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Enterprises are more motivated than ever to control energy costs and increase sustainability, while the utility grids they rely on grow more vulnerable due to aging infrastructure, extreme weather, and rising energy demand. A microgrid can help your organization achieve its goals and control its energy future ' with or without capital investment.
In this blog, I'll introduce microgrids, their benefits, and some useful terms for understanding this transformative approach to energy.
A microgrid is a set of on-site energy loads and resources that work as a system and can operate independently of the grid. It can be as small as a few solar panels and a battery or as large as an array of solar, wind, hydrogen, and other systems across multiple facilities or a community. An intelligent microgrid that automatically adjusts energy loads and resources to optimize cost and resilience requires a full stack of generation, storage, analytics, interconnection, and software components. This can be a complex undertaking, so finding the right partner is essential for success.
Utility outages are growing more prolonged and frequent in many areas, often caused by weather-related disasters and aging infrastructure. A microgrid enables your organization to remain powered by seamlessly switching to on-site generation or storage. If the grid fails, a microgrid controller can sense the disruption, disconnects from the utility, activates 'island mode,' and reconnects when the utility service is restored.
A microgrid provides the technical infrastructure to pilot, integrate, and scale renewable energy systems in lieu of or to balance out non-renewable sources from the grid at your own pace. With the right software, controller, and interconnection equipment, the microgrid can use renewable sources, including battery storage, to supply your needs and could enable providing decarbonized power through a utility to other users.
An intelligent microgrid controller determines the optimal times to consume, produce, store, or sell energy based on weather, predicted utility rates, and other factors. It allows you to use your own loads without paying peak rates from the utility and the option to sell excess power when available. A microgrid can be a long-term hedge against inflation as the cost of fossil-fuel utility plants increases relative to renewable sources.
EaaS is a business model that lets your organization reap the benefits of microgrid ownership without the cost and risk of capital investment. With EaaS, partners like Schneider Electric, through their Joint Ventures with AlphaStruxure, GreenStruxure, and GreenNext, build, own, and operate a microgrid at your site for a long-term price per kWh. This gets the microgrid up and running faster and protects you from utility rate hikes. Schneider Electric can even transfer the asset to a partner when necessary, reducing your financial risk.
DERs are power resources outside a central grid, including microgrid generation and storage systems. A microgrid controller automatically connects and disconnects these from the macro grid by remotely opening or closing a circuit breaker or switch. To do this seamlessly, the microgrid should be integrated with the utility's automation systems at the substation and distribution levels. By connecting a microgrid to the utility grid as a DER, you can help increase the role of renewables on the grid and improve grid resilience.
A PPA is an agreement to sell energy at a predetermined price. The buyer may be an energy supplier that resells the power or a company with significant energy requirements, or a need to reduce its carbon footprint. Renewable energy developers commonly sell power through PPAs to achieve a return on their infrastructure investment. Microgrid owners also can enter into PPAs to sell their unused energy to companies or utilities. EaaS is essentially a PPA in which a third party owns a microgrid, and you pay the operational costs as a fixed price for energy over time.
A VPP is an aggregation of DERs that can be dispatched and traded in energy markets as a unit. The aggregator can sell the VPP as energy capacity or as energy supply at certain times of the day. Often, VPPs sell stored renewable power during peak periods, saving utilities from having to add fossil-fuel capacity. Participating in a VPP can streamline the process of selling energy from a microgrid.
A microgrid adjusts the consumption and storage of locally generated energy to optimize costs and produce revenue. When the price of utility power peaks under high demand, the microgrid can automatically switch your loads to on-site energy instead. If excess power is generated or stored on the microgrid, you can participate in demand response programs by selling energy to the utility, easing overall demand on the grid.
Determine whether your goal is resilience, sustainability, cost reduction, or all three. Their relative importance will affect how you calculate your return on investment. Schneider Electric has various resources for assessing a microgrid's potential ROI, from a simple five-minute tool to a more complex one-day evaluation. Other evaluation services can help you dig deeper if a microgrid looks promising.
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Both SDG&E's demonstration project in Borrego Springs, CA, (recently heralded for keeping the lights on during a transmission line problem) and Konterra's solar-storage project at its Maryland corporate headquarters have made headline news as microgrids. But in ownership, scale, design, and operation they're very different. Which raises a fundamental question about a word too-often thrown about in electricity circles: What, exactly, is a microgrid?
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The electricity grid is evolving, moving away from the traditional centralized grid and toward a more-distributed grid utilizing local sources of generation, resulting in more and more microgrids. At the same time, islands and remote communities around the world operate grids that are completely separate from any larger grid, and these are also often referred to as microgrids.
In general, microgrids are small power systems that use local generation resources to meet local electricity needs. However, since different people use the word 'microgrid' to describe different things, it can be difficult to have a clear understanding of what is meant in specific situations. More important than agreeing on a standard definition of a microgrid is having a shared understanding of the specific microgrid in question in a particular situation.
1. Who owns it?
One way to learn more about a microgrid is to understand who owns it. Bloomberg's research group divides microgrids into five ownership categories that include commercial or industrial, community or utility, campus or institutional, military, and off-grid or remote. For example, the Borrego Springs microgrid mentioned above serves that community and is owned and operated by the local utility, SDG&E. The U.S. military has been implementing microgrids, both at stationary bases in the U.S., and at forward operating bases overseas. Understanding the ownership type for a given microgrid can provide useful insight into the microgrid being discussed.
2. Are there multiple owners?
Along with the question of which type of entity owns the microgrid, it can also be useful to understand if there are multiple owners. For example, in military microgrids there is usually just one owner, the military. Other microgrids however may have different entities owning various pieces of the system, such as the generation, the storage, and the connecting infrastructure. At the Philadelphia Navy Yard, which is a 1,200-acre former naval shipyard that has become a modern business campus, several partners including Penn State and Alstom have come together to further advance microgrid technologies.
3. Does it interact with the larger grid?
Many microgrids are connected to the larger grid, with an option to disconnect and become an electrical island. Alternatively, some microgrids may not interact with the larger grid at all, but instead operate as completely separate electricity systems. These types of systems are operating today on many islands and in remote communities around the world. While these are really just smaller versions of the grid, they are often referred to as microgrids.
4. What is the size?
Another key defining aspect of each microgrid is size. Size can be expressed in terms of installed generation capacity, peak load, number of people served, or amount of land covered. Some might consider a smart home that includes distributed energy resources such as solar PV and battery storage to be a microgrid, while others might suggest that something as small as a home is really more of a nanogrid, or even a picogrid. Meanwhile, many island systems such as those in the Caribbean are considered microgrids, even those that have several MW of peak load. The lines between what size fits into the pico, nano, micro, and macrogrid categories are blurry, so asking about the size can bring clarity to the conversation quickly.
5. What is the main purpose?
As another distinction, microgrids may be built to serve varying purposes. In some cases, the main purpose may be to provide emergency backup power to critical loads. On the other hand, some microgrids (like those on islands and in remote communities) are built to operate normally at all times. Other microgrids might fall somewhere in between; for example at the University of California, San Diego, the campus microgrid provides power in parallel with the grid during normal operation, but can also meet most campus loads during a grid outage (such as the 15-hour outage that occurred in ).
6. How much load does it cover?
Along with its general purpose somewhere on the spectrum between emergency backup and continuous operation, another key question is how much load the microgrid is designed to cover. Will it cover just the critical loads, or all of the required loads? For example, the microgrid being considered in Hoboken, NJ, (one of the teams at RMI's recent eLab Accelerator event) would provide critical support in the event of another storm like Hurricane Sandy. Meanwhile, a microgrid on an island or in a remote community is likely designed to meet all of the loads from residences and businesses.
7. How long can it provide power?
Given the mix of generation and storage resources included in a microgrid, it may be designed to provide power for a certain amount of time. Again in the example of islands and remote communities, many microgrids are designed to provide continuous 24/7 power using local generation resources (and possibly some storage). On the other hand, microgrids built for emergency backup, such as those that power critical substation equipment when the grid goes down, may rely more heavily on storage, or have a fixed amount of fuel available for generation resources. This means that they are designed to provide backup power for a fixed period (say 48 hours) during an emergency, just until the main grid can be restored.
8. Does it share infrastructure with the grid?
Microgrids can also differ in their physical infrastructure. They may be built utilizing some of the actual grid infrastructure that already exists. Alternatively, they may be physically separate, and built in parallel to the grid. The microgrid planned in Hoboken, mentioned above, will be built with all new infrastructure in parallel to the grid, in order to increase the city's resilience in an emergency event that disables the main electricity grid.
9. How 'smart' is it (technically)?
Different microgrids may have different degrees of 'smartness,' both in how they operate and in how they interact with the larger grid. Some microgrids require a manual operation to disconnect from (or reconnect to) the rest of the grid. Others are able to do this dynamically, using smart controls that ensure the microgrid frequency and voltage match the rest of the grid. In addition, there may be smart controls included within the internal operation of the microgrid. Peter Lillienthal, CEO of HOMER Energy, explains how controls can differentiate microgrids as there may be controls for load management and demand response, as well as for handling the parallel operation of multiple generation resources.
One interesting example is the system on King Island, Tasmania, a utility-owned microgrid without a connection to any outside grid. In this system wind, solar, and diesel generators are combined with a battery, flywheel, and dynamic resistor to provide electricity to the 2,000 residents, with a peak load of 2.5 MW. King Island's microgrid includes smart controls with a centralized energy management system to optimize the use of the renewable and storage resources, and also includes residential smart meters, which allow the system operators to monitor and control interruptible loads (water heaters, and heating and cooling systems) in participating homes.
10. How 'smart' is it (economically)?
Along with various ways to add technical 'smarts' to a microgrid, there are also options for dynamically exchanging services, value, and money across the point of interconnection between a microgrid and the main grid. These types of microgrids are called transactive. For example, the microgrid at the U.S. Food and Drug Administration's White Oak facility operates in parallel with the grid, and can also operate as an electrical island during a grid disturbance or blackout. In addition, the microgrid participates in demand response events as needed by the local utility, and has the ability to make power-purchasing decisions.
The word 'microgrid' can mean many things to different people. The above examples show the range of possible definitions. As more microgrids are developed around the world, it's important to have a clear understanding of exactly what is meant whenever there is a conversation about this important topic. The next time you hear about a microgrid, consider asking about the ownership, how it interacts with the larger grid, its size, its purpose and timeline, its infrastructure, and its 'smartness.' Digging a bit deeper will give you a better understanding of what people are talking about when they say 'microgrid.'
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