What is the Cost of a Microgrid? Think Function

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We’ve asked industry thought leaders to weigh in on the question: Are microgrids expensive? Here Michael Boswell, vice president of distributed generation at Concord Engineering, describes what goes into figuring out the cost of a microgrid.

Concord Engineering

Michael Boswell, Concord Engineering

Think of the cost of a microgrid as a direct function of what the microgrid is intended to do…. simply put, the more complex the function, the higher the cost. 

That seems intuitive enough, but it gets complicated. 

  • What number and types of distributed energy resources (DER) are to be integrated? 
  • What is the boundary of the microgrid?
  • Is the microgrid intended to perform economic transactions – dispatching the DER, transacting with economic signals outside of the physical boundary such a demand response or performing arbitrage? 
  • What are the requirements for security?

Where the cost of a microgrid gets expensive quick (no pun intended) is when the microgrid is required – or desired – to island away from the serving grid with minimal disruption to the facilities and systems within the boundary of the microgrid. 

Island operation – the cost of functional operation

The cost of the basic elements of control — microgrid controller, real time automation controllers, remote terminal units, utility relays, communication are, in some ways, a surprisingly smaller piece of the cost puzzle than the cost of the physical infrastructure to make the desired function operate and the engineering required to sort it out and make it work.

The physical infrastructure may require a number of switches or breakers to segregate the physical boundary of the microgrid from the local electrical distribution system. Fiber may be needed to communicate with switches. Radio operated remote I/O and related systems may be needed for communication.

Load shedding switchgear may be needed to assist transition into island microgrid operation and prevent the DER from faulting. A robust battery energy storage system may be necessary to support the microgrid transition.

The DER selected will need to be carefully assessed for their operating and design characteristics to support transition into island operation.

The engineering to make transition to island operation is not a trivial matter. To do it right, it requires sophisticated analysis and modelling of the operating conditions to insure the microgrid operates as intended. And of the course, the serving utility will most assuredly take more than a passing interest in the operation of the microgrid. And depending on the size and boundary of the microgrid, their distribution system may need upgrades to support transition into and out of island operation.

Require versus desire

If a microgrid is “required” to perform a certain unique function such as provide resiliency for the host with minimal disruption to its mission – the fast transition to island operation – then the cost of the microgrid may be inelastic to its required function. The cost “is what it is”. 

The cost of the microgrid being related to its complexity, certain functions may become discretionary. Some functions are more “desired” than “required” and come under the cold scrutiny of the spreadsheet.

Here is an example of two microgrids performing the same basic function but at widely different costs.

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cost of microgrids

In this example the cost to transition quickly and seamlessly to island microgrid operation is significantly higher than a simple “administrative” approach without automation.

The cold heart of the spreadsheet won out.

Read the original article in this series: Are Microgrids Expensive?

Sign up for the free Microgrid Knowledge newsletter for the next three articles in this series: 

  • “What Does a Microgrid Cost: Developing a Game Plan” by Will Agate, Ameresco
  • “Why Does a Microgrid Cost What it Costs?” by Erik Svanholm, S&C Electric
  • “Calculating Microgrid Costs” Interview with Jack Griffin, Veolia
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