Not Your Grandma’s Infrastructure: The Urban Energy Revolution Conference Wrap-Up

September 28, 2012 Conference Wrap-Up

By Alex Wynn

The Vision: Opening Remarks

Robert Amundsen, Professor and Director of the Graduate Energy Program at the New York Institute of Technology opened the conference.

Today, green technologies are rapidly evolving, leaving behind outdated ideas about being inconvenient, too expensive. “Part of our job is to let people know that, in many cases, these green technologies are the solution to the problem.”

Setting the stage for the conference, Nancy Anderson, Executive Director of the Sallan Foundation, provided a capsule history of New York City's energy infrastructure.

Since the 1880’s, when the nation’s first central power generating station opened on Pearl Street in lower Manhattan, New York City has become an insatiable power consumer. Today, the means for satisfying that appetite are being challenged and reshaped by the breakup of ‘natural’ utility monopolies, altered utility regulation, new classes of investors and ownership structures, and the availability of new renewable technologies.

The impact of increasing commitments to national energy security, clean air, and climate change are also looming change-agents. In this shape-shifting environment, promoting an energy revolution will entail creative destruction — the process by which new technologies and ways of doing things are developed that destroy and replace the old ones.

“The question before today's panelists,” said Dr. Anderson, “is what is the future of New York City's energy infrastructure?” Will it be a mainstream meshwork of distributed generation technologies, such as combined heat and power systems and microgrids?

Sallan Exec. Dir. Nancy Anderson greets Energy Infrastructure Conference attendees

Anderson welcomes Sergej Mahnovski, Dir. of Energy Policy in the NYC Mayor's Office

Amundsen, Director of the Graduate Energy Program at NYIT opens the conference

Anderson, provides a capsule history of New York City's energy infrastructure

Keynoters Moderator, Bourgeois, Deputy Dir. of the Pace Energy and Climate Center

Dr. Hammer, Lecturer in the MIT's Dept. of Urban Studies and Planning

Dr. Hammer exhorts the audience to adopt a bold vision of the energy grid

Attendees consider Dr. Hammer's paradigm to scale up distributed energy

Dr. Mahnovski, Dir. of Energy Policy in the NYC Mayor's Office talks big dat

Mahnovski and Bomke, Exec. Dir. of the New York Energy Consumers' Council

Previous Next

The Vision: Keynoter's Dialogue

The Keynoters panel, moderated by Tom Bourgeois, Deputy Director of the Pace Energy and Climate Center, framed the exploration of New York City's energy future in light of its infrastructure heritage.

Dr. Stephen Hammer, Lecturer in the Massachusetts's Institute of Technology Department of Urban Studies and Planning noted that today's electric power grid paradigm dates back 130 years. Distributed energy systems, likely in the form of microgrids and combined heat and power (CHP) — small, local energy system comprised of single or multiple entities that generate electric and thermal, energy and operate autonomously from or are integrated into the power grid — represent an alternative to the current paradigm.

CHP can become one of the, "backbones of the new power grid." Dr. Hammer exhorted the audience to adopt a bold vision of the new type of energy grid that would better serve the City. Progress will demand consideration of complex variables, including economic, cultural, and environmental constraints and developments, as well as the public's and industry's appetite for innovation. The list of challenges to scaling up the adoption of distributed energy also encompasses legal issues of land ownership, access across public right of ways, and the exclusivity of a utility franchise in a given area, to name a few.

Finally, Dr. Hammer cautioned that microgrids represent just one of the technological alternatives to the conventional power grid. Mircogrids are not the silver-bullet solution. They must fit in to a larger energy infrastructure where progress must be monitored and, at times, course corrections will be needed. We must take an energy system and future proof it, because we "don't want to trade one from of energy technology lock-in and trade it for another."

Dr. Sergej Mahnovski, Director of Energy Policy in the NYC Mayor's Office, underlined the importance of data in developing distributed energy resources, highlighting some of the City's efforts including benchmarking energy usage in buildings, solar mapping, as well as key cogeneration projects, lessons from the Green Infrastructure Plan, and regulatory solutions for interconnection. Dr. Mahnovski reminded the audience that the policies, investments, and technologies developed, adopted, and deployed today would "lay the groundwork for decades to come."

Boots on the Ground: CHP and Microgrids In NYC

The panel, moderated by David Bomke, Executive Director of the New York Energy Consumers' Council, explored three distinct approaches to implementing distributed generation technologies in New York City.

First, Sukanya Paciorek, Vice President of Corporate Sustainability at Vornado Realty Trust, discussed One Penn Plaza, one of the company's prized assets that features an on-site six-megawatt fuel cell installed in 2010. The blackout of 2003 was a wake-up call about the costs to property owners and tenants of power grid failure. Today, for tenants at One Penn Plaza, the guarantee of reliable 24/7 electric power is an amenity that Vornado offers.

Ms. Paciorek discussed how Vornado met the challenges of installing a new energy system in an existing, occupied building. One challenge is the spatial constraint imposed by the existing spatial configuration. Others include logistical issues associated with sourcing manufacturing components and labor, in addition to complying with the rules and regulations of the New York City Department of Environmental Protection and the Fire Department along with Con Ed's own procedures. Notwithstanding these challenges, the new on-site generation system now supplies up to 60% of One Penn Plaza tenant demand for electricity on peak usage summer days.

Guy Warner, Chairman and Chief Executive Officer of Pareto Energy, described his company's new technology that converts electrical current from AC to DC and DC to AC to reduce the instability associated with allowing microgrids to supply electricity to the national power grid. The Pareto Gridlink acts as a "buffer" between the microgrid and the utility grid. The NYU CUSP campus in downtown Brooklyn will be installing it and thereby serve as a test bed for the technology.

According to Mr. Warner, this technology can facilitate the widespread adoption of microgrids. To this end, he called for creation of "energy improvement districts", owned and operated by the utility managing a given service district, as mechanisms to significantly reduce the cost of building distributed energy systems.

Alex Lowenstein of Living City Block provided the third case study of New York City energy system innovation. As a hands-on not-for-profit, Mr. Lowenstein explained, Living City Block (LCB) is in a unique position to prove the business and finance case for microgrid adoption.

LCB begins by working with property owners, tenants, and neighborhood residents to identify the energy needs of the community. Its first goal is to engage tenants and residents to identify priorities before bringing in experts to perform modeling. Next, it would seek to aggregate small and medium-sized building owners (residential, commercial, or industrial) into legal entities to engage service providers to manage energy supply and demand.

Ordinarily, such buildings would be too small to obtain financing for their own energy infrastructure development project. At sites such as the demonstration project located near the Gowanus Canal in Brooklyn, LCB aspires to showcase the ability of microgrids to "shave off peak [demand] and flatten the demand curve [for energy]."

Key Technical, Financial, and Regulatory Issues

In the concluding conference session, moderated by Vignesh Gowrishankar, Sustainable Energy Fellow at the Natural Resources Defense Council, the panelists assessed technical, financial, and regulatory challenges to the widespread urban adoption of microgrids and other types of distributed generation.

From a technical standpoint, Margarett Jolly, Distributed Generation Manager at Con Edison observed that such technologies can be difficult to incorporate into the grid because a grid outage that coincides with a problem with the consumer's on-site generation system can result in the consumer losing power altogether. Nevertheless, Con Ed has witnessed growth in applications for distributed generation installations since 2005.

In addition, Ms Jolly expects as on-site generation technologies improve and their costs decline, the City's PlaNYC 2030 goal of producing 800 megawatts of energy by 2030 may be attainable. At present, Con Ed projects that by 2030, New York can have somewhere between 400–800 megawatts of installed power. Simultaneously, such advances will catalyze the utility's own shift in perspective from viewing customers not solely as consumers of energy, but as a "load resource" who reduce demand-induced stress on the power grid system.

From an economic standpoint, Mike Byrnes (filling in on a moment's notice for Kristin Barbato, Director of Business Development, Veolia Energy) provided his perspective of the market realities confronting the deployment of distributed generation technologies.

In the US his firm has district energy systems or CHP's in fourteen US cities including Boston, New York and Philadelphia. Nevertheless, said Mr. Byrnes, investors are still often reluctant to put money into such projects. Although government subsidies make these types of projects more attractive, co-generation infrastructure requires consistent, high demand throughout the day in order to earn revenue. Simply put, if preliminary analysis suggests that demand for energy at a particular site is low, then the project will not provide returns high enough to justify the investment.

Coming at the investment challenge from a different perspective, Samuel Wolfe, Managing Director of Legal and Regulatory Affairs at Viridity Energy, explained that the business model for a microgrid is much improved by recent Federal Energy Regulatory Commission Orders.

Order #745 requires that payment to consumers for reducing their demand for electricity from the power grid must be equivalent to what generators are paid for the electricity they generate; a watt-hour of energy saved is as valuable as a watt-hour of energy generated. Orders #719 and #755 enabled consumers to sell other services (such as regulation service) to the grid and be paid based on their performance — making electricity storage resources such as batteries a better source of creating revenue and value for a microgrid.

Mr. Wolfe also emphasized that potential investors should first ask what benefits they are seeking from a microgrid; then determine what assets are necessary to achieve those benefits; and then to identify sources of funding — especially revenues to be earned from wholesale electricity markets — that will make the project economically sustainable. Mr. Wolfe suggested that a microgrid could be developed over time, with early investments in the microgrid focusing on practices and technologies that would bring in revenues to support further development of the microgrid.

John Harris Esq., a partner at Harris & Beach PLCC and member of the Energy Industry Team and Environmental Law Practice Group, commented on legal obstacles to the adoption of distributed generation technologies. Aside from the usual array of local, state, and federal law governing electricity and the environment, one of the key impediments to the adoption of such technologies is there is no definition of "mircrogrid" in the Public Service Law.

Rather, the New York State Public Service Commission ("PSC") reviews projects that entail the installation of on-site generation systems and grid infrastructure on an ad hoc basis in light of a number of factors, thereby adding to the uncertainty of regulatory approval. These factors include the number and relationship of customers, the size of the project and length of the grid and pipe infrastructure to be built, whether installation of the system will involve the crossing public right of ways, and the need for a local franchise.

Historically, Mr. Harris stated that the PSC has endeavored to use a "lightened regulation" and in some cases a no-regulation, regulatory approach to these types of projects, which should help encourage developers to pursue them.

The road ahead to providing future generations of New Yorkers the energy infrastructure to power them through the next 130 years is challenging. That said, we see the foundation being laid today for the design and rollout of tomorrow's more distributed, more diverse, more reliable and climate-friendly energy generation and distribution system.

Half-day Infrastructure Conference Speaker Presentations for Download