these things, what you need that smart control system to do, besides some stuff that a dumb system could do, is to maximize the value of the battery. That’s where all the intelligence comes into play.

pv magazine: Battery storage has long been seen as the “killer app” for solar power. Going back to the 2010s, the arrays are there or they could be put in at reasonable cost for C&I and even private customers. Now battery storage has reached that level where it’s accessible to a broader range of customers. Would you say that is what is creating the opportunities your company sees for taking over those existing arrays and turning them into microgrids?

Kirk Edelman: Batteries have come a long way in a short period of time. Depending upon the tariff in effect at the site, adding battery storage can be incredibly lucrative or it might not pencil. But generally speaking, it allows you to create time-of-use arbitrage benefits. It allows you to peak shave. Those are two streams of revenue that can become very significant, depending upon the tariff the site operates under and what utility it’s with.

And then on top of that, in some states, like Massachusetts for example, the demand response programs and various other incentives for batteries are stackable and this becomes a very significant revenue source. So, I think batteries are fascinating. For us, we can take a site where an array on its own may be providing some benefits and by adding storage capability in a microgrid we can make it a much, much more lucrative project.

pv magazine: Let me ask you about some of the drivers. One argument I’ve seen is: “I’d like to get the ownership and management of my array out of my hair, let somebody else take it over.” So, that’s one way in. Another would be: “We can really get more bang for our buck if we were to add a storage component and then turn it into a microgrid.” Which of those two is the way that you mostly often get in front of a potential customer?

Kirk Edelman: This model that I just described it doesn’t hunt everywhere. You know number one that you need to be at a site that the grid power is expensive. If you look at where solar has caught on, in most cases it’s in the solar friendly states that have high grid power costs. Now that solar produces kilowatt hours that are so much cheaper than the grid can, that basic value right there is step number one.

If your grid power is north of 20 cents per kWh, then the microgrid is going to give you enough of an advantage where it’s worth your trouble as the host and our trouble as the provider. We’re saving you enough money that we can split the savings with you and we can get our money back with a return, and you can still get discounted power versus grid power.

pv magazine: When you take on these responsibilities to provide energy as a service, does this mean that you have to physically take care of these sites, or do you have partners that can do that? Do you have to have a physical footprint across the country, or do work with partners that can do the onsite operations and maintenance (O&M) work?

Kirk Edelman: In our industry, we make a distinction between technical asset management and financial asset management. We use national O&M service providers that we have master agreements with. We make sure that they have the capability to be at sites ASAP. They do that far better than we could building that out by ourselves.

Financial asset management we do in house. We have a network operations center where we are monitoring our operating projects 24 /7. When you see things that look troublesome come across the screen, you keep a close eye on it, and if it looks like it might become a big enough problem, then you decide if you have to turn to the technical asset management side and have someone go visit it and see what the problem is.

pv magazine: Looking at the customers that you’re after, the size of arrays that are out there, are they owned by the customer or are they owned by a third party that sells the customer power? Does the latter complicate what you want to do going into a situation? Is it better when the customer is the owner in terms of how you want to structure your deal?

Kirk Edelman: That’s a great question, because really when we rolled out ATM, my thought was more host-owned arrays versus third-party-owned arrays. Why? Because I think you’re going to see a lot of financial sponsors with investor-owned arrays, and they’re going to have bigger portfolios. And because they’re not strategic investors, but financial investors, they’re looking to maximize their return on selling us those projects. Typically, those projects come with [power purchase agreements (PPAs)] for whoever’s the host.

I just looked at a big portfolio from a big private equity firm that pitched it to us this past couple of days. And I’d say about two thirds of the projects had PPAs for like six cents a kWh for the next 10 to 20 years, with maybe one or two percent adjustments and some with no annual adjustment. It’s hard to make money with that kind of PPA. Contrast that with the host-owned sites, where the C&I customer owns and operates the array, where we can come in, take it off their hands and enhance it. They’re going to be a little less sensitive to trying to get the greatest possible return on flipping the asset. They just want to have somebody in who can run the thing and make it run the way it’s supposed to run, optimize it, and maybe even add some bells and whistles that make it even more lucrative.

So, I think my ATM program will work better with host-owned sites rather than investor-owned sites. But to be honest with you, I’m getting more inbound traffic from investor-owned sites and portfolios of sites.

pv magazine: One of the things that interests me is that with the change in federal support from the One Big Beautiful Bill Act and other actions, does that change the market in terms of solar portfolios? Do some people want to get rid of their portfolios, while others want to acquire more because they’re going to be more valuable going forward because maybe there won’t be as many available? Where do you see the push on that in terms of your business?

Kirk Edelman: Changes in federal support certainly does have an effect on our greenfield business. There a race right now to sign up and do deals that we know we can get done before the end of 2027. That’s a no brainer, absolutely.

In our array-to-microgrid business, which is what we’ve been really talking about here, even those that come from host-owned sites, the good flavor that I like, typically are already in operating lease-type financing structures where the incentives are being stripped out by a financial party, generally the lessor. So, we’re going to buy the lessee interest and then exercise the early buyout. We’re looking at that project from a post-federal incentive perspective. So, it really doesn’t affect that business, which is another reason why I’m excited about it. But as always, then we have to buy that array from the host at a price that allows us to do everything we want to do and have it make sense for both us and the host.

pv magazine: You were talking before about how a lot of the economics of microgrids depend on tariffs and what other policies are in place. I’ve attended panels where the main issue of, say, getting any kind of penetration with storage, is what are the local policies are. What can be done to improve that in certain parts of the country that need better definition of renewables policies to enable you to basically reach more customers?

Kirk Edelman: I would say that the biggest issue what we run into when it comes to crafting energy policy is that energy is a little bit mysterious for folks that are not in the energy business. You can’t see it; it’s hard to really understand. You hear all these stories about batteries bursting into flames.

And then there is the complicating factor of some of the propaganda out there. You hear Washington saying, “Renewables are the biggest con going.” This creates some headwinds. If you’re not an expert, you might think: “Well, I’m hearing it’s not the way to go. It’s a con game.”

I think it’s hard for people to get their arms around all the nuances of both the technology and the policies. You have to talk to people to help them understand what they’re paying for power and why. We spend a big part of our time talking to our customers about how their tariff works and explaining the bill that they just got from their utility. We’re in the demystifying business.

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