Off-grid renewables: off the grid and out of the box (Part 1)

Off-grid renewables: off the grid and out of the box (Part 1) 

Utility-scale renewables are now being deployed into small mining grids and for other off-grid customers. Renewable projects in an off-grid environment require special considerations.  

By Gerald Arends and Swati Johri

Is there anywhere truly off-grid?

There is much talk in the electricity industry about scores of private customers going off the grid and the networks entering a “death spiral” of fixed costs that must be spread across an ever-shrinking customer base. 

Ironically, those customers who are abandoning the networks are just embarking on a journey to become their very own network operators, for a network sometimes as small as the wiring in their own house. 

There is no place with electricity supply that is truly off-grid

In renewables, and in particular on utility-scale renewable energy generation in off-grid locations, it is important to note that there is no place with electricity supply that is truly off-grid. Rather, there are various networks, each with different characteristics. 

Striking the balance

Electrical networks need to be in balance at all times, i.e. supply (generation) and demand (load) need to balance out in real time. 

Centrally managed networks such as the National Electricity Market manage supply and demand through a central dispatch mechanism and have a vast multitude of generators and loads. This creates a portfolio effect that buffers the impact of individual generation and load changes.

Small and micro-grids also have a multitude of generators and loads, but the smaller scale requires additional technical measures (such as spinning reserve) and commercial protections (such as load management to ensure the delicate balance between generation and load is achieved). 

The distinctions between networks are not clear-cut, none is unconstrained

What many industry participants describe as off-grid environments in the narrowest sense are usually situations where all supply (generation) and all demand (load) is each provided by one person, and sometimes by the same person. In this environment, the technical challenges faced by small and micro-grids are exacerbated in both magnitude and impact. 

The distinctions between networks are not clear-cut, none is unconstrained. In Australia, even the National Electricity Market is segmented into state-based networks with limited interconnection capacity. By way of example, the South Australian network shows clear signs of constraints if wind or solar production is high, creating issues that would similarly arise in small and micro-grids. 

Managing the balance in electric network

Centrally managed and small and micro-grids regulate their affairs through complex regulatory and contractual mechanisms, necessitated by the multitude of relationships. Often, these regulations are designed to achieve a degree of “open access” for generators and loads to connect to the network and participate in the market generated. 

The additional deployment of renewables creates a triangular relationship

Off-grid environments in the narrow sense are, if generation is provided by a third party, typically managed through bi-lateral contractual arrangements under a power purchase agreement.  Both generator and customer are captive to one another.  

The additional deployment of renewables into such an off-grid environment, when separately financed adds an additional generator and creates a triangular relationship, requiring complex adjustments to both the technical set-up and the commercial arrangements. These adjustments are particularly challenging when renewables are introduced after the setup for conventional power has been completed. 

Thinking outside the box

Much of the renewable energy industry is still captive to the past, where feed-in tariffs offered a guaranteed offtake into a (nearly) unconstrained grid. The deployment of renewables into small and micro-grids and off-grid locations poses significant challenges for technical and commercial project development. We will be looking at some of the key issues in the coming weeks. 

Pegasus Legal is a boutique law firm with an exceptional level of expertise in the renewable energy sector. Amongst other projects, we advised juwi Renewable Energy on the industry-leading DeGrussa Solar/Battery Project in Western Australia

Our lawyers have worked on a large number of solar, biomass and wind projects in a wide range of countries. For further information please contact our directors Gerald Arends or Swati Johri.