The Smarter Microgrid is the Future

As the microgrid becomes even smarter, the benefits and vendor opportunities will increase significantly.
Published: Wed 12 Mar 2014

The microgrid can be viewed as a building block of the ultimate smart grid as it is designed to meet the increasingly complex needs of energy producers, consumers, and distribution utilities. As these needs grow in complexity, the microgrid will need to become smarter by adopting the latest and most appropriate smart technology. Kitted out with this smarter technology, the microgrid can offer an even higher level of reliability and efficiency.

Microgrid market is growing

Microgrid deployment has seen a major increase over the last few years. The reason? Microgrids offer a reliable power supply in all weather conditions and it provides quality, efficiency, and a diversity of services that the incumbent utility is often unable to compete with. We cover these benefits in our article, Microgrids-More Than Just a Back-Up Plan.

It is therefore no surprise that the microgrid market is set to grow from US$10-bn to US$40-bn in estimated revenue by 2020.

The future’s smarter microgrid

Going forward, new microgrids will become more reliant on new distributed generation installations, as well as other microgrid enabling technologies such as smart islanding inverters, advanced energy storage, internal forms of automated demand response (ADR), and other technologies.

As a community’s electricity needs become more complex, the microgrid will need to adopt smarter technology in order to meet these needs. This is what the smarter microgrid is able to offer its community, according to Galvin Power:

  • Benefits are optimized-Smart microgrids integrate consumers and buildings with electricity distribution and generation in an economic and highly efficient manner. Through smart microgrids, the economic and environmental benefits to consumers of the smart grid transformation will be optimized.

  • Enhances reliability-Smart microgrids increase reliability locally through the establishment of a specific reliability improvement plan that integrates redundant distribution, smart switches, automation, power generation, power storage and other smart technologies. Local power generation and storage allow sections of the grid to operate independently of the larger grid when necessary and therefore eliminates blackouts. Technologies such as smart switches and sensors automatically fix — and even anticipate — power interruptions. This is unlike today’s system where switches have to be reset manually in case of an outage. Redundant sources ensure that power continues to flow despite power interruptions. Microgrids also back up the bulk power grid when power demand and cost are highest by supplying electricity ancillary services.

  • Saves consumers money-Consumers pay a fortune in power outage costs-businesses in the US cough up at least $150 billion per year. The reliability of the smart microgrid can reduce these costs significantly. Microgrids allow consumers to receive their power in real-time at a much lower cost, while using local generation to offset peak power costs. In addition, the microgrid model usually includes third-party financing and long-term modernization plans, which reduce infrastructure upgrading costs that are normally carried by ratepayers. Similarly, local power generation is typically more efficient and reduces the distance energy must travel and thus passes on fewer costs from transmission losses, congestion pricing and customer service overhead, particularly when power costs are at their highest.

  • Generates revenue — Consumers and businesses can supply valuable services to the grid in return for payments from the serving utility or independent system operator. This includes demand response, real-time price response, day-ahead price response, voltage support, capacity support, and spinning reserve. In addition, these smart microgrids open up the potential for additional consumer revenues from distributed power generation, plug-in electric vehicles and carbon credits.

  • Encourages economic growth —Smart microgrids can provide jobs at the local level and create new business opportunities for stakeholders. Microgrids increase local investment through community on-bill financing of energy efficiency, local spending on grid improvements and integration of distributed energy and other smart technologies. By fostering the development of microgrids, some of these countries are establishing a new electricity business model that is more efficient, environmentally responsible, compatible with future technologies and likely to encourage ongoing innovation.

  • Makes the grid “futureproof” —The smart microgrid can meet the needs of the future. They allow local communities to increase the overall electricity supply quickly and efficiently through relatively small local generators, solar cells, wind turbines and other means. This is usually faster than having to wait for power companies to build costly centralized power plants. Smart microgrid technology empowers consumers, stimulates future electricity innovations and activates entrepreneurial free-market funding. In addition, smart microgrids’ energy management technology enables plug-in electric vehicles to be connected to the electricity system as smart power storage resources rather than simply another power consumer.

  • Reduces carbon footprint-The most significant environmental benefit of a smart microgrid is its ability to use local generation and the resulting “waste” heat to replace fossil fuel generated power. A local power generator can be renewable- or natural gas-fueled. The smart microgrid can reuse the energy that is produced during electricity generation for heating buildings, hot water, sterilization, cooling and even refrigeration (through absorption chilling). Smart microgrids also make it possible to get the most from clean, renewable energy since they have the flexibility to use a wider variation of energy sources. Microgrids give consumers the ability to meet some or all of their electricity needs by generating their own power through various energy sources. This “bottom-up” consumer approach can reduce reliance on fossil fuels and lower greenhouse gas emissions based on open market economic value.

  • While the basic functions of the microgrid provide a number of benefits, it is clear that with smarter technology, the microgrid’s capabilities are significantly optimized. This growing market should prove to be an exciting one for smart grid vendors as they develop technologies appropriate for optimized localized generation and storage.