Five Policies Blocking Microgrids (From a Veteran of Local Energy Wars)

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The smart phone has changed the consumer psyche about energy.  If we can control so much in the palm of the hands — at so little cost — why not energy too?

Such thinking underlies the growing appeal of microgrids, nanogrids, rooftop solar, solar gardens, energy aggregations, thinking thermostats and other technologies that can reduce the amount of energy we purchase from utilities.

“People’s expectations have risen about what level of control they ought to be able to have,” says John Farrell, director of democratic energy for the Institute for Local Self-Reliance (ILSR), a 40-year-old organization that is a veteran of local energy wars.

ILSR wants to see local communities control more of the $360 billion/year spent on electricity in the U.S. But the question is “how do we allow people to participant and have some measure of control in a way that makes the whole system work together?” he says. “I think it is very possible.”

Possible, but not easy. We could end up with a society of energy tech haves-and-have-nots; some benefiting from distributed energy; others stuck in an older energy paradigm. The problem isn’t one of wealth or poverty but of outdated policy and politics, as explained in ILSR’s new report, “Mighty Microgrids,” co-authored by Farrell and ILSR research associate Matt Grimley.

While some states are quickly trying to modernize energy policy to accommodate technology changes, others are slow to do so, according to the report. Spoiler alert: New York good; Minnesota needs work. Wisconsin is worse, Farrell tells us.

“The future of microgrids is about location, location, location,” says the report. “Microgrids depend  heavily on state policy and funding. New York  and California, for example, are leading the way with  numerous microgrid projects.”

Farrell brings to the report a decade of fighting the fight for local energy, one that he says has changed a lot in recent years.

Consider where things stood when Farrell was getting started. Wind power was the low-cost green choice for community energy programs. But the idea of tall wind turbines looming high over homes, schools and stores tainted the appeal, at least in small towns in the U.S.

Today smaller is possible with solar. And the technology is getting ever cheaper. Add energy storage and islanding capability and you have a nanogrid. Put in additional generation sources, maybe combined heat and power, plus a little more intelligence, and it becomes a microgrid. Now it’s clean energy plus reliability from a resource controlled locally and maybe even able to earn revenue by selling services to the larger grid.

Policies blocking microgrids

Sounds great, right? Where do I sign up? Not so fast. Regulations and outmoded policy are getting in the way. Microgrids are being developed in the U.S., but not at the pace ILSR would like to see. The report specifically identifies five policies blocking microgrids from wide-scale deployment.

  1. No legal definition

Most states have yet to define microgrids in law – indeed even the industry grapples with its definition.  Connecticut is the only state that has defined the term. Maryland, Massachusetts, California and  New York are working on it.

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  1. Intruding on utility turf

Rules exist in several states that protect utility franchises and limit the ability of microgrids to cross a right-of-way to distribute electricity. Microgrids weren’t contemplated when the rules were created.

As the report puts it:

“No one, to date, has taken a comprehensive look at franchise rules in all fifty states, which would say exactly where and under what circumstances a microgrid could operate. Deeply important in this discussion is what defines a ‘utlity.’ Microgrids, by their function defy being labeled a customer, utility, or otherwise. But by being labeled a utility, a microgrid may be subject to costly regulation by the state.”

  1. Interconnection rules

Most North American microgrids can operate independently or connected to the grid. Indeed, their ability to move back and forth between the two represents a key value of the technology. But to be connected to the grid, they undergo an application process that some utilities make daunting and lengthy.

“Despite years of data showing safe microgrid operation on and off the grid, utilities are still allowed by most states to require costly and time-consuming interconnection studies and limit, without transparency, the amount of distributed generation on their power lines,” says the report.

  1. Lack of a plug-and-play

Research and development continues to make microgrid controllers, ‘the brain’ of the microgrid, ever more sophisticated. But the technology is not plug-and-play. This adds to microgrid costs and complexity. The report quotes Michael Burr of the Microgrid Institute, describing lack of plug-and-play as the “biggest remaining technical barrier” to microgrids.

  1. Who pays for it?

Given that more than one entity may benefit from a microgrid, it’s not always clear who should pay for it.

Among those who might benefit are the customers or buildings directly served, the larger community that can take advantage of the microgrid’s power during an outage on the larger grid.  The local utility might also benefit by using the microgrid as a way to overcome weaknesses or shortfalls on its distribution system.

Questions also arise about  microgrid ownership, payment schedules, utility tariffs rates, microgrid revenue streams and similar issues still to be worked out in these relatively early days of advanced microgrid use in North America.

 1% of energy from grid

Despite these challenges, Farrell is bullish on the emergence of microgrids and distributed energy.  Consumers will force policy changes, he says, as the technology becomes more turnkey and off-the shelf — when “I can call somebody up and they say we’ll be there tomorrow and we can install it two weeks.”

He sees consumers eventually buying only one percent of their energy from the grid.

“It is not economical now in most parts of the country, but in 10 to 15 year it certainly is going to be,” he says.  “Ultimately, we will move in this direction…the political pressure and economic pressure is going to become too strong.”

Learn more about state microgrid policy at “New York and Beyond,” Microgrid Knowledge’s 2016 conference. May 19 in Manhattan.

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About Elisa Wood

Elisa Wood is the chief editor of She has been writing about energy for more than three decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.


  1. Michael A. Marullo says:

    On the other side of the coin, I’ve heard that according to the regulatory rules in some states it is “illegal” for utilities to own microgrids. Is this true, and if so, which states are those?

    • Elisa Wood says:

      Good question, Michael. This is an issue that arises in the restructured states where utilities are not allowed to develop, own and operate generation. Microgrids include generation. Does that mean the utilities cannot own microgrids? Some would argue yes; others say that microgrids are a unique kind of technology that can’t be so easily slotted. I think you’ll see this issue hashed out before state public utilities commissions before long. A map of the restructured states can be found here.


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