Fortifying the grid in the Southeastern U.S. through microgrids: Navigating an uncertain regulatory environment

Abstract

AbstractOne shortcoming of the current grid in North America is a lack of resiliency and reliability in inclement weather and the general need for investment to update its aging infrastructure. This is especially apparent in the Southeastern U.S., where tornadoes, hurricanes, flooding, and lightning strikes regularly disrupt power to customers. One way to increase grid resiliency in natural disasters is through the implementation of microgrids, which are a group of customers within defined electrical boundaries with the ability to connect to the grid or disconnect from the grid and operate independently in island mode. There are several factors impeding microgrid adoption, especially regulatory uncertainty. In many states, and particularly Southeastern states, there are not explicit tariffs regulating the interconnection and operation of microgrids, making investment in microgrids risky. Microgrids have been difficult for states to regulate because they often integrate multiple energy technologies and have complex ownership structures. There are three primary policy suggestions that could enhance microgrid adoption in the Southeastern U.S.: (1) States should adopt regulatory frameworks for microgrids that properly value the resiliency and grid benefits of microgrids, particularly through legislation that establishes legal definitions and rights of microgrids. (2) State legislatures should consider a shift to performance‐based ratemaking (PBR) rather than cost‐of‐service (COS) ratemaking to better prioritize certain performance goals, such as grid resiliency, and encourage more widespread adoption of microgrids. (3). To improve the economics of microgrids, state legislatures should consider authorizing community choice aggregation (CCA).