VOR123: Value-of-resilience

Unleashing Community Microgrids to deliver cost-effective resilience benefits to businesses, municipalities, and communities

Why we need a standardized value-of-resilience (VOR)

Everyone understands that there is significant value to the resilience provided by indefinite renewables-driven backup power. However, no one has yet quantified the value of this unparalleled resilience.

A value-of-resilience (VOR) standard is sorely needed, and its absence represents a significant gap in the market for Community Microgrids while learning is still in the early stages. As Microgrid Knowledge has noted, valuing resilience “is not so simple, yet may be the primary reason an organization installs a microgrid.”

A standardized VOR will allow all stakeholders to effectively consider VOR when analyzing Community Microgrid economics. This will result in Community Microgrids being widely deployed, and far greater resilience for communities.

The VOR123 methodology

At the Clean Coalition, we’ve developed a standardized VOR metric to unleash this key market. Our VOR123 methodology makes it simple to quantify VOR by standardizing VOR for three tiers of loads — critical, priority, and discretionary loads — across all facility types:

  • 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 following figure illustrates the level of resilience anticipated from a solar+storage microgrid at a facility where the Tier 1 load is 10%, Tier 2 load is 15% and Tier 3 load is 75% and where enough solar can be included onsite to net-zero the site’s annual electricity consumption. The average anticipated resilience, in terms of percentage of time online, is as follows:

  • Tier 1: 100%
  • Tier 2: 80% (at least)
  • Tier 3: 25% (at least)
Percentage of time online for Tier 1, 2, and 3 loads for a Solar Microgrid designed for the University of California Santa Barbara with enough solar to achieve net zero and enough energy storage capacity to hold 2 hours of the nameplate solar (200 kWh energy storage per 100 kW solar).

VOR123 will help everyone understand that premiums are appropriate for Community Microgrids that can provide renewables-driven backup power to critical loads indefinitely, to priority loads almost constantly, and to all loads a lot of the time.

The VOR123 methodology was referenced in July 2020 by California Public Utilities Commission (CPUC) staff in a Concept Paper submitted as part of their microgrid proceeding, which is tasked with implementing California’s SB 1339 microgrid legislation (see pp. 94 and 112 of the PDF).

Webinar: Valuing resilience of Solar Microgrids

The Clean Coalition’s Executive Director, Craig Lewis, presented on our value-of-resilience (VOR123) methodology during this webinar hosted by the Municipal Sustainable Energy Forum on 5 November 2020.

  • Craig’s presentation slides are available in PPT and PDF format.
  • The Avoided Diesel Generator Calculator referenced in the webinar is available in Excel spreadsheet format.

Resilience is worth a 25% adder

The Clean Coalition has found that there are different VOR multipliers for each of the three load tiers. The following valuation ranges are typical for most sites:

  • 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%. Hence, the Clean Coalition uses 25% as the typical VOR123 adder that a site should be willing to pay, including for indefinite renewables-driven backup power to critical loads — along with renewables-driven backup for the rest of the loads for significant percentages of time.

Validating the 25% adder

The Clean Coalition has resolved on the general 25% premium figure after conducting numerous analytical approaches, including the following four primary methodologies:

  1. Cost-of-service (COS): This is the cost that suppliers will charge in order to offer the Solar Microgrid VOR across the Tier 1, 2, and 3 loads (VOR123). 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 the larger school sites.
  2. 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, the Clean Coalition assumed a conservative annual cumulative outage time of 3 days for the DOE Multiplier VOR analysis. The SBUSD case study yielded an overall 30% VOR adder to the 2019 electricity spend.
  3. Market-Based: This is essentially the market price, where supply meets demand, and the Direct Relief Solar Microgrid provides a case study. Direct Relief has deployed a 320 kW PV and 676 kWh BESS Solar Microgrid, and while the PV is purchased via a roughly breakeven PPA, the BESS is leased at an annual cost of $37,500. While the size of the Direct Relief BESS (676 kWh) is a bit smaller than the size of the San Marcos Solar Microgrid BESS (710 kWh), Direct Relief is paying a bit more ($37,500/year) than the DOE Multiplier would value the San Marcos BESS ($36,729/year).
  4. Avoided Diesel Generator Cost: This approach is analogous to the previous cost-of-service (COS) approach, except it calculates the adder needed for a diesel generator to fulfill the VOR123 level of resilience. For this calculation, we equate “indefinite backup” to 30 days, and assume 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.

    See the Avoided Diesel Generator Calculator we use to calculate the adder needed for a diesel generator to fulfill the VOR123 level of resilience (Excel spreadsheet).

Load management and optimizing batteries for economics and resilience

Load management is key to ensuring that a facility realizes the full value of resilience. The optimal approach for load management is the critical load panel (CLP) approach, in which 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. 

The circuit-flow diagram for the CLP approach at a Santa Barbara Unified School District high schools provides an illustration:

Optimizing batteries for economics and resilience is also key. For a Solar Microgrid to optimize economic performance while always being ready to provision indefinite renewables driven-backup power to critical loads, the Solar Microgrid needs to always be ready to operate in these two fundamental modes:

  1. Normal grid-connected operations: In normal operations, with the exception of a minimum BESS state of charge reserved for resilience (SOCr), the entire usable battery energy storage system (BESS) energy capacity should be available for daily cycling in pursuit of economic optimization, as illustrated in the figure below. To maximize economic performance, the SOCr should always be minimized, and high-fidelity SOCr values should be calculated regularly, based on load and solar forecasts. The Clean Coalition’s SOCr algorithm updates every 15 minutes.
  2. Emergency grid-outage operations: In emergency operations, during grid outages, the site is entirely powered by the Solar Microgrid, with the solar and BESS being dedicated to serving onsite loads according to the specified tiering prioritization.

A site 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 set lower SOCr levels. Conversely, in the face of coming storms and/or power outage warnings, the site can set higher SOCr levels to prepare for the increased likelihood of grid outages and associated energy resilience needs.

What is power system resilience?

The Clean Coalition defines resilience as the ability to keep critical loads online indefinitely in the face of extreme or damaging conditions.

This goes beyond reliability, which is measured after only 5 minutes of grid outage. Resilience is driven by renewables with energy storage and demand response, and it is focused on reducing outage duration, cost, and impact on critical services.

Critical loads are those that are life-sustaining or crucial to keep operational during a grid outage — usually about 10% of a community’s or a facility’s total electrical load.

Why we need a more resilient power system

Our centralized energy infrastructure is costly, aging, inefficient, and a highly vulnerable security risk. Extreme weather events are occurring more frequently: since 1980, the US has experienced over 280 weather and climate disasters that had overall damages/costs of at least $1 billion (adjusted to 2020 dollars) — for a total cost of $1.875 trillion. 2020 set a new record with 22 of these events.

Lack of resilience comes with high costs:

  • $119 billion: Annual cost of power outages to the U.S.
  • $20 – $55 billion: Annual cost to Americans of extreme weather and related power outages
  • $243 billion – $1 trillion: Potential cost of a cyber attack that shuts down New York and D.C. areas

Diesel generators and gas are not the answer

Diesel generators are heavy polluters, concentrated in densely populated areas — compounding their health risks. They require monthly testing for proper maintenance, and spew the worst pollution during this testing. They’re expensive to operate and maintain, with diesel fuel costs rising. Plus, there is generally only enough diesel fuel to maintain power backup for two days, and replenishing diesel during a major disaster is not always possible.

Peaker gas plants are also polluters — with higher capital costs, plus far higher operations and maintenance costs, than renewable energy.

Gas lines are just as susceptible as power lines to ground disruptions from earthquakes and other disasters — and restoration of service for gas lines after earthquakes takes 30 times longer than restoration for electricity:

Source: The City and County of San Francisco Lifelines Study, https://sfgov.org/esip/sites/default/files/Documents/homepage/LifelineCouncil Interdependency Study_FINAL.pdf, p. 18

We have a better solution: Community Microgrids

What is a Community Microgrid?

A Community Microgrid is a coordinated local grid area served by one or more distribution substations and supported by high penetrations of local renewables and other distributed energy resources (DER), such as energy storage and demand response. Community Microgrids represent a new approach for designing and operating the electric grid, relying heavily on DER to achieve a more sustainable, secure, and cost-effective energy system while providing indefinite, renewables-driven backup power for prioritized loads

Learn more

Community Microgrid features

  • “Islanding” from the grid: A coordinated local grid area that can separate from the main grid and operate independently
  • Components: Solar, energy storage, demand response, and monitoring, communications, & control
  • Clean local energy: Community Microgrids facilitate optimal deployment
  • Resilient: Indefinite renewables-driven backup power for critical and prioritized loads
  • Replicable: Can be readily extended and replicated throughout
    any utility service territory.

Community Microgrid benefits

Community Microgrids provide communities an unparalleled trifecta of economic, environmental, and resilience benefits.  They bring communities four benefits not provided by today’s centralized energy system:

  1. Lower costs and increased economic investment
  2. Improved overall performance
  3. Resilience and security
  4. A replicable, scalable model

Clean Coalition Community Microgrid Initiative

Providing a standard methodology that any community can use to optimize and streamline the deployment of local renewable energy.

Our Community Microgrid projects:

The resilience value provided by Community Microgrids

  • Powers critical loads until utility services are restored: Eliminates expensive startup costs and the need to relocate vulnerable populations
  • Ensures continued critical services: Water supply, medical and elder-care facilities, grocery stores, gas stations, shelters, communications centers; avoids the cost of emergency shipments.
  • Provides power for essential recovery operations: Provides lighting for buildings, flood control, emergency shelters, food refrigeration; minimizes emergency response expenses.
  • Reduces dependence on diesel generators: Diesel is expensive and can be difficult to deliver in emergencies.
  • Keeps businesses open: Serves the community and maintains revenue streams.

Learn more

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