July 2021 - Quarterly Market Letter
On behalf of the team at 5, I am pleased to forward our market letter for the second quarter of...
Microgrids are a hot topic lately because of the crucial role they play in business continuity and resiliency planning. Thanks to a handful of unpredictable weather events, a wide variety of stakeholders are turning to microgrids to keep power flowing when natural disasters or catastrophic grid failures disrupt the utility grid’s normal operations.
The best way to understand microgrids is to contrast them with the traditional electric utility’s power generation and delivery systems. Across most of the United States, utility companies move electricity across hundreds of miles of wires that separate the power plants from the end-users of that electricity. Despite the fact that wires are good conductors of electricity, the resistance of those wires becomes significant across large distances and contributes to what is known as line-losses.
In contrast, a microgrid is a localized network of generating assets that produce electricity for specific end-use customers. Often these networks are self-contained and independent systems that serve college campuses, healthcare facilities, municipalities, and military facilities.
There are three essential characteristics of a microgrid.
Microgrids are, by definition, a localized system. This means that the users of electricity are geographically close to one another with a specific footprint and defined boundaries. Additionally, the electricity that supplies the microgrid is locally generated and specifically supplies those nearby customers in the system with power. Various types of generating assets can be used in a microgrid such as solar arrays, fuel cells, natural gas or diesel generators, and biogas generators. Often battery storage systems play an important role in microgrids as well.
Microgrids can have advanced control systems. Sophisticated software and systems are necessary to operate, manage and balance the supply of electricity with the demand of the customers in the microgrid. Control systems monitor and adjust the output of the generating assets and coordinate with storage systems to account for the operating profile of the microgrid’s electricity customers.
Microgrids can operate independently from the utility grid. A microgrid will maintain electricity supply even if the utility power grid fails. The ability of a microgrid to supply electricity and operate independent of a utility provides the reliability that some essential businesses and organizations require. Some microgrids can connect to the local utility grid while others are completely isolated without the capability to interconnect. “Island mode” refers to a microgrid’s ability to disconnect when the utility grid fails.