How Microgrids Will Change the Way Electricity Is Made, Delivered and Used

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Microgrids — managed by sophisticated software — are part of a shift toward on-site power production, driven by businesses and organizations that want to control their own energy destiny, according to a group of panelists at the Microgrid 2021 conference.


By Alexander Limbach/

Growth in microgrids comes as customers increasingly look for solutions to various issues, such as having a reliable, affordable power supply that meets sustainability goals, said Steve Pullins, chief technology officer for AlphaStruxure and the panel moderator.

It also comes as electric transmission and distribution fees have jumped about 50% in the last decade, federal and state governments adopt renewable energy incentives and storm-related costs for businesses have soared to about $600 billion over the last four years, according to Pullins.

Microgrids respond to cross-cutting concerns

Those cross-cutting concerns will drive near-term microgrid development, according to Ravi Pradhan, vice president of technical solutions at Siemens Energy Management.

“What we see coming up in the future, everything that’s gone on in terms of resilience, in terms of distributed energy resources, everything that’s going on [at] the edges, there’s going to be a need to aggregate these, manage them, but at the same time, take the larger view and see how they all interact with each other, such that you get the best outcomes, both in terms of resilience, in terms of emissions, in terms of economics,” Pradhan said during the panel discussion on “How Microgrids Will Change the Way We Make, Deliver and Use Energy.

An initial emphasis will be on making sure businesses and organizations have reliable electricity as storms and wildfires increasingly cause widespread power outages, Pradhan said.

Power production goes local

There is a shift toward the localized production of electricity, which will change the power system, according to Pradhan.

The emergence of electric vehicles will only add to the grid’s evolution, he said.

“That is going to drastically change everything that we do in terms of both supply and delivery of energy and the use of it,” Pradhan said. “We can foresee that there will be much more highly localized [production and delivery] coming down to not just the microgrid, but down to the nano level.”

Digitalization and software can control local generation and loads, providing an overarching, optimal view to maximize the value of all distributed energy resources, he said.

Increasingly, companies and organizations are setting sustainability targets while also hoping to reduce their energy costs, according to Clark Wiedetz, chief sales officer at GreenStruxure.

“You’ve got to save them money to do the sustainability targets, but you tie in this resiliency element and the reliability element,” Wiedetz said. “Now you’re saving some big bucks because those outages are costing them a fortune.”

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In an exciting change, microgrids have become more sophisticated, often including multiple assets that can be intelligently controlled to provide “untapped potential,” according to Marshall Worth, senior product manager for PowerSecure.

Energy flexibility for businesses and organizations

In addition, microgrids provide flexibility and they can evolve. “How you use your assets today doesn’t have to be how you use them 10 years from now,” Worth said. “We can totally change the objective at that point.”

AlphaStruxure, which often has 25-year contracts with its customers, provides those customers with a long-term game plan, Pullins said.

Hydrogen, for example, which may become widely available in the next couple of decades, could be used to replace natural gas generation, he said.

Some regions already provide opportunities for selling grid services in wholesale power markets, a practice that will likely spread, providing new revenue sources for some microgrid customers, Wiedetz said.

Even with a more decentralized system, utilities will likely be needed in the long run, partly to provide opportunities to sell electricity and grid services into markets, according to Pradhan.

businesses and organizations

“We’re not going to go back to a world where every town has its own utility,” Pradhan said.

Mike Byrnes, executive vice president  and chief operating officer of Source One, Veolia North America, said that the elephant in the room is that no utility representatives were on the panel. “Those are the people who have to send the price signal and accept the power. That is going to be the real rub here. How do they do that? Do they send it out by network, by neighborhood, by block? How granular does this get?”

Byrnes noted that providing power to utilities during high demand periods is a “bespoke” process. “You’re actually providing the power when the utility needs it. You have to have someone who knows what they are doing to look at it and bid it into the market for you. That all has to be automated as you move further down the value stack.”

Overcoming concerns about microgrids

There are still significant misunderstandings about microgrids that need to be overcome, according to Wiedetz.

Many people don’t recognize the multiple benefits microgrids offer, they think microgrids are overly expensive, and they believe they are too risky, he said.

One of the solutions to those concerns is taking an energy-as-a-service approach where a company like GreenStruxure finances, owns and operates a microgrid and is paid for it under a long-term contract, he said.

“What really matters is this transfer of the risk of what’s going on with the energy system that we’re going to own,” Wiedetz said. “And now that risk no longer lives with the client, but it lives with the owner.”

Also, the owner may be able to tap into tax credits for the project that are unavailable to government or nonprofit organizations that don’t pay taxes, he said.

In a sign of how customers are embracing the energy-as-a-service model, last year, during the COVID-19 pandemic, 560 microgrids were set up in the US, and two-thirds were under energy-as-a-service contracts, according to Pullins.

“There’s a couple trends there that say something about how we’re going to use energy, how we’re going to distribute it or deliver it, and how we’re going to make it,” Pullins said.

Watch the full discussion: How Microgrids Will Change the Way We Make, Deliver and Use Energy.

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  1. “It also comes as electric transmission and distribution fees have jumped about 50% in the last decade, federal and state governments adopt renewable energy incentives and storm-related costs for businesses have soared to about $600 billion over the last four years, according to Pullins.”

    This is where the Federal regulator FERC is failing. Instead of being the ombudsman of wholesale energy interconnection in the U.S., FERC has passed rulings like 841 and ruling 2222 to allow energy storage to become a part of the grid infrastructure. Yet many buried HVDC and UHVDC projects are stalled that would be used to feed the (national) wholesale grid network with new solar PV and wind generation installed from the Southwest and plains States to allow distribution from coast to coast and north to south.

    In States like California the layering of mandates has created a costly electricity system where (average) electricity rates are around $0.20kWh to $0.25/kWh with spikes up to $0.47/kWh. It has been predicted that between 2025 and 2030, the average cost per kWh will be from $0.30/kWh to $0.35/kWh. The 70,000 square mile service territory of PG&E is underserved and needs several grid hardening projects completed as soon as possible. The PSPS will lose money from commerce again this year and folks are starting to ‘defect’ into CCAs, with a community Macro-grid of perhaps several MW of solar PV and perhaps some wind farm generation feeding a large energy storage facility to give the town resiliency during brown outs, black outs, and PSPS events.

    It’s because of all of this dilatory O&M, PSPS, high electricity prices a lot of residential solar PV adopters are adding energy storage or when they do by a system it is solar PV + storage. You can find quite a few larger solar PV arrays on roofs that are 10 to 20kWp and either an actual microgrid with interactive inverter with up to 4 TESLA power walls is becoming common.

  2. Vic Hardy says:

    “There is a shift toward the localized production of electricity, which will change the power system, according to Pradhan.” There is? News to me. My utility (Georgia Power) certainly isn’t talking about it, and in fact like most utilities talks a good green fight but like most all utilities really doesn’t like the idea of their customers having solar panels and certainly doesn’t like the idea of paying much for their power.

    While I ‘believe’ that the micro-grid approach may have merit, certainly from the standpoint of not having to incur much infrastructure costs to transport electrons across the country, I also believe that utilities will either fight it or slow-roll it since it’s their rice bowl. The other variable that I think people don’t talk about is costs to the rate-payer. If micro-grids can really lower costs on a per KW hour basis then sign me up. For all the hoopla about the low cost of renewables over the last 5 years I’ve yet to hear of any utility lowering the rates to consumers.

    • You should look at some of the Coops and munis that have been able to lower rates by building onsite renewables. A recent example is Kit Carson Electric Company. I agree we haven’t seen this from IOUs as they’ve increased their T&D as a percent of costs.

    • Part of the problem is The Southern Company failed dismally on their Kemper “clean coal plant” and decided to go full speed ahead on the Vogtle nuclear plant in spite of double the cost overruns in construction. The Southern Company would love to create a new southern States ISO called SEEM. The reason The Southern Company wants this ISO containing The Southern Company, Duke Energy and Dominion Energy, by creating an ISO including both Duke and Dominion, they get a wider electricity sphere of influence area and therefore more ratepayers under the ISO. The Southern Company is drowning in bad debt from the Kemper plant and the cost overruns of the Vogtle units 3 and 4. The more ratepayers there are in the ISO, the easier it is to spread this decades long debt out over a larger population until it is paid off. Roughly $2/month for Kemper, and $5/month for a total of $7/month for the next 30 years to pay off The Southern Company’s “stranded asset” debt on these two projects.