Outages in Louisiana make resilience the watchword as electricity grids are rebuilt

ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Sept. 1 – When Entergy Louisiana was looking to replace an aging power plant a few years ago, local citizen groups urged the utility to add distributed, renewable energy that could provide a measure of resilience and reduce emissions that are intensifying storms in the Gulf of Mexico. 

The utility rejected those calls, and even hired actors carrying pro-gas signs to pack a city council meeting. Instead, Entergy built a natural gas power plant that it promised would provide a local backup to long-distance power lines in the event of an outage.  

As it happens, Entergy’s new gas power plant remained offline as New Orleans passed its third day without power. Hurricane Ida knocked out all eight of the city’s long-distance transmission lines. Entergy customers are footing the bill of up to $650 million for the gas plant, along with the estimated $1.7 billion in damages from Hurricane Laura in 2020, and now Ida’s wrath.

“It shows the folly of this central-station kind of model,” Daniel Tait of the Energy and Policy Institute told ImpactAlpha. “Customers are paying over and over and over again to keep replacing the same thing.” 

The falling costs of solar power and battery storage are most often associated with the reduction of carbon and other greenhouse gases that are increasing the frequency and intensity of climate-related events like hurricanes and wildfires. But it is resilience to those same disasters that may drive the adoption of a more distributed – and resilient – system of electrical generation and storage.

Resilience as a service

Drought-fueled wildfires in California, floods in Tennessee and hurricanes bashing the Gulf Coast have made resilience the watchword for investors, energy developers and policymakers.

One example: the proposed “Making Imperiled Communities Resistant to Outages with Generation that is Resilient, Islandable and Distributed,” or MICROGRID, Act, introduced by California Rep. Jimmy Panetta. The mouthful of a bill would create a 30% tax credit (or direct payment for governments and nonprofits) to encourage the development of local microgrids. The credits would decrease gradually to 10% by 2028 and be phased out in 2029. 

Clean energy microgrids built by commercial and industrial customers and even municipalities and government installations combine solar with storage, and can integrate other backup energy. During normal operations, they feed the grid and save customers money. Perhaps even more important, they can sustain local electrical service when the grid goes down – what’s known as “islanding.”

That’s an advantage not only over centralized power plants and long-distance transmission lines, but also over the vast majority of “grid tied” solar power that automatically shuts down when the grid does, and is not designed to provide badly needed backup power. The bulk of backup generation today is still via polluting and expensive-to-operate diesel generators.

“We’re moving toward microgrids comprised of cleaner resources that can send energy onto the grid during regular conditions but also are capable of islanding and providing backup power to households or a whole distribution circuit or neighborhood,” said Andy Lubershane of investment firm Energy Impact Partners. 

The firm has invested in Enchanted Rock, a maker of backup generation systems. Today, the systems are natural gas-based. But over time the company plans to add in new energy resources such as solar power and battery storage. “They’re really a platform for resilience over the long term,” Lubershane said. Other investments include long duration storage company Form Energy and fusion hopeful Zap Energy.

The microgrid at the Marine Corps’ Air Station Miramar in San Diego, completed in March, combines solar and landfill gas, which generate power continuously, with battery storage and additional backup energy sources, including diesel. The system, built by Schneider Electric and Black & Veatch, has also supplemented San Diego Gas & Electric during heat waves, forestalling shutoffs of thousands of homes. 

In May, Blackstone’s portfolio company ClearGen committed $500 million to Schneider Electric and impact investment firm Huck Capital to launch GreenStruxure to help commercial and industrial users transition to clean energy by covering the upfront costs.

Many commercial customers get stuck on technical, regulatory or financial issues involved in setting up a microgrid. “We work very hard on unsticking them through technology that transfers difficulty complexity away from the site to the cloud or to the advanced manufacturing environment, and then through business models like energy as a service,” Schneider Electric’s Mark Feasel told ImpactAlpha.

Utilities are getting on board in some states. Wisconsin’s Xcel Energy is launching a resiliency-as-a-service pilot for its commercial customers. The utility will pay for the bulk of the projects up front, and will be repaid over 10 years. 

In wildfire-ravaged California, microgrids are key to the state’s efforts to reduce the impact of power outages. The state has implemented rolling power outages in the face of devastating fires, many sparked by Pacific Gas & Electric’s power lines.

After emerging from bankruptcy, PG&E may be taking a new approach under new CEO Patti Poppe. PG&E’s Community Microgrid Enablement Program offers technical assistance and matching funds, with an emphasis on critical service providers such as hospitals, police and fire stations, and food stores. One-third of the $27 million-a-year program is set aside for vulnerable or disadvantaged communities.

In Humboldt County, the Redwood Coast Airport Microgrid will power the Arcata–Eureka Airport.  The 2.2 megawatt microgrid will serve more than a dozen customers, including a U.S. Coast Guard air station. The Redwood Coast Energy Authority will own the microgrid, which is being designed and developed by the Schatz Energy Research Center at Humboldt State University.

“Every community center that can serve as a home base for emergency response operations and for sheltering people whose homes are damaged during a storm should have this type of backup resilience system,” says Lubershane of EIP. 

Solar push

Citizen groups such as Energy Future New Orleans and the Deep South Center for Environmental Justice that have been pushing for cleaner, distributed, reliable energy have made some gains. New Orleans’s city council, which oversees Entergy, in May passed a Renewable and Clean Portfolio Standard that requires the utility to generate 100% clean energy by 2050. Local groups such as the Energy Future New Orleans Coalition had pushed for the standard, similar to other clean energy mandates passed by more than three dozen cities and states. Entergy fought the move, and threatened to sue the city council. 

The University of Louisiana-Lafayette’s Energy Efficiency and Sustainability Energy Center has estimated that Louisiana, which has almost as much sunshine as Florida, could attract $6 billion in solar investments.  

Wind, solar and storage costs have plummeted, making renewable projects less expensive to build and operate over the lifetime of a plant. New Orleans has one of the highest energy cost burdens on low-income households in the country, with 19% of their incomes going to pay energy bills, five times higher than the national average. 

Entergy, which plans to push ahead with other natural gas plants, is bucking the trend. U.S. project developers commissioned 9,915 megawatts of new solar, wind and storage capacity in the first half of 2021, according to the American Clean Power Assoc. That’s the highest record for new clean power installations, representing a 17% increase in the same period last year. 

To date, revenue incentives for solar-plus-storage microgrids generally encourage developers to prioritize feeding the grid over providing onsite backup power, Spring Lane Capital’s Rob Day argues. On-site power makes increasing economic sense. 

Bundling smart software with the microgrids can reduce the size of the batteries needed for longer-duration backup power and bring down costs, he says. And adding in a “resiliency fee” as part of a microgrid-based power purchase agreement would also make them more financeable. 

“All infrastructure investors in microgrid projects need to be challenging the developers more about resiliency-based business models” that include on-site power, says Day. “Resiliency-based revenue models can actually be more underwritable. They’re effectively an insurance plan.”