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Macro trends point to microgrids

Nov 28, 2006 -

Our job is to be your early warning system, a radar screen, that warns you of new trends as soon as they cross the horizon, while there is still time to prepare. We were among the very first to predict rapid expansion for advanced metering (now in full swing). And to forecast big growth for distribution automation (now getting underway). [And, by the way, one of the few to say that BPL would not grow quickly, despite analysts rosy predictions a few years back.]

We're back again, this time to warn you to get ready for microgrids. Below you'll find:

The three macro trends that make microgrids inevitable

Six on-the-ground examples

Thoughts on what utilities and vendors need to be thinking about next

Four sources for more overviews and more information

Distributed generation (DG) consists of small power generators such as microturbines, diesel gensets, solar arrays, fuel cells, and small wind installations. The distributed part comes from their scattered locations near customers (as opposed to traditional centralized power plants).

Standalone DG sources connect individually to the grid. A microgrid ties two or more DG sources together on their own feeder line. Then it links that feeder to the grid at a single point. In the event of a disturbance, a microgrid seamlessly separates and isolates itself from the utility, while maintaining power availability and quality. When the utility grid returns to normal, the microgrid automatically resynchronizes and reconnects itself.

Macro Trends

Three macro trends are converging to make microgrids inevitable.


1. Security. More and more countries, states, provinces, and cities are facing up to the dangers of terrorism and natural disasters. They are urgently searching for ways to isolate disturbances so they do not turn into cascading blackouts. Military bases are already heading down the microgrid path. So are a few countries (such as Denmark). Even a few cities and business districts are using security from natural and manmade disasters as a motivator to move toward microgrids.


2. Self-reliance. As more and more industries go digital, they are bumping into the requirement for high-quality, interruption-free power. As the CTO of tech giant Oracle once put it: “We don’t worry about the cost of power. We worry about the cost of not having power.” Indeed, interruptions can cost tens or even hundreds of dollars per minute for certain commercial and industrial power users. Sources such as the RAND Institute and the Electric Power Research Institute say outages cost North American businesses $100B per year or more.


As a result, more and more commercial and industrial customers are considering sophisticated backup power and onsite generation and discovering microgrids as the best way to ensure self-reliance.


3. Standards. Until recently, each connection within the microgrid and each interconnection to the larger grid was a “custom” job. As a result, costs were exorbitant. Finally, however, standards are emerging in both areas. The CERTS Initiative (a coalition of national labs, universities and others) is developing plug-and-play specifications for inside the microgrid. And the National Renewable Energy Laboratory is leading the charge to create national interconnection standards. As these standards are proven and penetrate the market, they will bring down costs and installation time.


Real-World Examples

Microgrids have been around as a concept for quite a while, but now they are showing up as real-world pilots and demonstration projects. There are dozens of examples around the world. For instance:

·      American Electric Power has created a facility to test microgrid equipment and concepts developed by CERTS.

·      A subsidiary of DTE (the Michigan-based utility) is offering to build microgrids for commercial and industrial customers.

·      The European Commission has co-funded more than half a dozen microgrid demonstration sites in different countries.

·      Mad River Park, a Vermont commercial/industrial center, has created a prototype microgrid in collaboration with Washington Electric Cooperative.

·      Sandia National Laboratories is underway on its Energy Surety Microgrid program. The program will use a military base as its first demonstration in Spring 2007 and hopes to eventually see microgrids in all of the country’s military and federal installations. From there, it hopes to expand to civilian communities.

·      Wal-Mart has created microgrids for two facilities, one in McKinney, TX, and one in Aurora CO. They draw their energy first from onsite resources then from the grid as a secondary service. (They apply dozens of energy efficiency techniques as well.)


What to Do Now

Even if you didn’t believe any of the other indicators, the fact that penny-pinching Wal-Mart thinks microgrids are cost efficient should tell you that this trend is for real.


Utilities need to determine the role they want to play. Will they see it as a profit and customer service opportunity? Will they take a leadership role to ensure that standards are set correctly (as AEP has chosen)? Will they do nothing until forced to act and then scramble to catch up (a typical strategy for past technology changes)? Or will they fight a rearguard action, giving lip service in theory while using high interconnection charges and lawsuits to delay it in practice?


Likewise, vendors need to figure out how their products and services fit into a world of plug-and-play microgrids. I see a big opportunity for companies that can be early to market with products that comply with emerging standards. When companies such as Wal-Mart start to roll out microgrids and onsite generation nationwide, you can bet they will insist on open standards.


I see an even bigger opportunity for companies that can act as integrators, pulling the pieces together for the developers and owners of commercial/industrial properties. Wal-Mart may have the resources to create its own energy subsidiaries (as it has already done). But there are hundreds of thousands of companies and real estate developers who don’t want to go into that business. They will gladly pay for a one-stop-shopping, turnkey solution.


Where to learn more

Few people yet realize that the microgrid category is nearing the tipping point. I predict 2007 will be a year of pilots and standards, with 2008 the year that the early-mover microgrid integrators begin to gain traction. If that sounds distant, don’t forget that 2008 is only 13 months away. If you haven’t yet gotten up to speed on the microgrid phenomenon, here are four good starting points.


   UAE/T&D article “How ‘Microgrids’ Are Poised to Alter the
   Power Delivery Landscape”

   An excellent summary of the benefits and barriers


   Distributed Energy article “CERTS Proves Two Grids Are Better Than One”

   A useful overview of the concept and challenges


   European Commission Microgrids project home page

   An extensive collection of research projects and presentations


   Email Jesse Berst


Updated: 2016/06/30

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