Feasibility study of a realistic microgrid

Analysis of the pilot microgrid in Fortaleza, Brazil

Cesare Quinteiro Pica

Marcos Aurlio Izumida Martins
Tania Nalborczyk Leites Nilo Rodrigues
Bruna Peixoto de Souza Coelce, Enel Group
CERTI Foundation Fortaleza, Brazil
Florianpolis, Brazil

Abstract - Feasibility of microgrids depends on a viable

business model, enabling technologies, correct monetization of II. SIMULATION PARAMETERS
power flows and a favorable regulatory framework. Therefore, a Homer Energy Pro software was used to simulate the
correct modeling of the microgrid scenario including all microgrid presented in Fig. 1.
boundary conditions is necessary in order to estimate economic
benefits for microgrid participants, as well as to recognize
conditions that affect the microgrid feasibility. This article aims
to explore and categorize different value flows, proposing
monetization strategies for each one. Also, these strategies are
tested in a simulation of a pilot microgrid that is being
implemented in Fortaleza, Brazil. The main conclusion is that, at
first, residential microgrids are not easily feasible. However,
when implemented together with other strategies, those
microgrids can be viable.

Index Terms Brazilian energy market, microgrids,

regulatory policies.

I. INTRODUCTION
Energy microgrids are a key to future smart grids,
integrating modular energy sources, such as solar, wind,
thermal generators and fuel cells, with energy storage devices
FIGURE I MICROGRID SIMULATED IN HOMER PRO SOFTWARE
and both critical and non-critical loads to form low-voltage
distribution systems [1]. A. Microgrid components
The system can be seen as a controllable component of the The specification of the components that integrate the pilot
distributed network capable of supplying its own local load application is presented in Table I. An energy storage system
even in case of the disconnection from the upstream network was dimensioned to supply priority loads during power
[2]. interruptions for up to half an hour (considering 100% of
The first part of this article proposes the use of Monte Carlo priority loads consuming energy) and the whole system is
methodology for estimating the load profile of microgrids with going to be connected to the local electrical network.
load shedding. Later, an approach for quantifying energy
TABLE I MICROGRID EQUIPMENT
interruption costs is proposed. Finally, a concept proof of
regulatory and tariff propositions is presented, as well as a Equipment Installation local Total installed power
methodology to share the microgrid costs between microgrid Photovoltaic modules Residences 20.4 kW
participants. To validate the proposals, simulations were Photovoltaic modules Social club 24.96 kW
performed using Homer Pro software, considering the realistic Photovoltaic modules Concierge 2.04 kW
model of a pilot application that is being implemented in a Central battery Common area 111 kWh / 250 kW
Brazilian residential condominium (Alphaville). This pilot Wind turbine Social club 7.0 kW
application groups ten residential consumer units, Diesel generator Concierge 20 kW
condominium essential services such as surveillance, security
and lighting and energy sources, and is located in Eusebio,
Fortaleza Cear, Brazil.
 B. Interruption cost ANEEL (National Agency of Electric Energy) for the
In Brazilian economic scenario, microgrids are not easily microgrid location, as shown in Table III.
feasible unless an interruption cost is specified. The main TABLE III FREQUENCY AND DURATION LIMITS FOR ENERGY INTERRUPTIONS
reasons for infeasibility are, among others:
DIC (hours) FIC (number of interruptions)
Capital costs for microgrid implementation are Annual Quart.. Monthly Annual Quart.. Monthly
very high; 20.77 10.38 5.19 13.20 6.60 3.30
There are not governmental direct incentives for
implementing microgrids;
Most of the players in the energy sector are not C. Load profile estimation
allowed to provide ancillary services. Load profiles were estimated based on Monte Carlo
As explained in Table II, microgrid value is the result of the methodology, known as the propagation of distribution method
addition of revenues and avoided costs, discounting project and [4]. This method was used because the microgrid hasnt been
operational costs. Therefore, avoided costs become relevant in totally implemented yet, and not enough measured data is
order to obtain revenues that justify the project investment. available for modelling load profiles. Thus, the estimated
TABLE II COMPONENTS OF MICROGRID VALUE
profiles were obtained based on the use variability of different
kind of equipment.
Microgrid revenues (MR) Microgrid avoided costs (MAC) The microgrid loads were classified into priority and non-
Sales of energy excess Payment of high demand charges priority load groups. For each group, the load curve was
Government incentives Interruption costs
Ancillary services Generated energy
composed considering different household types with different
Sales of energy with quality Problems related to low energy consume configurations, determined by its usage habits, that
(differential price) quality are dependent on consumers quantity per household type and
Possibility of connecting to another their routines.
Services for participants
voltage level (lower energy tariff) The analysis for the pilot microgrid was made categorizing
Microgrid Value= MAC + MR Project Costs Operational Costs
the loads into different family household types as shown in
For industrial applications, interruption costs can be easily Table IV. For each family type, the number of equipment and
estimated because they represent the value of lost production their usage probability by hour of the day was specified,
plus outage-related costs. These costs include labor costs to according to the familys routine. These usage probabilities
restart production, labor costs to make up production, material distribution were oriented by studies such as [5] and [6]. Some
costs to restart production, damage costs to materials and to the loads, such as refrigerators and freezers, were considered as
physical plant, among others [3]. constant loads during the day. An example of these
Nonetheless, for residential purposes, these costs do not probabilities distribution is showed in Table V.
apply, and the interruption costs estimation becomes TABLE IV - HOUSEHOLD TYPES
sometimes a challenge.
For the pilot application, the energy interruption cost was Household Type Inoccupancy times
assumed to be the opportunity cost for a potential new Single adult 09:00 to 18:00 on weekdays
participant, and modeled as the investment that should be done Single Pensioner Adult Occupied all the time
to become part of the microgrid, weighted by the estimated Two adults 09:00 to 18:00 on weekdays
number of interruptions. This approach makes sense because
Two adults with children 09:00 to 13:00 on weekdays
several condominium owners were not integrated at first in the
Two pensioners Occupied all the time
microgrid, and they will have to decide between the value of
the choice of a best alternative lost while making a decision. In Two adults at least 1 pensioner Occupied all the time
this case, the best alternative would be saving the investment, Three adults or more 13:00 to 18:00 on weekdays
compared with deciding to become part of the microgrid,
avoiding interruptions. TABLE V USAGE PROBABILITY DISTRIBUTION FOR DIFFERENT EQUIPMENT
The investment is composed by two parts: automation
Time Hob Refrigerator Television Computer
equipment and a share of central storage system that this new
participant will be able to use. The value was diluted in the 05:00 to 6:00 0 1 0,1 0
possible energy interruptions that will be avoided by 06:00 to 7:00 0,2 1 0,3 0
connecting to the microgrid during the whole project lifetime. 07:00 to 8:00 0,6 1 0,5 0,2
Considering the storage capacity, the number of 08:00 to 9:00 0,1 1 0 0
interruption occurrences (within the tolerance limits for the
utility), and the initial investment, the energy interruption cost Along with certain equipment distribution usage such as
can be quantified in R$ per kWh. In the pilot application case, lighting and air conditioner, it is relevant to consider the
this quantity was 117.5 R$/kWh. influence of seasonality. Because of that, usage probabilities
The limit values of duration and frequency of energy were structured considering different weights for each season.
interruptions were based in the yearly limits dictated by Finally, the random number of families usage per hour is
multiplied by the number of equipment/number of families and
the specific consumption of each equipment. The process result
is the equipment hourly power consumption distribution, for
each equipment modeled.
The sum of each equipment power consumption gives the
daily consumption per hour of each household type, and the
integration of all profiles in a single one results in the
electricity consumption load profile for each load type, as
shown in Figure II for the non-priority load type.
FIGURE II ELECTRICITY CONSUMPTION FOR NON-PRIORITY LOADS
In order to obtain a more realistic simulation, random
variability was added to the profile load curves obtained
through Monte Carlo method. The software Homer Pro
executes two processes from this: scaling and random
variability. The first change the data magnitude without affect
the profile form (load size analysis), the second turn the profile
more realistic, without affect the average load. In this way, the
curves inserted in the software resulting from this process are
shown in the Figure III. Besides that, from the values obtained
through the simulation, was calculated the percentage of non-
priority load and, so, the limit of load that will be not attended
in a year was defined by 94%.
FIGURE III - LOAD PROFILE USED IN THE SIMULATION
III. SIMULATION RESULTS
The result calculated by Homer Pro represent the most
economical configuration. The hourly behavior of the loads,
the energy storage system and the power sources are
represented in Figure IV. It is simple to observe that renewable
generation occurs during off-peak hours, and for this reason, it
is interesting to create incentives that stimulate battery usage
for shifting generation from off-peak to on-peak hours, taking
advantage of the microgrid control capabilities. One of these
mechanisms, from the utility point-of-view, is presented below.
FIGURE IV HOURLY BEHAVIOR OF THE MICROGRID
One relevant simulation result is the feasibility study of the
project, calculated comparing the case in which only loads and
the electrical network is represented (base case) and the case in
which the microgrid with all sources is implemented (current
system). It is necessary to clarify that the base case considers
not only the cost of power purchase and demand payment, but
also the costs of metering and communication infrastructure.
That is, the basic infrastructure for communication and
measurement is considered in both cases.
Analyzing the results obtained in the software, it is possible
to conclude that the microgrid becomes viable with a simple
payback of 9.64 years and has a rate of return 9.8%.
Clearly, when the costs of the infrastructure measurement
and communication are disregarded, the microgrid turns to be
unfeasible, because the initial investment becomes very
relevant and cannot be cashed before the end of life of the
project. However, the first result is still valid to demonstrate
that, if there is interest in the modernization of infrastructure
(fiber optic incorporation, smart metering, demand
management, among others) of industrial parks, residential
condominiums or similar, this investment can easily turn
feasible by incorporation of a microgrid project.
IV. ANALYSIS FROM VALUE FLOWS POINT OF VIEW
Different value flows are perceived in a microgrid scenario,
as shown in Figure V. Not all of them are allowed to be
monetized in the current Brazilian regulatory scenario, as is the
case of ancillary services. However, they were considered in
simulation results as a way to be prepared for future
regulations, which will certainly be stimulated by microgrid
crescent growth.
 weight. On the other hand, if peak mitigation is the focus, CF
would have a greater weight.
This demand charge was applied for the case of the pilot
microgrid, in order to explore the effects of the incentives
mentioned. Considering that the microgrid decreases peak
consumption and shifts the consumption to off-peak hours, for
factors CF and FOR considered in Table VI, the table shows
the economy achieved with this strategy.
TABLE VI EXAMPLE OF DEMAND CHARGE APPLICATION

Peak Off-peak
FOR CF Annual total Economy
Demand Demand

293 kW 131 kW 0.0 0.0 181,091.40 -

250 kW 92 kW 0.50 0.0024 112,005.7 38.15%

FIGURE V VALUE FLOWS IN A COMMUNITY MICROGRID [7]

A. Value flow between utility and microgrid

This value flow is represented by demand and energy costs. B. Value flow between microgrid operator and microgrid
As seen in Fig. 1, both costs are representative in the pilot participants
microgrid scenario. Several items could be included in the participant share,
In terms of utility view of the microgrid for billing energy and each one must be monetized in order to define the proper
and demand, there are three options that could be implemented share to be paid by each microgrid participant. Some of these
in current regulatory scenario: items are:
Microgrid seen as one entity, billing energy and demand Energy consumption
for the all entity Energy generation
Microgrid seen as a group of clients, billing energy and Peak coincidence factor
demand separately Participation in ancillary services
Microgrid seen as a group of clients for energy billing, and Energy consumption during interruptions
as one entity for demand billing Billing of information providing service
After a regulatory and economic analysis in the context of Microgrid O&M rate
the pilot project, the option chosen was to consider the Other services offered by the operator
microgrid as a single entity, charging energy and demand for The methodology used to quantify the monthly amounts to
the whole system. In that case, the payment share among be paid or received by each participant is described in Table
participants becomes an issue to be solved between the VII
microgrid operator and microgrid participants. TABLE VII - METHODOLOGY FOR CALCULATING THE SHARE OF
1) Reserve capacity EACH PARTICIPANT.
As suggested in [8], is relevant to structure incentives for Billed
microgrids, enhancing microgrid operators to develop a better Methodology adopted
Component
electric grid usage. One of those incentives can be Consumed energy Calculated according to consumption of each participant
implemented through the demand charge, weighting its value Generated energy Credited according to the generation of each participant
by the factors that are willing to be encouraged. In [8] a new Divided according to the maximum demand of each
Demand charge
rate structure is explained, named as demand charge, and participant
structured as explained in Eq.1. Participation in Considering the ancillary service of demand response,
distribution according to demand/power cut at the time
$ $ ancillary services
requested by the utility
[ ] = [ ] {1 0,5[0,6(1 ) + 0,4(1 )]}
Consumer power Will not be considered in a first moment, avoiding
factor excess load control signals
Where CD is the contracted demand, CF is the Energy consumed
Coincidence Factor (of the microgrid with relation to the grid), in contingency
Recovery of energy considering specific calculation
FOR is the Forced Outage Rate and RC is the demand Portion of the mmicrogrid O&M rate to be paid by each
Microgrid O&M
charge to be calculated1. The main idea of this equation is to participant, weighted according to participants
rate
relate some factors with the fixed portion of the rate, giving consumption
different weights to the factor according to the utility interest.
If the focus is the dispatch planning, FOR would have a greater 1) Energy consumption during interruption
To specify the billing of energy consumed during
1
The terms 0.5; 0.6 and 0.4 are arbitrary and serve only as a interruptions, an analogy with the application of real-time
means of balancing the relationship between the value of the pricing will be made. It is observed that when the microgrid is
monthly standby tariff and the contracted demand.
islanded, the operating cost is governed by the dynamics of the
microgrid and not by the distribution rate. Thus, a rate that
reflects microgrid operating costs is more appropriate for the
interruption event. Furthermore, it avoids the cross-subsidy by
charging participants by the cost incurred by the operator to
assist them.
Therefore, the price of energy consumed during an
interruption may have a different price if we consider that may
be relevant to encourage those consumers to leave a larger
reserve (which can be used to be sold to the grid or relieve
some local contingency, for example). As for the tariff value at
the time of contingency, assuming the microgrid is
economically dispatched, it is proposed to adopt the LCOE in
R$/kWh. The value for the pilot microgrid is 1.36 R$/kWh
(obtained from simulation).
In this sense, it is proposed the billing of this amount
following a method based on the module method (MM) [15].
, residential microgrid.
= [ ] This solution will be tested and implemented in a pilot
, microgrid, p rev io us l y described, and the environment can
With:
Total cost for the Fi interruption; microgrids, which is expected in the Brazilian market in the
Levelized cost of energy [R$/kWh] coming years. It is clear that this is the case of a pilot
, Amount of energy consumed during application and the other real cases may vary considerably with
interruption Fi by the participant j
C. Compilation of power flows and economic analysis
By choosing the strategy of considering the microgrid as
one entity, billing energy and demand for the all entity, lower
energy and demand rates were achieved. The economy on
energy and demand payment was used to compensate the
expenses in O&M rates, as well as the billing of other services
and factors.
For the simulation performed, the difference with respect to
the bill before the participation in microgrids was also
calculated. Note that in all cases there was a reduction of the
amount to be paid as a consequence of the strategies adopted.
The economy for the pilot simulation is presented in Table
VIII, and could be used as a reference for the microgrid
operator to charge their services.
TABLE VIII - DIFFERENCE BETWEEN ORIGINAL BILL AND BILL AFTER
BECOMING A MICROGRID PARTICIPANT
Residences (each) Club Common areas
Diference ~2% ~3% ~27%
V. CONCLUSIONS
As a first point, it is important to highlight that, thanks to
the economic analysis, it was possible to identify which model
for charging the participants would be the most appropriate,
due to the maintenance or decrease of their energy bills.
Moreover, participants will have the opportunity of decreasing
their bills, depending on their participations in demand
response programs and improvements in their load profile.
Furthermore, the list of propositions presented encourage
the efficient use of the grid, focusing on the decline and even
extinction of the consumption peak during some hours of the
day.
On the other hand, a form of calculating the interruption
cost for the case of residential microgrids installed in
condominiums is presented, seeking for quantify a relevant
avoided cost that could contribute with the viability of the
be optimized to meet the growing participation of
respect to the ones obtained in the simulation, but the results
serve as a first validation of the regulatory and tariff proposals
presented.
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