How the Microgrid Industry Has Evolved to Benefit Businesses and Homeowners

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In the latest edition of the Microgrid Knowledge Executive Interview series, Mark Feasel, president of Smart Grid North America for Schneider Electric, offers insight into new changes in microgrids for businesses and homeowners.

Many people aren’t aware of just how much the microgrid industry has evolved in ways that benefit users of the technology.

The concept of a microgrid has been around for quite awhile. Campuses have been using microgrids for decades and have shown that microgrids are compatible with local utility grids and reap benefits for both the campuses and the larger grids.

Some people have developed ideas about microgrids based on what they were like years ago. These ideas no longer apply.

For example, some people see microgrids as technology that might involve a diesel generator that doesn’t operate very often.

But the truth is that the technology has evolved to incorporate assets such as solar and batteries that are used every day, whether the microgrid is connected to the grid or off-grid. More and more, new revenue streams are developing for microgrids that utilize these assets.

“The overall cost of solar and storage is reduced a lot as you use them in different ways and find new revenue streams,” said Feasel. What’s more, the costs of solar and battery storage have dropped significantly over the past three years. In many cases, the cost of these technologies has dropped to a fifth of the cost they were three or four years ago.

Made easier by the cloud

Some businesses and homeowners also see microgrids as difficult to design, commission and operate, based on the industry’s early experiences with the technology. However, many of the costs associated with design and commissioning have dropped because tasks associated with these goals are no longer completed on-site, but moved to the cloud. Weather forecasts are one example.

Five years ago, microgrid developers would conduct weather analyses on-site. Such efforts are important because weather conditions influence energy consumption. For example, weather conditions affect the operating costs of solar.

But weather analyses can now be conducted in the cloud, which means there are fewer on-site visits, which reduces cost. And prediction accuracy has improved.

With these cost improvements come better outcomes for microgrid users. As assets are deployed more often, the cost per kilowatt-hour keeps dropping.

Innovations in microgrid financing

Another step in the evolution of microgrids is innovative financing arrangements. Under the energy-as-a-service model, for example, the microgrid buyer pays no upfront costs. The risk is shouldered by a third party who owns and operates the microgrid, and charges the customer monthly fees, much like a utility bill. These arrangements can be customized to fit the needs of the third party and the microgrid host.

As both the utility and microgrid industries evolve, a new world of energy is being created. With more digitalization and decentralization, energy is being decommoditized.

“You take this entity [energy] that was provided in the past by a utility. And you’re now able to break it up into things like how renewable is it, does it meet my sustainability goals or how resilient is it?” said Feasel.

bus depot microgrid

Schneider Electric affiliate AlphaStruxure was chosen for a smart solar microgrid for a bus depot in Montgomery County, Maryland. Photo courtesy of AlphaStruxure

Why solar can’t do it alone

Along with other misunderstandings about microgrids and how they’ve evolved, many people don’t understand that solar alone can’t operate through a power outage unless it’s part of a microgrid.

They don’t comprehend that most of the solar deployed today will trip offline when a power outage occurs on the grid. Many who have solar on their homes or buildings learn the hard way that when the grid goes down, solar alone doesn’t help. In order for solar to continue operating during a power outage, it needs to have energy storage and sophisticated controls that allow it to operate.

“There are some misconceptions from people who have solar. What do I have and what does it really mean?” Feasel explained.

How do you use energy?

People can gain a better grasp on such issues by taking the time to understand their energy usage and what it means to them. Once they understand what energy usage means to their families or businesses, it becomes easier for them to invest in solutions that are important to them. Do they want a system that operates through an outage? Are they seeking resiliency, trying to meet sustainability goals, or both?

Businesses and homeowners also struggle to understand where it makes the most sense to deploy a microgrid. They wonder, for example, why there weren’t more microgrids deployed in Texas when a recent storm knocked out power.

To understand why, it’s important to look at two issues that affect the cost effectiveness of installing microgrids. First of all, if energy prices are very low — as they are in Texas — it’s difficult to argue for augmenting the utility prices with a behind-the-meter solution. Second, areas with a higher probability of outages are better suited to microgrids. Up until the latest storm, Texas was not viewed as a region susceptible to storms and outages.

In addition, a region’s rebates and incentives will lower the cost and increase adoption. And a region’s regulatory environment affects deployment. If it’s easy for microgrids to interconnect with a utility, that’s a plus.

If those interested in microgrids understand how much the industry has evolved, they’ll learn that microgrids now can be acquired at lower costs or no upfront costs. In addition, they provide their owners with more sources of revenue, the ability to meet sustainability goals, the potential to save money and the ability to provide resilience.

Learn more about microgrids for businesses and homeowners by reading the Microgrid Knowledge Special Report, ‘The Financial Decision-Makers Guide to Energy-as-a-Service Microgrids,” available for download courtesy of Schneider Electric and AlphaStruxure.

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