The US Department of Energy (DOE) defines a microgrid as “a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”
A microgrid may contain a variety of power and thermal energy sources: solar, wind, batteries, combined heat and power (CHP) cogeneration, methane production from sewage treatment and food waste, and even energy storage. The goal is a system that can stand alone to provide power during a power outage or when the main grid is under heavy load. The potential benefits include resiliency against disasters and avoidance of transmission and distribution (T&D) costs by providing power on-site during heavy grid load.
After Superstorm Sandy caused extensive damage to electric power systems, several states sought ways to make the grid more resilient. The New York State Energy Research and Development Authority (NYSERDA), through a competitive competition known as NY Prize, awarded 83 grants to study where microgrids could be cost-effectively installed and operated. Find descriptions of the projects at http://nyserda.ny.gov/ny-prize. The rapidly dropping prices for both solar and stored power (batteries and ice cooling) provided an impetus for projects that integrate them with other energy efficiency options, such as gas-fired CHP. Several of the studied opportunities will receive development funding to flesh out their details.
Two publicly available studies, one concentrated in an urban industrial area, Hunts Point, and the other suburban, Croton, were examined. Both were sufficiently detailed to demonstrate that the concept is heavily dependent on how much society is willing to pay for resiliency and reductions, or avoidance, of T&D costs.
The general notion is that the use of on-site renewables and demand management would, over time, produce enough revenue to cover the costs of microgrid independence. If sufficient subsidies and incentives are provided to build a microgrid, both designs would work. But if diesel or gas-fired backup generators are used instead of on-site renewables and microgrid distribution networks, both resiliency and load shedding may be attained at a fraction of the installed cost of either system. Of course, emissions requirements must be thoroughly vetted before going this route.
So – are microgrids potentially cost-effective? Microgrids were originally designed for economics, not resiliency. Adding the latter tends to balloon the bottom line cost of new systems, but resiliency brings its own benefits. The rate of return discussion changes when the cost of avoided outages is factored into the economics. Microgrids avert financial losses that occur when businesses, communities, hospitals, and other facilities lose power. Thus, outages help boost microgrid economics, since the microgrid keeps power flowing to the facility when the larger grid fails.
At a May 19, 2016 conference NYSERDA reported that the top ten NY Prize applications, those with the highest Internal Rate of Return (IRR), accrued average benefits of $1.679 billion at a cost of about $759 million. Many of the projects required no more than one outage day a year to tip into a positive IRR.
Microgrids have existed for close to a century in the form of district energy systems that centrally distribute heat (and, in some cases, chilled water, steam, or power) at hundreds of sites. Please see https://www.districtenergy.org/topics/microgrids for more information. GTM Research, an electric industry research firm, estimates that there is currently about 1.4 GW of microgrids in the US. They recently increased their 2020 estimate to 3.59 gigawatts (GW).
Although it may seem like common sense, locations, where the cost of an outage in terms of business or societal impact are the highest, will make strong candidates The best chance for success may be where an “anchor tenant,” such as a large university, or a dense concentration of critical facilities, already exists or is to be erected. A central plant and distribution system may be more easily expanded to provide energy for nearby unrelated sites than would occur by starting from scratch. Making that plant and its additions resilient may be easier, depending on the dispersal of satellite participants, than creating new utility distribution that is more resilient than existing lines. A large existing central plant may already have access to high-pressure gas mains and be serving buildings with rooftop solar potential. Several such sites are likely to receive grants to further develop their opportunities. So keep an eye out for that ace up the sleeve, as more is revealed about that process.