Making hospital microgrids affordable to implement and operate

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This is my last post in a four-post series on microgrids for hospitals. In my first post, I discussed the operational and budget issues driving hospitals to increasingly adopt microgrid technology. I also described the importance of distributed energy assets (DER) like combined-heat-and-power systems, renewables like solar and wind, fuel cells, and energy storage.

My second post, offered a more detailed look at the many ways an intelligent microgrid solution – including advanced microgrid control and energy analytics – can help a hospital improve resilience to grid instability, while also helping reduce energy costs and support sustainability.

In my third post, I explained how new modular approaches to hardware and software are helping simplify everything about hospital microgrids, from design to installation to future adaptation, as well as reducing maintenance costs and making operation more reliable.

In this final post, I’ll answer what will likely be a burning question for most hospital administrators: how can you afford to upgrade to a microgrid? Navigant Research recognizes that there is an increasing demand for “innovative DER financing options” and that more and more organizations are looking for solutions that can meet operational and efficiency needs “without CAPEX or an impact on day-to-day operations.” That’s a tall order. Let’s see how this might be achieved.

Hospital Microgrid White PaperTwo common microgrid financing options

The first step is for the hospital team to consider the state of the current infrastructure. If, for example, boilers are aging and needing replacement, the timing might be right to replace those with a CHP system as part of a complete microgrid solution.

As noted in my last post, there will also be considerations around local tariff and demand structures, local natural gas pricing, etc. These will influence the viability of installing onsite energy resources. But if all these factors point towards a microgrid solution, then the next step is to consider how to finance and operate the new infrastructure. There are primarily two options to consider: customer-owned, or energy-as-a-service (EaaS).

In the customer-owned model, the hospital will own the microgrid outright. The upside is in retaining full control of the system, the benefits, and the financial returns. However, the microgrid will be a major capital expense and all financial, technical, and operational risk will be on the shoulders of the hospital.

In contrast, under the EaaS model, there could be multiple parties involved, including a vendor, a financier, and the local utility. Within the agreement could be a range of concepts, including:

  • Equipment leases/loans and energy asset concession agreements
  • Power purchase agreements
  • Efficiency savings agreements, energy savings performance contracts, or shared savings agreements

The hospital will typically pay a monthly fee to a third-party microgrid owner/operator who takes on the capital investment and all of the financial and operational risk. In addition, the hospital will benefit from the developer’s expertise in power system design and modeling.

Taking advantage of all incentives

The last thing to seek out in making a microgrid solution more affordable are any policies and incentives promoting microgrids and renewables in the hospital’s region of operation. These might include:

  • Tax credits that cover a portion of solar and microgrid installation costs
  • Renewable portfolio standards that support solar-friendly policies and incentives
  • Net metering policies that allow the hospital to get paid for solar power production, offsetting the cost of installation
  • Policies that exempt a hospital from interconnection study fees (a necessary part a microgrid project)
  • Grant programs that provide partial funding of microgrids, solar, and other generation and storage technologies

To learn more about the topic of this post, download the white paper “Building resilient, efficient microgrids for hospitals: from design to financing.” Schneider Electric provides complete microgrid expertise and integrated solutions for hospitals. Discover these at our microgrid solutions page.

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