New York governor Andrew Cuomo has put $40 million in prize money behind his push to bolster the state’s post-Hurricane Sandy storm resilience with community microgrids. But will that be enough to overcome the regulatory and economic barriers that have challenged efforts to create microgrids in the Empire State?

That’s the question facing would-be contenders for the NY Prize competition. As part of a much broader $17 billion storm preparedness plan unveiled Tuesday by Gov. Cuomo and Vice President Joe Biden, NY Prize is a $40 million competition aimed at jump-starting at least ten “independent, community-based electric distributions systems” across the state.

The projects are meant to support communities of about 40,000 residents and to operate in conjunction with the grid most of the time. But during emergencies, the microgrids will be able to disconnect from the grid and power themselves, providing islands of stable power for hospitals, police department, fire stations, gas stations and other critical systems.

It’s the latest move by Cuomo to use prize money as an incentive for community microgrid projects. In October, the state announced a similar competition to direct $10 million to each of two winning projects in Nassau and Suffolk counties, both areas that sustained heavy damage from Hurricane Sandy, as part of an $815 million recovery package for Long Island.

It’s a more indirect route than that taken by neighboring Connecticut, which in 2012 created a statewide microgrid program. In August, the state dedicated $18 million to fund nine projects. Connecticut is considered the leader in the region in terms of microgrid support, although other governments are putting funds behind emergency backup power and community energy sufficiency. New Jersey, for example, is partnering with the Department of Energy on a $1 million study aimed at supplying microgrid capabilities for New Jersey Transit, and New York City is studying a microgrid project for the Rockaway Peninsula as part of its climate change response plan.

To be sure, microgrids could be considered to be far down the list of New York’s storm prep priorities, particularly since its $17 billion plan currently has only $6 billion in federal post-Sandy emergency aid behind it. Cuomo’s list of projects includes billion-dollar transportation overhauls, wastewater improvements and coastal protection and flood control projects, as well as $1.37 billion in transmission and distribution grid hardening work, indicating that energy resiliency is being considered at both the micro and macro scale.

Meanwhile, regional utilities such as New York’s Consolidated Edison and New Jersey’s Public Service Electric & Gas have their own multi-billion-dollar grid projects underway that put storm preparedness at the forefront. Compared to these outlays, money aimed at microgrids remains a drop in the bucket.

One of the key challenges for the microgrids as grid resilience resources is the fact that they’ve got to find ways to pay for themselves that extend beyond keeping the lights on during emergencies. But many of those alternative revenue streams can come into conflict with existing regulations, not to mention posing a threat to utility business models that rely on selling power to customers.

The scope and scale of New York’s potential microgrid resources is certainly broad. At the large scale, multi-megawatt combined heat and power (CHP) systems at Cornell University, NYU and Stony Brook University are enabling self-powered campuses. At the small scale, the state is spending $25 million to provide emergency generators to about 1,000 gas stations near major highways and hurricane evacuation routes, an initiative which could be expanded under Gov. Cuomo's new plan.

But truly modern microgrids are meant to go beyond diesel generators, incorporating clean, renewable energy resources like rooftop solar PV with energy storage and on-site energy management systems. These could offer not just emergency backup power, but could also serve as models for integrating a range of grid-edge technologies into the grid at large.

That's how the New York State Smart Grid Consortium, a group including state agencies, universities and research labs, big utilities and smart grid vendors like General Electric and IBM, would like to see Cuomo's microgrid push develop. In a Wednesday announcement (PDF), it described the promise of community microgrids as "the means to increase reliability and give local communities more control of their energy systems, while also allowing for the adoption of clean and efficient distributed energy sources such as solar or combined heat and power," not to mention electric vehicle adoption. It remains to be seen whether New York’s new competition can help deliver projects that live up to this type of microgrid promise.