Microgrids: The Way of the Future?

09/28/2012 | By Jennie Morton

Power your path to grid independence

What would it mean to your business if you could eliminate the risk of blackouts or insufficient power quality, produce on-site generation with fewer regulations, lower your utility bill, and create revenue by selling excess energy?

Welcome to the microgrid. Drawing on the flexibility of the smart grid concept, a microgrid allows a group of buildings to work in tandem with the utility grid but operate independently at will.

“Microgrids are small-scale versions of the centralized electricity system. They achieve specific local goals established by the community being served, such as reliability, carbon emission reduction, diversification of energy sources, and cost reduction,” explains the white paper

Understanding Microgrids by the Galvin Electricity Initiative, a nonprofit campaign for national energy surety.

Given the volatility of fuel prices, aging grid infrastructure, and the increasing need for power quality, microgrids can provide building owners with a dynamic way of safeguarding against power failures while expanding their ability to produce energy.

“Like the bulk power grid, smart microgrids generate, distribute, and regulate the flow of electricity to consumers, but do so locally,” the white paper continues. “Smart microgrids leverage the bulk power system to take advantage of lower cost baseload power and remote renewable resources.”

While the technology for microgrids is fully realized, barriers such as regulations and financing have made it difficult for this new operating model to take root. Learn about the benefits of microgrids so you can reap the advantages of grid independence.

The Benefits of Grid Independence

The Four Phases of Grid Independence


Efficiency Improvements

Building management system
Lighting retrofits
HVAC upgrades
Building envelope
Usage transparency
(advanced metering)


On-site Generation
and Storage Capacity

Gas turbines <50 mW
Diesel generators
Power storage
(thermal, electric)
Renewable energy
(PV, wind turbines)
Electric vehicle infrastructure


Implement Advanced Controls

Demand response programs
Balance system supply and demand
Optimization of power system
based on performance metrics
(economics, carbon
footprint, reliability, etc.)


Operate in Island Mode

Automatic connect and disconnect from main
grid to meet specific performance outcomes

Microgrids are best realized in a campus setting – universities, business and medical parks, military installations, and manufacturing sites are likely candidates for a microgrid. Even a consortium of downtown buildings with multiple owners, for instance, could join forces.

Energy surety is also useful for a business that cannot afford to be offline for any length of time. A power outage, even for a matter of minutes, can result in lost data, disabled security, or a standstill in business operations. Power loss could even pose a life-threatening risk to occupants, particularly in healthcare facilities.

The FDA headquarters in Maryland is a prime example. With nine facilities heavily invested in research activities, a power outage could have dire consequences. “The White Oak campus runs experiments that last for years. They cannot afford to be without power for any duration of time, otherwise years of data could be lost,” explains Jeff Puffer, director of Business Development for Honeywell Federal Systems Group. Honeywell is currently strengthening the site’s microgrid with a number of efficiency projects (see sidebar).

When a group of buildings operates as a microgrid, it fundamentally changes the relationship between the utility and its clients. “The grid becomes a back-and-forth transaction where each party can provide power to the other or cut ties when needed,” notes John F. Kelly, executive director of the Perfect Power Institute, a division of Galvin Electricity Initiative.

It also places control and flexibility into the hands of the building operators. “A microgrid allows you to prioritize your loads and to decide what type of power you want to use in a given day,” Puffer says. “It gives you choices – do you want to buy electricity from the utility, use your oil-running assets, or draw from your renewable sources?”

One of the key disadvantages of microgrids is calculating costs. Investment costs significantly differ depending on how efficient your site already is and what needs to be added for complete grid separation. It’s also difficult to put a price on energy quality – what is it worth to you to have improved power reliability?

Under this framework, payback can be loosely achieved by fulfilling sustainability goals, lowering utility bills, or strengthening your business image.

“For example, if you’re trying to lease your space and you can guarantee that the facility will be up and operational, the availability of a microgrid could have a major impact on site selection for a potential tenant,” says Puffer.

There’s also the option of making a profit from your output. “Sometimes the power you generate on-site has more value than the price you can buy it from the grid,” explains Phil Smith, director of Federal Project Development for Honeywell Building Solutions. “Revenue becomes part of the formula when you can make additional electricity and sell it back to the utility.”

The Role of Your Utility
Before you embark on developing a microgrid, you need to form a partnership with your local utility. “They are a stakeholder that needs to be engaged at the beginning of the process,” stresses Liam Dohn, a project manager for Siemens. “It’s a big responsibility to be interconnected with the utility’s system, which has been collectively paid for by the public.”

Utility attitudes about microgrids vary sharply across different regions. Some have begun to realize the benefits for all involved and are rolling out trial programs and incentives.

Others cling to the vertically integrated model currently in place. When the utility won’t relinquish control over generation and distribution, it can create roadblocks for building owners. Without the ability to install and own on-site generation and sell back excess power, microgrids are difficult to achieve.

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