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Growing Trend of Microgrids

Posted to Questline in the Grid Professionals Group
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Mike Carter's picture
Senior Engineer Tech Resources

Mike Carter is a Sr. Engineer for Tech Resource's Questline service. Mike has a BS Engineering and MBA degree from The Ohio State University. He has worked with various EPRI centers supporting...

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  • Jun 16, 2021 5:00 am GMT
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Historically, microgrids consisted of prime mover electric generation equipment located at one site, a microgrid island. The latest trend is nested microgrids acting as networked nodes. While not physically interconnected to each other, they are embedded in the distribution system of a local utility. A microgrid network operations center (NOC) operates each nested microgrid node separately or collectively. Being aware of microgrid trends will help your utility provide customers resilient operations at the lowest cost. Let’s explore the microgrid landscape and identify a few more trends.

Prime Movers

Microgrids can be powered by distributed generators (diesel fuel or natural gas), battery energy storage and renewable sources, such as solar and wind energy. Microgrids are still primarily fossil-fuel driven, though, with 86% of 2019 microgrid new capacity powered by diesel fuel and natural gas according to Wood McKenzie. However, forecasters expect renewable power sources (solar, wind and hydropower) to drive 35% of new microgrid capacity by 2025.

Microgrid Trends

While a record number of microgrids (546) were installed in the United States during 2019, the first half of 2020 was the slowest for the U.S. microgrid market since 2016 according to Wood McKenzie. The pandemic is to blame but disruption is expected to ease in late 2021 especially due to reinstated federal tax credits for solar PV systems (and accompanied energy storage), common components of microgrids. Also, FERC Order 2222 is paving the way for aggregated distributed energy resources (DERs) to compete with traditional power plants in wholesale markets. Third-party ownership of microgrids is another driving force for the development of microgrids. Another trend is smaller (below 5 MW) replicable modular systems.

Microgrid controls are the magic sauce of microgrid performance. An industry trend has been moving from a top-down (on-premise centralized) to a bottom-up (cloud-based decentralized) controls architecture. Due to concern about cloud resiliency, however, a hybrid approach is leading the way. Guidehouse Insights’ Leaderboard methodology was used to identify the top 15 microgrid controls vendors with respect to a dozen criteria. Schweitzer Engineering Laboratories (low-cost solution), Schneider Electric (energy as a service) and Opus One Solutions (smart grid) were the top ranked suppliers.

Microgrid Benefits

Microgrids have several advantages over standalone generators:

Efficient sizing. Power resources are shared across many buildings, which reduces the volume of power needed to back up critical loads.

Maintainability. Only a few, large generation units typically with standardized features are required, making it easier and less expensive to maintain.

Reliability. A high level of reliability is possible because of a networked structure, which ensures that if any single generation unit fails, another can instantly take its place.

Flexibility. Because microgrids are networked, they can respond to changes in electricity needs at no cost and integrate the power from renewable energy sources.

Coverage. Excess generation is almost always available and can serve any load connected to the microgrid because it's sized to meet peak loads.

Utility Response to Microgrids

Some utilities embrace microgrids while others see them as a potential threat. There are several tools available from Lawrence Berkeley National Laboratory’s (LBNL’s) Grid Integration Group to help utilities properly evaluate microgrids.  LBNL’s Distributed Energy Resources Customer Adoption Model (DER-CAM) can be used to find the optimal portfolio, sizing, placement, and dispatch of a wide range of distributed energy resource (DER) investments in the context of either buildings or multi-energy microgrids. The goal is to minimizes costs while ensuring resiliency targets.

LBNL's Integrated Modeling Tool (IMT) models the interactions between consumers’ adoption of DERs, utility grid planning, and utility rate design. The IMT aims to answer the following questions:

  1. How to influence consumers’ adoption of DERs through electricity rates (or other incentives, e.g. rebates) in ways that benefit the distribution grid?
  2. How can utilities combine rate design with grid investments to accommodate mass deployment of DERs and decrease costs?
  3. How to recover grid costs in scenarios of mass deployment of DERs?

Commercially available tools are also available such as HOMER Pro (smaller 100 kW to 10 MW capacities) and Bentley Systems’ OpenUtilities which help utilities integrate microgrids into the larger grid.

Thinking Small

The benefits of microgrids to utilities are anything but micro. Microgrids can improve the operation and stability of the regional electric grid and provide increased resiliency to critical operations customers like hospitals and military bases. Plus, they can shore up aging utility infrastructure and decrease peak demand. For energy utilities, thinking small has its advantages.

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Matt Chester's picture
Matt Chester on Jun 16, 2021

While a record number of microgrids (546) were installed in the United States during 2019, the first half of 2020 was the slowest for the U.S. microgrid market since 2016 according to Wood McKenzie

What's the definition of a microgrid in this instance? Isn't it true that a microgrid can be small, large, or even a large microgrid being composed of numerous component microgrids-- how are we counting them? 

Mike Carter's picture
Mike Carter on Jun 16, 2021

True on all counts, Matt. The Wood-McKenzie report stated that most of the microgrids were less than 5MW in capacity. For instance, the American Red Cross has implemented a few hundred solar-plus-storage school microgrids in hurricane prone areas over the last few years that average 6 kW each. W-M's summary also shows that they divide the systems into Basic and Advanced, but the details are hidden in the purchased report. Their report brochure did not give additional details.

Julian Silk's picture
Julian Silk on Jun 17, 2021

Nothing was stated about the relative cost of microgrids vs. large central generation stations.  The following IEA site provides detailed levelized cost of electricity (LCOE) for the USA as of 2016. 

https://usea.org/sites/default/files/Operating%20ratio%20and%20cost%20of%20coal%20power%20generation%20-%20ccc272-1.pdf

The estimate there is about $78 per MWH.  Note that coal, even if the figures are inflated, would still only come in at around $90 per MWH at present.  In

https://ieeexplore.ieee.org/document/7741379

an LCOE for microgrids is estimated, also in 2016, as $122.2 per MWH (Table 1).  This is without battery storage being included in the microgrid.  Applying the same inflation figures to the microgrid would provide an LCOE of $141 per MWH at present.  The Greentech site below

https://www.greentechmedia.com/articles/read/beyond-declining-battery-prices-six-ways-to-evaluate-energy-storage-in-2021

estimates battery storage (using lithium ion batteries) as $137 per kwh at present.  So one might add, arbitrarily, another $20 per MWH for microgrids with battery storage, to have a "warehouse" figure of $161/MWH with the microgrids.  This is basically a 79% price increase in the cost of electricity to consumers, if these figures are correct.

This is not to say moves toward distributed energy should not be done, or by any means to say that pulverized coal, without treatment, should be kept regardless of climate risks.  But as I have continually tried to emphasize, getting rid of coal eliminates jobs (not just for the mining firms and workers, but for the generation sites), as in the very recently announced end of coal for the Morgantown plants in Charles County, Maryland.  This is guaranteed to produce backlash.  By stating the costs honestly, and seeing ways they can be minimized, instead of just promoting the technology and being out of the line of fire when the bills come in to the consumers, this backlash can be minimized.

Nevelyn Black's picture
Nevelyn Black on Jun 21, 2021

Looks like Georgia Power agrees with you on embracing the advantages of microgrids.  The utility is working with Georgia Tech to open a 1.4 MW microgrid project in Atlanta.  The project is two-fold, it will evaluate integration with the grid and serve as a research lab for Georgia Tech professors and students to gather data.  Their findings could assist other utilities on how best to introduce microgrids in cities across the nation. 

Audra Drazga's picture
Audra Drazga on Jul 11, 2021

Response from LinkedIn Follower: Rohan Raghunath

Very good read. The benefits of microgrids are indeed anything but micro. Utilities will continue to deeply embrace the microgrids as clean energy sources further scale up. Utilities are or have already started shoring in IT investments to facilitate DERs marketplaces and these DERs will be a significant source of energy in the near to mid-term future. Thanks for the lovely share!

David Gaier's picture
David Gaier on Jul 12, 2021

Microgrids will continue to be built, and the ability to island and be fully power-sufficient is key. But they must still be grid-connected, typically with two, not one, feeders, and able to sell power back to the grid operator when load and prices warrant.

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