A New Electric Utility Business Model to Optimize Port Electrification

Guest Article
guy warner

Operators of many American seaports can no longer procure electricity from the wide-area utility-owned power grid (“Utility Macrogrid”) to satisfy their increasing energy demand in a timely way, or with the levels of reliability and sustainability needed to achieve their operational and environmental imperatives.

New technology, institutional innovations, and legal enabling now empower consumers such as port terminal operators to compete with the Utility Macrogrid. They can do so by installing and optimizing a more affordable, reliable, and sustainable local area network of on-site generators and renewable energy resources (“microgrid”). Consequently, the concept of an integrated port energy system to replace the Utility Macrogrid has emerged. It would consist of multiple consumer-owned microgrids connected by power electronics hardware and distributed optimization software with each other, with the Utility Macrogrid and with certain transportation carriers (e.g., vehicle-to-microgrid, ship-to-microgrid and rail-to-microgrid power). This article proposes a new distributed utility business model by which such an integrated port energy system can move from concept to reality.

Among other objectives, the AAPA Port Opportunities with Energy, Resilience and Sustainability (POWERS) Program seeks to enhance electric infrastructure at ports by installing microgrid technology and local power generation, developing grants for port electrification, and ensuring fair dealing with legacy utilities. In other countries, numerous case studies of working applications in the field prove that large-scale integrated energy systems consisting of multiple interconnected microgrids with local power generation can provide more affordable, reliable, and environmentally sustainable power than the Utility Macrogrid.

In the United States, integrated energy systems with microgrids and local power generation can now recoup a large amount of capital investment from the Inflation Reduction Act’s increased tax credits as well as allocations of New Markets Tax Credits, and grants such as the Federal Emergency Management Agency’s Building Resilient Infrastructure and Communities Program. A number of State public service commissions have completed regulatory reforms that open up the monopoly Utility Macrogrid operators to fair competition from an integrated energy system of multiple consumer-owned microgrids.

Assuming microgrid technologies are past proof-of-concept in terms of superior affordability, reliability, and sustainability, can largely be funded by Federal tax credits, and can legally distribute power to multiple consumers under new state regulations, then a new type of distributed utility company may be expected to appear.

Unlike the asset building focus of the Utility Macrogrid business model, the distributed utility business model will derive its principal value from a multi-agent platform that electrically networks microgrid generators and institutionally networks the consumers using microgrids, the labor that builds them and the communities that host them. Much like a similar decentralization of telecommunication and computing networks that led to the collective management of the internet by consumers as a so-called common pool resource, the decentralization of electric power networks that leads to microgrids will be collectively planned and governed by consumers.

a new electric utility business model to optimize port electrification

Several specific features of the distributed utility business model may be envisioned as follows:

A distributed utility company will apply to the applicable state public service commission for a certificate of public convenience and necessity to distribute power to multiple consumers from an integrated energy system of multiple microgrids. The application will include a proposal for a microgrid-to-utility macrogrid payment that will account for the negative impact of consumers leaving the Utility Macrogrid net of the benefits of the energy system of microgrids in reducing congestion on the Utility Macrogrid (i.e., the result may be a credit to the microgrid from the Utility Macrogrid).

The distributed utility company will complete an initial engineering design needed to apply for federal grants and tax credits and to secure a construction loan, the proceeds of which will be used to complete microgrid design and construction. It will be useful for the system to be designed as a digital twin that can be used for simulating optimized operations, training operators, and ensuring cybersecurity. The digital twin will be deployed as the operating system for the installed energy system (i.e., the real twin).

The distributed utility company will contractually guarantee rates, reliability, and global and local air emissions to consumers. Rates will include a fee that will be used to transfer ownership over time to consumers as part of a Consumer Stock Purchasing plan. A trustee and management committee elected by consumers will govern post-transfer ownership and operation of the energy system.

The distributed utility company will develop a benefits package for the vulnerable communities that tend to host critical infrastructure and microgrids.

Guy G. Warner is chairman and CEO of Pareto Energy LTD.

Editor’s Note: Seaports Magazine is proud to feature the voices of a wide variety of thought leaders who care deeply about ports and supply chain resilience, funding, and success. This and forthcoming articles like it solely express the sentiments of the writer and may not reflect the beliefs of the American Association of Port Authorities (AAPA) and its stakeholders or members.