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Opportunities and lessons learned for distributed energy systems in Latin America

16 May 2018

Andrea Ruotolo, Consulting Project Manager, Smart & Distributed Energy, Advisian/WorleyParsons Group, shares her expertise in an interview with Energia Estratégica entitled, "The 'keys' for Latin America: an expert brings the experience of the United States to deploy distributed energy systems with renewable sources."

Original article from Energia Estratégica, written by Gastón Fenés in Spanish. Translation by Andrea Ruotolo.

 Andrea Ruotolo

How did you start working on the regulation of distributed generation and microgrids?

I was doing my PhD research on how to accurately value microgrids when New York City was flooded by Hurricane Sandy. That storm cost the U.S. economy over $50B. Almost half of that was not from direct storm damage, but was caused indirectly by the loss of electricity for millions of customers, which for tens of thousands of people lasted for several weeks. As part of the state government’s response to the storm, I was invited to work in Manhattan with the New York State Smart Grid Consortium to help account for the value of microgrids as a way of improving grid reliability, and to develop policies and programs to accelerate market adoption of microgrids.

Following Hurricane Sandy, New York State launched the largest government-funded grid modernization program in the U.S. with the goal of saving money by improving the grid in ways that lower energy costs, prevent outages, and reduce carbon emissions. The program is called Reforming Energy Vision (REV). I worked within REV, focusing on the use of microgrids to improve grid reliability and prevent major power outages.

Are storage systems (batteries) being used as part of the distributed energy systems?

In our work, we often include storage, but not always. This is partly because storage is not always part of the optimal solution, and because technologies for large batteries are developing and costs are coming down rapidly, by as much as 12% to 14% per year. For this reason, in some cases it makes sense to install storage in a later stage when batteries will be cheaper. However, storage technologies have become cheap enough and advanced enough that in most cases they add value to the system, so they are already commonly used and are becoming more popular all the time.

The main reasons people install advanced energy systems are to save on their energy costs, to prevent power outages, and to reduce carbon emissions. Energy storage, in the majority of cases, can increase savings in all three of these ways, by charging when energy is more available or is cheaper, and discharging to make energy available at the point of use when it is needed. This reduces energy costs, improves reliability, and reduces emissions. Batteries can also add revenues by selling services back to the grid.

What is the reason?

Savings. With on-site renewable energy generation from solar panels or other sources, plus storage, energy can be available 24/7 at lower costs than traditional sources. With storage, the local system can also keep the power on and available for use even when the power is out on the surrounding grid. Also, by pairing renewable generation with storage, the most carbon emissions can be avoided.

How does storage impact cost to the user?

In general, a system that includes both local generation and local storage can save as much as 30% more money for the end user than either the generation or the storage can alone. This is because distributed generation and distributed storage work very well together, providing energy over time from the generation source, and in the moment when it is needed from the storage. However, actual savings depend very much on how the system is configured. This is one of the areas we excel in, setting up the optimal configuration of microgrids and other distributed energy systems. Without optimization, the different parts of the system can be mismatched to each other and create unnecessary costs. To produce the best possible savings, we use advanced software to design optimized systems.

Can you replicate that experience in Latin America?

Yes. The majority of technological advancements and lessons learned from New York REV and other work in North America and Europe can be transferred to other countries as easily as cell phones and computers developed in North America have been adopted in other parts of the world. There is one difference because at this stage the advanced energy systems still need expert oversight to be installed in a way that ensures the greatest savings and reliability. Well-established global companies with experience in technology transfer, like ours, can solve this challenge and deliver value with these technologies. 

The good news is that many of the issues have been resolved in the North and the technologies and business models are now ready for diffusion to other regions, and the savings and improved reliability can be realized in almost any country or market. We are very excited to be able to bring these advantages and lessons learned to benefit my home country, Argentina, to help grow the Argentine economy and improve energy reliability for businesses, residents, and especially critical infrastructure such as hospitals, ports, police and fire stations, and other public-purpose buildings.

How important are the incentives?

When operating a business, decision makers only count costs and benefits to that business. But looking from the perspective of society as a whole, we also count the costs and benefits to society of having that business operating, which are almost always greater than for the individual business. For example, if a port loses power, obviously it loses some amount of business. But as well as the port itself, every other business that relies on shipping through that port loses business too. At the policy level, we count the full cost to society of things like high energy costs, power outages, and carbon emissions. Incentives are based on this larger, full-cost to society accounting, and well-designed incentives help the market, and private businesses, move in the direction that creates the greatest overall benefit for the whole economy and for society.

What model of distributed generation do you recommend to develop the market?

The principle we follow is “least cost, best fit.” The specific technologies will be different in different situations, because different users have different needs. There is not “one size fits all.” Exactly what mix of technologies will produce the greatest savings and will most improve reliability is one of the first questions we help people to answer when we approach a project. In general, microgrids are a very important part of the grid of the future. But they are not always the best solution to implement first, and it must be assessed on a case by case basis.

What advice would you give to the authorities that work on the issue in different countries?

The most important policy step that governments are starting to take is to put a price on carbon emissions and regulate those. Aside from that, the other most important policy step is to put a value on grid reliability and resilience. That is why I focused my PhD research on that topic as relates to microgrids, which has proven to be very important for my work since completing the program. Estimating the value of reliability, and building policies to take it into account, is a necessary step for all countries that hope to improve grid infrastructure and energy services at an appropriate rate.

Which countries are advancing the fastest in distributed generation?

U.S. (especially the states of New York and California), Germany, and Denmark are leading, and other parts of Europe and Australia are not far behind.

For questions or more information, contact Andrea at: andrea.ruotolo@advisian.com, or connect with her on LinkedIn.

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