Voinovich Fellow presents at global forum on microgrids

Daniel Kington
June 19, 2017

Michael J. Zimmer, executive in residence and senior fellow at Ohio University’s Voinovich School of Leadership and Public Affairs, recently presented at the Fourth Microgrid Global Innovation Forum, held May 16-17, 2017 at George Washington University in Washington, D.C.. Zimmer, who serves as Washington Counsel for the Microgrid Institute and advises its newly-created Microgrid Finance Group, joined other experts on a panel to address evolving microgrid financing options.

Microgrids are relatively small power grids that operate independently or semi-independently from the main power grid. They drastically reduce the distance between the production of energy and its consumption, resulting in increased efficiency and the easier integration of renewable energy into the system. Because they offer such a variety of benefits to governments, consumers and utility companies, microgrids are among the fastest growing technologies in the electric utility industry. However, since microgrids operate on such a smaller scale than the main power grid, they tend to be more difficult to finance.

“As microgrids move from the pilot phase to fuller commercial deployment, the quest arises for more financial models and disciplined structures to support financing ahead,” Zimmer said in a recent write-up of his presentation.

Zimmer notes that successful microgrid financing could be essential to the further development of solar energy. “Some in the electric industry see microgrids as the next market iteration of solar, which has grown 800 percent in the period from 2010-2015. Solar expanded another 119 percent in 2016 alone. Financing is the primary growth factor and will serve as an essential catalyst for future growth of microgrids with energy storage.”

The good news is that many stakeholders are eager to invest in the technology. Zimmer identifies five major financing models as viable: the use of funds first invested alongside a variety of microgrid stakeholders; loans from vendors who hope to work with microgrid projects; energy service company financing; utility company financing; and loans backed up by commodities held as collateral. According to Zimmer, the best financing model for an individual microgrid should be ascertained according to the relative risks involved in the viable financing options.

“For microgrids to succeed in their financing goals, their financing strategies must be built from known successes,” Zimmer said.

He goes on to argue that financing microgrids should not be left solely up to the government – both for the benefit of the taxpayer and the viability of the project.

“The industry itself will not just happen as a matter of state policy or through utilities without a market-based demand from its customer base,” Zimmer said. “When thoughtfully conducted, less taxpayer dollars are utilized and these programs facilitate use of public-private partnerships.”

This article was adapted from a written version of Michael J. Zimmer’s presentation. To read the entirety of Zimmer’s analysis, click here.