Cutting energy costs with microgrids

March 27th, 2019, Published in Articles: Energize

As South Africans suffer another round of power interruptions, imposed upon them by the national power utility which is unable to generate sufficient electricity to keep the lights on, advanced technology offers a realistic, affordable and environmentally-friendly solution.

Bunty Kiremire

Six months ago, Energize visited Eaton’s factory in Wadeville, Germiston, to see a sophisticated microgrid which had been installed there and to speak to the operations manager about the system. Recently, Energize caught up with Bunty Kiremire, Eaton’s newly appointed senior application leader for microgrid energy systems and asked him about the success of project.

Q1. Has the Eaton microgrid, with second-life batteries, met the expectations the company had for it?

Eaton’s microgrid project started three years ago when the company decided that it needed to improve its energy efficiency and reduce demand-side load. The company managed to reduce its bill by about 40% through the use of energy-efficient lighting, equipment and appliances; and then started looking at the supply side. Eaton has over twelve years’ experience in microgrid technology in the US, so the South African branch decided to investigate the viability of using this technology at its local factory.

Q2. How did Eaton become involved with microgrids?

Microgrids are now prominent in the organisation’s agenda because it sees a natural evolution in the energy sector. What’s happening in South Africa is reflective of what’s happening in the rest of the world and microgrids play a key part of that. Now that the price-points of renewable energy and storage has reduced so significantly, microgrids are an affordable option in commercial applications.

Internationally, Eaton has a strategic focus on microgrids and decided to build one at its own manufacturing facility in Wadeville, Germiston. and built a pilot which consists of two 230 kW rooftop PV panels, 275 kW inverters, a 200 kWh storage battery, a 400 kW diesel generator as well as an electricity supply from the local utility.

Q3. What were the main drivers behind Eaton’s decision?

The first benefit is outage avoidance because the loss of production during outages is extremely expensive to the company. The second is renewable maximisation because PV Systems have been so commoditised that they are now the cheapest form of energy over the lifetime of the plant. However, when using PV alone any excess is not dispatchable on an unreliable grid. However, power conversion systems, microgrids control systems and Li-ion energy storage systems allow for a riding out of outages so that the plant can keep operating – without the use of a diesel generator – when the utility supply fails. The third driver is maximum demand reduction, and the fourth driver is energy arbitrage (applicable typically to industrial customers who are subject to time-of-use tariffs. This allows them to shift lower cost energy for use during higher cost tariff periods).

Q4. Has the theory proved true in a real-life application?

On paper, the project at the company’s factory in Germiston looked good. The last 12 months of operational data have  shown that the benefit is actually better than was originally anticipated. In the original assessment, the cost reduction on energy savings alone through arbitrage and maximisation of solar PV, would give us a payback period of about six years. When the outage avoidance figure was factored in, using six, two-hour outages per year, the payback period reduced to four-and-a-half years.

The tricky thing with outage avoidance is that it becomes hard to predict over the long-term, but the company has experienced about 23 outages in the last year alone – in one case power was off for two consecutive days in September 2018 – i.e. 16 hours of production loss – which was far worse than the original projection of 12 outage-hours per year and has made the microgrid a valuable investment for the company.

Q5. How has else the company benefited from this installation?

The project has generated a lot of market interest resulting in a pipeline of potential projects being created in south, east and west Africa.

Q6. Does the market understand the microgrid concept?

Initially a lot of education was needed to help potential clients understand the technology, how it works and its benefits. There is a great deal of interest in the use of battery storage for the deferment of upgrades to transmission and distribution infrastructure. Now that people understand that microgrids make economic sense, the discussion has moved to how municipalities, companies and utilities can finance such options. Some clients want to own the infrastructure while others simply want to buy the power the system generates without owning the asset. Where a customer wishes to benefit from long term “power as a service” agreements, the financing options, specifically relating to energy storage systems, are a critical key to open up the market.

Q7. What drives other companies to consider a microgrid?

Availability, resilience or reliability and cost of electricity are the three major drivers for microgrids. Some countries experience up to 500 outage-hours a year. To put that into context, in South Africa the average is about 50 outage-hours a year. But in Nigeria, for example, daily outages of between six and twelve hours are common. According to the World Bank, Nigerians suffer an average of 4600 outage-hours per year – out of a total of 8750 hours a year. Nigeria has 7 GW of conventional generation, the transmission network can transmit 5 GW; and there is about 28 GW of installed private diesel generation, so that the key driver in Nigeria is offsetting the cost of diesel fuel.

The weighting differs from region to region, and in South Africa cost of electricity is a key driver followed by availability or outage avoidance.

Q8. Speaking of costs, isn’t it expensive to build a microgrid?

Microgrids actually bring costs down, despite the initial capital expenditure. Industrial microgrids offer a lower cost of ownership through the use of low-cost electricity generation, outage avoidance and reliability. Microgrids also offer frequency and voltage support in private distribution area networks, improving the overall quality of the power.

 

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