How a perfect storm is driving microgrids into the mainstream

By Will Agate, Vice President of Microgrid Services at Ameresco

Given the diverse benefits that microgrids provide – reductions in energy costs, business risk, and carbon emissions, and increases in resiliency and power reliability – one wonders why discussion of microgrids has only started to take off recently.

Most of this can be explained and understood in that it comes down to the fact that microgrids are now experiencing “the perfect storm” of factors relating to why they are beginning to make so much sense. These factors include pivotal advances in technology, reduction of costs, and significant changes in the environment and traditional electric grids all around us. Today, these factors and other related energy innovations are leading many large energy users to contemplate how they might be able to leverage a microgrid to help them address their own energy and infrastructure needs. In this article, we will present key reasons for why now is the right time to start thinking about microgrids more seriously as well as some perspectives on how to make the leap to your first microgrid.

Five Key Factors Driving Interest in Microgrids Today

One of the key drivers of interest in microgrids today is the increased need for businesses and communities to plan for their own resiliency. The traditional electricity grid was not built to withstand the increasingly intense weather conditions, such as hurricanes, that have become stronger and more frequent; companies and government agencies are looking to microgrids as a means of hardening their infrastructure on a localized basis as protection against the types of major outages unleashed by Hurricanes Maria, Sandy, Florence, and others in recent years.

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The increasing availability of new distributed energy resource technologies is the second major driver of interest in microgrids, particularly energy storage, which is arguably where solar was 10-20 years ago and is about to undergo a major period of deployment. Energy storage technologies can now provide faster and more flexible power than diesel generators in the case of an outage, which helps maintain smooth operations to avoid damage to equipment and infrastructure caused by outages. Microgrid controllers, which allow microgrids to island from the grid during a major event, also enable a level of control over power that far exceeds traditional backup power systems. These technologies, coupled with other types of distributed generation, are enabling microgrids with a broader set of capabilities than at any point in the past.

Third, perhaps unsurprisingly, is the fact that the costs of distributed energy resources are dropping rapidly, allowing them to achieve price parity with other traditional energy sources. Solar PV will likely continue to experience steady cost declines as the market continues to grow. The same is just starting to impact storage strategies; as the financial advisory and asset management firm Lazard wrote in its most recent levelized cost of storage analysis, “sustained cost declines have exceeded expectations for lithium-ion technologies.” Accordingly, the market is reaching an inflection point at which the cost of solar-plus-storage places it within the investment criteria of many organizations to serve at least a portion of their on-site energy needs.

Of course, none of these innovations would have been possible without major changes in how the energy sector is regulated. A few decades ago, customers had few choices for energy supply beyond relying on monopoly energy and gas utilities. Following years of deregulation and the creation of new market rules (such as those enabling customer and third-party ownership, innovative tariff schemes, demand response programs, and others), customers these days tend to have a diversity of options for how to procure and manage energy in order to save on energy costs, improve reliability, reduce carbon emissions, and achieve other ends. Microgrids are one of the best ways of taking advantage of this diversity of choices because they are flexible, in many cases modular, and can address the energy user’s individual energy-choice preferences. This availability of energy-choice is the fourth reason for the intensifying interest in microgrids.

Finally, microgrids provide customers with protection against cybersecurity threats on the grid. The investment in “smart” technology on the grid in the past decade is important on the one hand, but, that added intelligence also creates a potential target for attack by hackers, foreign state-backed bad actors, and others with an interest in disrupting the grid. Investing in islanding technology provides a measure of energy security against the growing threats on the broader grid.

Breaking Through the Remaining Barriers for Microgrids

Although many of the stars are aligning for microgrids today, a number of persistent challenges holding back the microgrid industry remain. One of the most common ones we see is that the prospect of combining a suite of technologies into a functional microgrid involves more complexities, which may be new and confusing to many would-be customers and even providers. On the demand side, customers are often facing difficulty determining the value of resiliency to their organization or convincing key decision-makers of its importance. On the supply side, vendors and microgrid integrators have more experience selling standalone products and services than complex solutions like microgrids, so many are at the beginning of the learning curve as well. This new set of opportunities requires the expertise of a new set of energy services providers that can integrate these solutions so that they do not become a burden on the end user customer.

In the ideal case, a customer would engage an advisor with a proven track record of operational microgrids that can lead them through the entire process, from the initial scoping stages to commissioning and perhaps even to operations & maintenance. Working with an experienced advisor can take much of the guesswork out of the microgrid development process.

Engaging an experienced advisor can also enable the team to design a “holistic microgrid,” or a microgrid that is designed with the whole system in mind. Many rush to put in solar PV and energy storage as the first steps in their microgrid given the hype around them without thinking about the energy profile of the site overall. A holistic microgrid, in contrast, would start with energy efficiency measures that reduce the fundamental energy demand of the site so that subsequent energy generation systems, be they PV, CHP, or anything else, are right-sized to the setting. Without this crucial step, microgrid customers may be wasting money on systems that are larger than necessary, creating higher capital and operating costs that could be avoided with a lower energy load.

One of the other key strategies that can help a customer initiate the process of acquiring a microgrid is by starting with a “foundational microgrid” and phasing subsequent projects over time.  A foundational microgrid is designed to a scale that addresses a few clearly defined pain points or priorities for a customer but stops short of a complete microgrid deployment. Although the format of a foundational microgrid will vary significantly from one setting to another, it will likely provide a customer with some measure of resiliency as well as energy cost reduction. Microgrid components such as microgrid controllers and energy storage batteries lend themselves well to this kind of phasing since they are designed to be highly interoperable with a wide range of complementary technologies. By starting small, the concept can prove itself, and subsequent projects can be undertaken later to build on top of that foundational microgrid.

Although initiating the microgrid design process may seem daunting, this “perfect storm” of factors that is bringing microgrids into the mainstream cannot be ignored. Rather, the opportunity exists today to find ways to include these new technologies in a customer’s overall business strategy. By approaching the process with a holistic design mentality and planning for smart phasing, energy users can start to take advantage of the diverse benefits that microgrids offer.

Microgrids are an important part of both POWERGEN International and DISTRIBUTECH International. 

Mr. Will Agate currently serves as Vice President, Microgrid Services, Ameresco. Prior to joining Ameresco, Will founded NetZero Microgrid Solutions. Leading NetZero represents the culmination of Will’s 25+ year career in energy management, economic and real estate development, and smart city sustainability and change management.

Immediately prior to forming NetZero, Will served as a Senior Vice President since 2010 with PIDC, Philadelphia’s public-private economic development corporation, in charge of the nationally acclaimed Philadelphia Navy Yard. The Philadelphia Navy Yard is a dynamic and modern 1,200-acre business campus where Will led the effort to interject a progress energy plan into the overall sustainability effort, and to continue the explosive growth to its current success with more than 12,000 employees and 152 companies in over 7.5 million square feet of office, industrial, manufacturing, and research and development space occupied and in development, making it one of the most successful military base redevelopments in the country.