That’s where microgrids come in. According to the US Department of Energy (DOE), a microgrid is “a local energy grid with control capability.” This means that although it’s often connected to a nearby macrogrid, a microgrid is independently powered and can operate on its own if needed, such as during a blackout. Based on its purpose, a microgrid can operate a single facility, a group of buildings, or even an entire town. Some microgrids, called smart grids, run on renewable energy sources like solar or wind power.
According to Wood Mackenzie, 546 microgrids were installed in the US in 2019, a record number. Although the coronavirus pandemic slowed the pace of installation in 2020, the global microgrid market is expected to grow from $24.6 billion to $42.3 billion from 2021 to 2026 at a compound annual growth rate of 11.4%. A number of factors are driving this growth, in particular:
- An increasing concern by governments, corporations, and individuals about greenhouse gas emissions;
- Higher demand for reliable power, especially in rural areas;
- Greater concern about cyberattacks on macrogrids.
There are several common types of microgrids, including:
- Campus/institutional microgrids: These are used to power university campuses or similar facilities.
- Remote/off-grid microgrids: Found in rural areas, particularly in developing nations, remote/off-grid microgrids provide power to people who don’t live anywhere near a main power grid (otherwise known as a macrogrid) because sending power to them would be too expensive.
- Military base microgrids: Similar to campus/institutional microgrids, military base microgrids power military facilities independently from a macrogrid, which makes the facilities more secure.
- Commercial and industrial microgrids: These provide uninterrupted power to commercial and industrial facilities for which a power outage in a macrogrid would cause considerable revenue loss.
Benefits of Microgrids
A primary job of a microgrid is to ensure uninterrupted power delivery to hospitals and other critical infrastructure if a macrogrid ceases to operate for some reason. For example, although the recent wildfires in California caused widespread macrogrid outages, facilities powered by microgrids were unaffected. “Microgrids can provide energy resiliency to end users by operating autonomously during planned or emergency grid interruptions,” Carol Denning, director of distributed energy resources for Center for Sustainable Energy told Startup Savant. “This ‘islanding’ feature also serves as a grid resource for quicker system response and recovery.” Similarly, microgrids can continue to provide power if a macrogrid suffers a cyberattack.
Let’s take a look at some of the other benefits of microgrids:
Widespread Use of Renewable Energy
A central controller manages where a microgrid gets its electricity at any given time and how much is stored for later use. The controller can intelligently utilize uncontrollable renewable energy sources like wind and solar when they’re available and store excess renewable energy in batteries for use when they’re not. Alternatively, a microgrid can switch to controllable energy sources like turbines powered by natural gas, another clean-burning fuel. “Microgrids give end-user customers and the local grid the opportunity to efficiently optimize their energy usage with clean and renewable energy,” Denning said. A microgrid with a clean distributed generation backbone, like combined heat and power, allows for greater integration of solar, wind, and battery storage, thus promoting renewables.”
Efficient Energy Use
When centralized power plants send electricity long distances over a macrogrid, a significant percentage of that energy is lost as heat. This is a primary reason why it isn’t always feasible to connect isolated communities to a macrogrid. By contrast, a microgrid sends electricity a short distance to a limited number of users. In addition, excess heat from plants that power microgrids can be captured and used locally to heat water or buildings. Some microgrid controllers can even determine which of several available power sources is cheapest at any given time, thus saving energy costs.
Powering Isolated Communities
Cities and towns that aren’t located close enough to a macrogrid often have to live without electricity or resort to dirty, unreliable power sources to provide it. A microgrid can literally change their lives. For example, millions of rural Kenyans still don’t have power in 2021. “The Kenyan government has done quite a lot to provide people with power, but we have not had enough resources to [reach homes in rural areas], Zachary Ayieko, executive chairman of Powerhive, told Bloomberg. “Once electricity is provided, the economic empowerment of people goes very high.” The company’s mission is to develop scalable, affordable off-grid microgrids to provide greater access to clean energy, particularly in Kenya and other developing nations.
Protecting Human Health
Microgrids built on renewable energy can help replace dirty energy sources and eliminate pollution that causes health problems. For example, a report by EarthSpark International found that electric cooking technologies powered by solar microgrids reduce the need for fire-based cooking in developing nations like rural Haiti. As a result, people breathe less smoke and particulates.
Reducing the Load on Macrogrids
Microgrids can supplement electricity from a macrogrid during peak usage times, which helps prevent brownouts and blackouts and can lower energy costs. It can also be cheaper to install microgrids in a given area rather than building a large new power plant – along with the required transmission lines and related infrastructure – to supply electricity to a macrogrid.
Challenges for Microgrids
Although microgrids provide myriad benefits, they currently supply less than 0.2% of US electricity needs, according to the Center for Climate and Energy Solutions. About 160 microgrids currently operate in the US, mostly in Alaska, California, Georgia, Maryland, New York, Oklahoma, and Texas.
However, technical and logistical questions need to be resolved. “We build renewable energy microgrids in remote places where our customers are dependent on diesel because they don’t have access to the grid,” said Sujay Malve, co-founder and CEO of Canopy Power, a microgrid development company. But, “when we go there to integrate renewables, small things like logistics can create a huge risk or blind spot. For example, taking the last mile by boat can present a myriad of challenges if a well-thought-out plan isn’t in place.”
In addition, a California Energy Commission case study shows that while a relatively large percentage of microgrids are powered by renewable energy, a significant number still rely on fossil fuels. For example, the US Department of Energy found that in the US, community-based microgrids often rely on diesel generators. If microgrids are to achieve their full potential in fighting climate change, more of them will have to rely on renewables.
Another difficulty is that in many parts of the world, people simply can’t afford to install microgrids even though renewable energy prices have plummeted. “When I started in this business 20 years ago, the price per watt of a solar panel was five or six dollars – now it’s 20 cents,” said Chris Horner, CEO and founder of Powerhive. “It’s opened up a huge opportunity in Africa to deliver energy. [Microgrids] have been around for a long time. The problem is there hasn’t been an economic model to support the operation of these grids.” One challenge, then, is to promote economic development so that people can afford power and become customers of microgrid companies.
However, perhaps the greatest barrier to more widespread installation of microgrids comes down to good governance. A recent study found that while microgrids can theoretically help support the world’s transition to renewable energy, public policy needs to keep up for that to happen. “The emerging policy structures require substantial further development to operationalize [microgrids’] potential,” the study said. In addition, “Unresolved fundamental policy tensions arise from justice considerations, such as how to distribute the benefits and burdens of microgrid infrastructure.”
Denning of the Center for Sustainable Energy said that public policy and perception both need to improve if microgrids are to reach their full potential. “Overall, the greatest challenge for increased microgrid deployment is educating end users, who often do not understand the technologies involved and think installations would be too expensive,” he told Startup Savant. “Added to this are regulations in many areas that limit how customer-owned energy assets, such as microgrids, can be shared and interact with the grid. Addressing such regulatory barriers will help the economics of projects to pencil out by reducing engineering and administrative costs.”
Recent Microgrid Developments
Microgrids are popping up all over the world in both developed and developing nations. In many cases, the basic goal is essentially the same: producing more reliable energy from renewable fuels. According to Microgrid Knowledge, a few of these projects include:
Mixed-use microgrid developments in California: Google plans to build several microgrids in California, which famously suffers periodic power outages due to its aging statewide electrical grid. “Google is poised to make very substantial investments, using its own funds, to design, build and operate large, fully functional microgrids — i.e., microgrids that operate on a 24/7 basis, and not merely in emergency ‘island’ mode during grid outages — in campus-type settings at various locations in California,” the company said, as reported by Microgrid Knowledge. Plans initially include a microgrid project for an 81-acre high-density development in San Jose. Relatedly, the California Public Utilities Commission recently adopted rates, tariffs, and rules to help utilities in the state commercialize microgrids.
Grocery store microgrids in the Northeastern US: Stop & Shop, a major grocery store chain in the Northeastern US, is installing microgrids in 40 of its stores in Massachusetts and New York. The continuously running microgrids will keep freezers and other electrical equipment running even if power is cut during a hurricane. Microgrid installation has already begun on Cape Cod, Massachusetts, and other locations. In addition to providing backup power, the microgrids are expected to significantly cut the stores’ carbon emissions because they run on fuel cells that convert natural gas or biogas into electricity without burning anything or releasing greenhouse gases or particulates.
Campus microgrid in Ireland: Innovation Green, an initiative based in Ireland, wants to develop a microgrid that will power a campus where researchers and companies can develop new solutions for renewable and sustainable energy, which could then be scaled up and used around the world. Power to the microgrid will come from a combination of wind, solar, and other renewable sources. As with many similar microgrids, excess energy will be stored in batteries for use when renewable energy isn’t available. Innovation Green hopes the campus will stimulate economic growth, in part by providing green energy jobs. “It is key to our sustainable growth that we develop in a new way to decarbonise industry in Europe,” a representative of InSite Bavaria, a partner in the project, said in a statement. “Ireland may gain a competitive advantage as an industry location by offering carbon-efficient investment sites.”
Renewable energy microgrid in Australia: Horizon Power in Australia wants to build the country’s first microgrid that runs on renewable hydrogen. The goal is to free municipalities from reliance on diesel power, which is highly polluting. Solar power will be used to produce water and hydrogen, which can then be stored and used to power a fuel cell. The project is on the small side and will only power about 100 homes. However, if successful, the technologies it employs could be used in some of Horizon Power’s 34 other microgrids that it currently operates in remote areas of the country. It could also serve as proof of concept for additional microgrids in other Australian states and territories, reducing both electricity costs and emissions.
Clean, renewable energy in Haiti: EarthSpark International is working with other stakeholders to bring clean, renewable energy to rural communities in Haiti via solar-powered microgrids. Solar panels and batteries currently power microgrids in the towns of Les Anglais and Tiburon, collectively serving about 4,000 people. EarthSpark wants to scale up microgrid installation to 24 Haitian towns through a microgrid development company called Participant Power, owned by EarthSpark and other investors. A foundation called the Green Climate Fund has agreed to finance the endeavor over the next five years, bringing renewable, affordable, reliable energy to some 80,000 Haitians – many of whom currently have no power at all. "Reliable local electricity systems bolster local autonomy and resilience in the face of natural disasters,” EarthSpark President Allison Archambault told Startup Savant. “Our smart, solar-powered microgrids are redefining service quality in rural Haiti and are relevant in many other parts of the world.”
Microgrid Companies to Watch
Many startups are contributing a piece to the microgrid revolution. Here are a few of them:
Powerhive: By integrating its proprietary hardware and software with telecommunications, billing, and energy technology, Powerhive seeks to profitably deliver productive and affordable electricity to communities far from centralized power grids. The company, founded in 2011, provides a highly automated technology platform that includes a smart meter and web-based software application. This allows electricity providers to remotely manage microgrids using several tools that optimize performance and maximize revenue, including account management and payment processing, customer communications, remote monitoring of maintenance needs, and data analytics. The platform helps reduce customer non-payment and personnel requirements. In addition, the platform allows energy companies to sell power on a pay-as-you-go basis. These benefits allow microgrids to be financed and monetized at scale. Powerhive currently operates about 25 village-level solar-powered microgrids in Kenya.
Me SOLshare: Founded in Bangladesh in 2015, Me SOLshare designs, manufactures, and sells smart solar meters for home-based solar power systems. These meters improve how solar power systems perform and allow users to trade excess solar energy they generate through an energy marketplace. In addition to enabling peer-to-peer electricity trading, the smart meters facilitate smart grid management, remote monitoring, and mobile payments and analytics. In addition, the company has a mobile app that manages customer portfolios and keeps track of energy consumption. This data is fed to a web-based platform that analyzes it and identifies any problems that need to be addressed. Using these tools, communities can develop microgrids consisting of interconnected homes, which eventually can connect to a national grid but still work independently if the national grid is unavailable.
Canopy Power: Founded in 2016, Canopy Power develops microgrid projects, providing site surveys, project management, system design, procurement, financing, and inspections. It offers on-site data collection, a cloud-based portal, and data analytics capabilities to enhance system performance and make microgrids more profitable. Canopy Power says it specializes in microgrids, helping companies integrate renewable energy and energy storage with legacy electrical generation sources. The company’s project financing services include power purchase agreements and lease-to-own options to help customers fund their projects. All of these services are available a la carte so customers can use only those they need. Canopy Power is currently developing microgrids in Southeast Asia.
CleanSpark: This company, started in 2008, provides advanced energy software and control technology that enables microgrids to be scaled to a given customer’s specific needs and can be widely implemented in a variety of settings, including residential, commercial, industrial, military, agricultural, and municipal. CleanSpark provides energy software and a smart battery backup system to help homeowners monitor, maintain, and manage their energy systems for affordability and reliability. The company also provides big data analysis for utilities, a solution for integrating and optimizing multiple energy sources, and other products and services. It recently announced an update to an ongoing roll-out of mVoult, its smart energy system and companion mobile app designed specifically for homes and small businesses.
New Sun Road: New Sun Road, founded in 2014, provides solutions that allow companies to monitor and control their renewables-based power systems from anywhere using artificial intelligence and Internet of Things (IoT) technology. Its products include Stellar Power, a software platform that helps companies optimize management of power systems that utilize renewable energy; SolSense, which provides cloud-based system monitoring and control; and the Stellar Microgrid OS, a cloud-based software-as-a-service offering, and Steller Edge, a smart device controller. Together, these provide robust IoT data acquisition, reliable internet access, and AI-driven insights to remotely control and optimize microgrids. According to New Sun Road, more than 500 power systems in more than 17 countries use the Stellar platform.
About the Author
An analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in advanced analytics and media.