Bright Ideas Blog, clean energy markets, Microgrids, Renewable Energy Strategy

Can Microgrids Help Define the Utility of the Future?

This article is part one of a two-part trend series on microgrids. Subscribe to our e-letter to receive all our trend pieces.

The quest to create a zero-carbon future and the drive for a more resilient, flexible power grid are not mutually exclusive goals. As the number and severity of climate events escalate, microgrids are gaining favor as the preferred solution for rebuilding utility infrastructure, especially in remote communities.

Utilities who were once resistant to islanded distributed generation projects are now developing microgrids at a rapid pace. And commercial and industrial entities are increasingly looking to microgrids powered by renewable energy for the resiliency their businesses crave.

Screen Shot At . . Pm - Clean Power Marketing Group
Photo Credit: Siemens

As we enter this new reality, let’s take a step back to ask: Is it possible for local communities and even entire industries to rely on microgrids as their dominant energy source? And to what extent could bidirectional distributed generation – bolstered by solar, wind and advanced energy storage – help stabilize the grid?

First, let’s agree on a definition of microgrids. According to the U.S. Department of Energy Microgrid Exchange Group:

“A microgrid is 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.”

Benefits of Microgrids

The advantages for microgrids generally fall into three categories:

  • Resilience and security
  • Economic benefits
  • Clean energy integration.


Severe weather, cascading outages and risk of cyber and physical attacks makes the grid increasingly vulnerable, according to a recent report in Science Direct, Microgrids: A review of technologies, key drivers, and outstanding issues.

Due to their decentralized nature, microgrids isolate the effects of outages and can provide power to critical facilities when the central grid falters.

Economic Benefits

The average power plant in the U.S. is now more than 30 years old, and 70 percent of transmission lines and transformers are at least 25 years old. (Science Direct)  Microgrids offer a more economical way to upgrade or replace existing infrastructure with efficiency improvements such as reduced line loss and combined heat and power. Ancillary services like congestion relief, frequency regulation, black start and reactive power and voltage control provide additional value to the grid.

For microgrid hosts, who may include corporate entities, public facilities, community hospitals or even schools, cost savings from microgrids can greatly reduce demand charges and overall electricity costs. These entities (as well as utilities) may even be able to participate in energy markets via arbitrage strategies.

Clean Energy Integration

Screen Shot At . . Am - Clean Power Marketing Group While microgrids first got their start as off-grid resiliency projects, today’s microgrids are commonly integrated with the grid and feature more renewable energy including solar, wind, and battery storage. Since these resources provide variable generation, microgrids are seen as a better way to locally manage generation.

While there is an abundance of solar and storage in the microgrid pipeline at present, a new report from Wood Mackenzie Power & Renewables suggests that renewables are still being used primarily as a backup source of power to fossil fuel generation.

How Many Microgrids Exist Today?

It’s not easy to pinpoint how many microgrids there are in the world today, since many have been deployed in remote areas. North America is the leading microgrid market in terms of total capacity, followed by Asia Pacific and the Middle East & Africa, according to Navigant Research. As of Q4 2018, Navigant had identified 2,258 projects representing 19 GW of planned and installed power capacity, compared with 1.5 GW of deployed capacity in 2015.

“In 2018, the global market for remote microgrids totaled $3 billion. By 2027, it is expected to be $10.2 billion.”
–Navigant Research

Where do Microgrids Work Best?

In the U.S., microgrids have been utilized to improve resiliency and reliability of critical infrastructure such as healthcare facilities, water systems, emergency response facilities, and communications and transportation systems. Increasingly, utilities are opting for microgrids when updating aging infrastructure since by design they can be phased in over time.  Science Direct reports: “States in the U.S. are also looking to microgrids to replace retiring generation capacity and to relieve congestion points in the transmission and distribution system.”

As IoT technologies and EV charging advance, microgrids can be added in stages while providing valuable ancillary grid services.

What are the different types of microgrid projects?

While there are a number of microgrid categories, for the purposes of this article we are going to focus on three sectors:

  • Remote/Island Microgrids
  • Commercial/Industrial Microgrids
  • Community Microgrids. 

Remote/Island Microgrids

Hurricane Maria caused the longest power outage in U.S. history on the island of Puerto Rico. More than 1.2 million households, or 75 percent of residents, were without power for more than a month. The rebuilding of the island’s utility infrastructure is a test case for microgrids incorporating renewable energy. The proposed Integrated Resource Plan for Puerto Rico includes eight “minigrids” to improve resiliency to critical infrastructure facilities and communities, and in light of Puerto Rico’s recently announced 100% renewable portfolio standard, these will undoubtedly include renewables.

Today, renewably powered microgrids are being utilized expressly for cost-savings, particularly in isolated areas: “So-called ‘hybrid’ microgrids that incorporate renewable energy sources, often as an add-on to diesel generator-based systems, show great potential to diversify generation and lower microgrid operating costs in island communities that rely on expensive imported oil for generating electricity and in remote areas far from existing electricity infrastructure.” (Science Direct)

Commercial/Industrial Microgrids

One of the fastest growing sectors of microgrid use is among the Fortune 500. Corporations install microgrids to reduce costs, lessen or eliminate carbon emissions and improve reliability. In some cases companies can even sell ancillary services back to the grid operator for incremental revenue.

Industrial microgrids are being designed to supply near zero-emission industrial processes, integrating combined heat and power (CHP) generation, powered by renewable energy and waste processing with energy storage added on to optimize operations.

One example of advanced microgrid deployment is the Shell Technology Center Houston Campus, a 200-acre campus where nearly 2,000 Shell engineers, scientists and researchers work. Shell has installed a microgrid consisting of 300-kw of ground-mount solar, a 127-MW natural gas reciprocating engine and a 1,050-kWh advanced lithium ion battery and 250-kW load bank. Electric vehicle charging stations and other are slated to be fully operational in June.

Although the Shell microgrid is being used primary for research purposes, it is already providing economic returns to Shell and will help inform the company’s renewable strategy going forward.

Other corporate entities pursuing microgrids include high-end manufacturers of automobiles, data centers and other private enterprises that can lose millions of dollars in lost revenue with just a single day of lost power.

Community Microgrids

As microgrids have become more acceptable in utility infrastructure, their use is expanding beyond critical infrastructure and remote areas to communities where reliability, low-cost renewables integration and security are key.

In particular, smart cities in which new technologies are being added to the grid are looking to microgrids as a solution: “Microgrids represent ways for smart cities to increase resilience while also integrating diverse DER – including EVs, thermal energy assets, and building loads – all orchestrated to offer resiliency, economic and environmental benefits to the larger utility distribution grid,” writes Peter Asmus, associate director at Navigant and a leading expert on microgrids and virtual power plants.

What’s Next for Microgrids?

In our next article, we will take a deeper look at several different microgrid projects and the myriad business models that have successfully been installed in the U.S.

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By Nancy Edwards. Contributing editors: Giuseppe Brizi and Jessica Harris.