IEEE Electrification Magazine - March 2014 - 36

TABlE 1. Microgrid Revenues, Costs, and Expenses.
Revenue Sources

Capital and Development Costs

Operating Expenses

A microgrid services fee can be assessed
to all participants in the system for its
management, operation, and maintenance.

Capital cost for procurement and installation of on-site CHP systems, solar PV
arrays, storage capacity, and thermal
energy conduits, etc., and their associated rights of way and permits.

Costs of fuel for generation
systems, with associated hedging
arrangements.

Payments for power and thermal energy
sales (especially for CHP systems) can
consist of fixed or variable rates per
kilowatt hour, shared savings payments, or
some combination of the two.

Capital costs and licenses for microgrid
energy management and control systems and software.

Operational costs, such as salaries
of management and operational
employees of the system, expenses of physical premises of company
(rent), and fees for professional
advisors to the operator (accountants, attorneys, etc.).

If a customer desires ultrareliable power, it
can be provided under a special "ultrareliability" tariff as a premium service.

Fees of professional consultants in the
development phase, such as engineers,
financial advisers, attorneys, permitting
specialists, and financial placement
firms.

Fees of consultants and subcontractors employed to support
operation and maintenance of the
system.

Payments from building owners for the
installation of energy-efficiency measures,
such as upgrades of HVAC systems and
lighting and installation retrofits, can consist of fixed payments for services and
shared savings incentives. Grants from
state and federal agencies also might be
available.

Capital costs of protective relaying
needed for interconnection, costs for interconnection and transmission studies
for connecting microgrid systems to the
utility grid, and for possible upgrades to
utility substations for standby power and
fault protection.

A management fee for the managing general partner or operating
manager.

Payments from third-party customers for
thermal energy for heating and cooling
if they wish to be connected to a district
energy system.

Capital cost of equipment needed to
implement energy-efficiency measures,
such as new boilers, chillers, lighting,
and insulation, and fees of service
providers.

Standby service rates to be paid to
the central grid for providing backup
power.

Incentive payments from government agencies and private foundations.

A financing fee payable to the managing
general partner or operating manager in
connection with a successful raising of
capital.

Insurance premiums, including for a
new insurance product coupled with
ultrareliable power covering business losses in the event of power
loss (which is much less likely with
reliable on-site
generators).

Sales of renewable energy credits, emission allowances, or emission reduction
credits where applicable.
Source: Minnesota Microgrids: Opportunities, Barriers, and Pathways Toward Energy Assurance, Figure 4-1, p. 70.

or community under what is effectively a concession or
operating agreement. mechanisms and contracts used in
cases 1) and 2) in the "microgrid revenues and expenses"
section could also apply in a commissioned microgrid.

Microgrid Revenues and Expenses
the value stream from microgrids is critical to generating
revenues to retire debt service. two sources of value arise
from: 1) the benefits provided by the specific der applications that are used within a given microgrid and 2) the
additional benefits created by the unique attributes and
geographic location of the microgrid.
several potential sources of revenue can be developed

I E E E E l e c t r i f i c ati o n M agaz ine / MARCH 2014

to support adequate cash flow. these revenues, and their
integration in firm esas, will provide the critical framework for accessing third-party capital in microgrid project
financing structures.
planning and building a microgrid will require capital
investments, start-up spending, and ongoing expenses.
these need to be accurately reflected in modeling. table 1
outlines several examples of potential microgrid revenue
streams and categories of expenses.

Attracting Third-Party Capital
a microgrid could qualify for federal or state tax incentives
for certain discrete elements of the project. these include

Table of Contents for the Digital Edition of IEEE Electrification Magazine - March 2014