Microgrids offer users a more direct way of decarbonising their operations
INCREASED RESILIENCY
Particularly in the United States, microgrids are proving popular because they provide a constant source of power in case of outage on the main network
LOAD SHAVING
Optimised microgrids can reduce peak loads, lowering bills and saving on expensive grid upgrades
KEY QUOTE
Microgrids offer a way of bolstering the resilience of power systems in areas with fragile grids or critical infrastructure where a reliable power supply must be a priority
Borrego Springs lies at the extreme west of the Sonoran Desert about 140 kilometres from San Diego in southern California. It is subject to scorching heat and monsoon weather conditions. For decades, the town of about 2800 people relied on a single 95 kilometre transmission line and distribution circuit and frequently suffered from power outages. In 2013, San Diego Gas & Electric (SDG&E), a major state utility, launcheda microgrid system, backed by digital tools.
The microgrid in Borrego Springs is connected to a 26 megawatt (MW) solar photovoltaic (PV) facility and includes two battery storage systems, a microgrid controller, two diesel generators as backup and an ultracapacitor—capable of quickly storing and discharging electricity to keep power flowing during emergencies and planned outages on the larger grid. It was the first utility-owned community microgrid project in North America.
The United States’ Department of Energy (DoE) defines a microgrid as, “A group of interconnected loads and distributed energy resources (DER) within clearly defined electrical boundaries that act as a single controllable entity with respect to the grid and that can connect or disconnect from the [main] grid… to enable it to operate in both grid connected or island mode.” A remote microgrid is a variation of a microgrid that operates in islanded conditions.
With the rise of intelligent digital network products and cheaper renewable energy, microgrids offer a way of bolstering the resilience of power systems in areas with fragile grids or critical infrastructure where a reliable power supply must be a priority.
RESILIENT SYSTEMS
Last year SDG&E received a $4.5 million grant from the DoE to buy smart power inverters, microgrid controls and state-of-the-art energy management systems it says will enable it to improve energy reliability, stabilise the microgrid and become 100% renewable.
In April 2021, the utility announced Borrego Springs would be the site of one of two green hydrogen demonstration projects it plans to implement next year. The goal is to demonstrate hydrogen’s use as long-duration energy storage, a microgrid asset and a resource for dispatch by the California Independent System Operator (CAISO) to support grid reliability.
The state of California is promoting microgrids as a solution to improve grid resiliency, as the risk of mechanical equipment sparking wildfires has led to frequent “public safety power shutoffs” (PSPS) over the last few years. Talk of microgrids is also now in vogue in Texas after the power system was knocked out after a crippling blizzard in February 2021.
Resiliency and the ability to keep producing power when the main grid goes down became the driving factor for microgrids in the US after Hurricane Sandy in 2012 led to power outages for some eight million customers across 21 states. Amid a rise in extreme weather events prompted by climate change, this is not expected to change anytime soon.
“The US is the leader in microgrids but mainly because the grid is going down a lot,” says Peter Asmus, an expert on microgrids at Guidehouse Insights, a market intelligence and advisory firm.
Hospitals and military bases with critical loads and institutions like universities have been among the forerunners in microgrids. The vast majority of microgrids are for single users. Multi-customer projects are more complicated and the legal, liability and planning issues make them even more expensive, explains Bruce Nordman from the DoE’s Lawrence Berkeley National Laboratory.
The fact that “every microgrid is custom-made” can make them pricey, to begin with, Nordman says. To expand the use of microgrids, “We have to learn lessons from IT and particularly Internet technology, where you buy a computer, plug it in and it works.”
Indeed, the push in the industry is towards microgrid products that are simpler and replicable. Microgrids are increasingly seen featuring cloud-based solutions that enable greater computing power and analytical capabilities while helping to bring project costs down. Digitalisation is driving new business cases for microgrids.
In the US and globally, the commercial and industrial (C&I) segment represents the fastest growing market for microgrids. Microgrids, in general, are becoming more viable as costs keep going down for solar and batteries and controls “just keep getting better,” explains Asmus.
“Businesses in the US can also see how much all these grid problems are costing them and now with emission reduction mandates you can’t just turn on the diesel backup generation every time the power goes out.”
ADDED VALUE
By optimising grid operations and power resources, microgrids are a single tool that can reduce peak loads, allow for savings on electricity bills, facilitate the uptake of household-scale renewables and reduce the need for grid investments to meet peak demand.
More and more, microgrids are also being used to provide value to the larger grid when market regulations allow, says Asmus. “A decade ago utilities in the US were worried about microgrids and there was talk of a utility death spiral but now more microgrids are being deployed by utilities themselves. Utilities have also called upon microgrids to take load off the system, basically serving as demand response reserves.”
A growing number of US states have introduced policies and incentives supporting microgrids. The regulatory framework is also increasingly encouraging the involvement of microgrids and other aggregated DER on the energy market, opening the way for new revenue sources for microgrid owners and improving their business case.
The US Federal Energy Regulatory Commission (FERC) approved Order No. 2222 in September 2020, which enables DER including electricity storage, intermittent generation, distributed generation, demand response, energy efficiency, thermal storage and electric vehicles and their charging equipment to participate in wholesale, capacity, energy and ancillary services market alongside traditional resources.
The expansion of the Energy-as-a-Service (EaaS) financial model is also expected to help support the growth of microgrids, allowing for end-users to avoid all or some of the upfront costs and the hassle and risks associated with developing and operating them. The microgrid is owned by a third party, to which end-users instead make regular payments for the services they receive. Private equity investors have spotted an opportunity and have been teaming up with microgrid solutions providers.
Last year, Schneider Electric, an energy and digital solutions provider, joined forces with investment firm The Carlyle Group to form AlphaStruxure to bring microgrids to airports, seaports and other large infrastructure sites, along with other C&I projects.
Schneider also set up GreenStruxure along with San Francisco-based investor Huck Capital to target small and medium-sized buildings with an electrical load below 5 MW. Elsewhere, Siemens and infrastructure investor Macquarie’s Green Investment Group established Calibrant Energy, to finance and build microgrids and other distributed energy projects.
EUROPEAN LAGGARD
As the US races ahead, Europe has been a laggard in the development of microgrids. This is mainly because the grid tends to be more reliable. To date, the region’s islands have been the favoured location for microgrids.
“People traditionally have paid a lot of money to ship over fossil fuels for conventional generation to islands that often are suitable for wind and solar PV,” explains Robert Klaffus, who heads up the digital grid business at Siemens. “Here the use case and business case for a microgrid is clear.”
Aside from isolated settings like islands, microgrids in Europe are expected to operate almost exclusively in grid-connected mode and the US trend for grids that can also operate independently from the main grid is not seen as a motivation for their development on the other side of the Atlantic Ocean.
“Grid resilience is not that big of an issue here, because of the high degree of interconnection of the European grid,” explains Andrés Pinto-Bello, from SmartEn, a Brussels-based association promoting digital, decentralised and decarbonised energy solutions. “The vision here in Europe is that we are stronger together.”
Pinto-Bello sees the concept of a microgrid being applied to some of the local renewable energy communities that the European Union is seeking to foster, although setting up a microgrid is not a prerequisite for an energy community and the regulatory framework is still being developed.
Pinto-Bello says successful energy communities and eventual community microgrids will encompass a mix of households, industry and offices and make a business case based on optimising self-consumption of local renewable resources to lower energy bills and providing services to the grid. “They also represent a system opportunity to manage local grid congestion,” he adds.
In the US, community microgrids are also a hot topic, although they can be complicated given restrictions on crossing public rights-of-way unless you are a utility. The large number of stakeholders means these projects move slowly even if a utility is involved, says Guidehouse Insights’ Asmus. “Community projects are the most difficult ones to do but communities are the ones who want microgrids the most.”
San Francisco-based utility Pacific Gas & Electric Company (PG&E) recently launched a community microgrid programme to provide technical and financial support for multi-customer microgrids serving critical facilities and vulnerable customer groups in areas that have a higher likelihood of power outages. The programme also prioritises projects with higher levels of renewable energy, the utility says.
MICROGRID ELEMENTS
Not everyone needs a microgrid and other options also exist for integrating renewable energy resources into grids. While the growth of distributed resources like rooftop solar is making the grid more complex and requires more technology, Siemens’ Klaffus points out that in places like Germany grid operators have a good track record of using technology to smoothly incorporate more distributed resources.
Utilities may also apply technologies typically used in microgrids like storage, forecasting capabilities, and load management without the need for an actual microgrid. While he anticipates “very fast” growth in the next five to ten years, Klaffus expects microgrids to play a supporting rather than a dominant role in the power system.
Rather than microgrids, for example, European countries have been focusing more on the use of virtual power plants (VPPs), which use software to aggregate DER like battery storage and rooftop solar from a number of households or businesses to provide flexibility to the grid. VPPs could also incorporate microgrids.
Asmus sees the main reasons for opting for microgrids over VPPs as the need to boost grid resilience for critical resources and tighten control over the pace of decarbonisation, for example for companies that are seeking to get to zero carbon by a certain date. “We will need more things like microgrids and VPPs as more DER comes onto the grid so the utility doesn’t have to see every individual power resource and control it,”he says. •
TEXT Heather O’Brian PHOTO Scott Curtis-Ells