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Business Cases for Microgrids: Modeling Interactions of Technology Choice, Reliability, Cost, and Benefit


Distributed energy resources (DERs), and increasingly microgrids, are becoming an integral part of modern distribution systems. Interest in microgrids---which are insular and autonomous power networks embedded within the bulk grid---stems largely from the vast array of flexibilities and benefits they can offer stakeholders. Managed well, they can improve grid reliability and resiliency, increase end-use energy efficiency by coupling electric and thermal loads, reduce transmission losses by generating power locally, and may reduce system-wide emissions, among many others. Whether these public benefits are realized, however, depends on whether private firms see a ``business case'', or private value, in investing. To this end, firms need models that evaluate costs, benefits, risks, and assumptions that underlie decisions to invest.

The objectives of this dissertation are to assess the business case for microgrids that provide what industry analysts forecast as two primary drivers of market growth---that of providing energy services (similar to an electric utility) as well as reliability service to customers within. Prototypical first adopters are modeled---using an existing model to analyze energy services and a new model that couples that analysis with one of reliability---to explore interactions between technology choice, reliability, costs, and benefits.

The new model has a bi-level hierarchy; it uses heuristic optimization to select and size DERs and analytical optimization to schedule them. It further embeds Monte Carlo simulation to evaluate reliability as well as regression models for customer damage functions to monetize reliability. It provides least-cost microgrid configurations for utility customers who seek to reduce interruption and operating costs.

Lastly, the model is used to explore the impact of such adoption on system-wide greenhouse gas emissions in California. Results indicate that there are, at present, co-benefits for emissions reductions when customers adopt and operate microgrids for private benefit, though future analysis is needed as the bulk grid continues to transition toward a less carbon intensive system.

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