Microgrids in the US
- More than 200 microgrid projects have been launched in recent years
- Most of them in the Southwest and Northeast quadrants of the US
- Expected to reach $1 billion in annual investment in 3 years
LO3 Energy is a startup at the heart of efforts to transform the electric marketplace, employing microgrids and facilitating energy trading among prosumers via the magic of transactive energy.
A raft of new microgrid projects – more than 200 of them – have quietly taken off, primarily in the Southwest and Northeast quadrants of the United States.
Many industry experts believe these efforts represent the opening volley of a wave of microgrid initiatives that could swell close to four-fold and represent close to $1 billion in annual investment in a scant three years.
To better understand this push towards microgrids, Icons of Infrastructure talked with Lawrence Orsini, LO3 chief executive, about his efforts in this space, electric grid changes ahead and their implications.
ICONS OF INFRASTRUCTURE: Are utilities consigned to the dust bin of history?
ORSINI: No, but there’s an evolution that will happen. At a recent meeting in Paris, someone from Australia said utilities are like dead stars: you can still see the light but there’s no star there anymore. The business models are gone, technology has really eroded or limited their business models. There has to be a shift in business models for utilities. They won’t run the way that they’ve been run before. It’s incumbent on regulators and policy makers to change those business models quickly to make sure that we don’t have disruptions in the industry.
ICONS OF INFRASTRUCTURE: Are there a few utilities in the United States ahead of the curve in terms of adaptability and preparing for the future?
ORSINI: There absolutely are.
ICONS OF INFRASTRUCTURE: Who are they?
ORSINI: I will not name them.
ICONS OF INFRASTRUCTURE: Why wouldn’t you want to point to them as an example that others might want to emulate?
ORSINI: A couple of reasons. First off – why would I tell my competitors where to go? The utilities I’m talking about have all reached out to us. We haven’t actually marketed to any utilities. A utility is treading an interesting line between today’s business model and tomorrow’s business model. There is a European utility that determined that they have to take innovation outside of the company. It needs to be sheltered from a larger company. You have to spin it out of the utility otherwise you have antibodies within the existing organization that will kill it. In order to develop the business model of the future, a utility has to think outside of what today’s business model. That’s hard to do when you have a massive organization that’s focused on perfecting today’s business model.
ICONS OF INFRASTRUCTURE: To what extent is storage playing a role in your vision of the future? Some companies in Europe think they can build the utility of the future around storage
ORSINI: It’s not. It’s useful, but I don’t see it as the utility of the future. You’re going to need storage as technology continues to advance. But what you need even more than that is demand responsive loads tied to price signals. The thrust of my efforts and the travel that I’ve been doing globally is to talk to regulators about how do we enable transactive energy and really get prices to devices so they can self-organize around market conditions. What are the pricing structures that allow that? There are standards that need to be in place, there’s policy that needs to regulate some of this. But once that happens I think that responsive loads are going to be far more valuable than batteries.
ICONS OF INFRASTRUCTURE: There’s a lot of concern about climate change. What is the solution to that?
ORSINI: I would characterize what we’re doing as supporting climate choice. It doesn’t matter if you believe in climate change or you don’t believe in climate change. The new energy businesses will provide you with the choices that you need to direct the money that you’re going to spend every single month from electricity to fuel sources that you care about, and keep it away from fuel sources that you don’t care about.
ICONS OF INFRASTRUCTURE: Do you think a more distributed energy model will mitigate greenhouse gas emissions?
ORSINI: It will definitely have some pretty big impacts. The thing that’s changing when you go to a distributive model is that you’re producing energy closer to the loads, so there’s a less inherent loss in the system. The closer you put production to loads the cleaner it has to be. This is happening across Europe and it’s headed to the United States. We’re probably at least 7 to 10 years out before the U.S. is really running at full speed. But once those things re-align, once you come up with location-based pricing for energy and you pay for the grid you use, then markets will re-align substantially. I fully predict that they’ll re-align around distributive models.
ICONS OF INFRASTRUCTURE: What do you like most about the work you’re doing right now?
ORSINI: This is a pretty big wave that’s building. We’re reaching critical mass in transactive energy. A lot of progress has been made, the technical hurdles are overcome. At this point, what we’re talking about are policy evolutions that are necessary. Then new business models and new customer engagement models are needed. Technology doesn’t adopt people, people adopt technology. You need to be able to talk to people about this new technology in a way that matters to them. Otherwise it’ll never go anywhere. That’s why the focus is on business models.
ICONS OF INFRASTRUCTURE: Tell us about yourself.
ORSINI: I’m in my late 40’s. I was born in Ohio, raised in Nevada and I’ve spent the last 20 years in California and New York because these are probably the most progressive energy markets.