Microgrids: The Way of the Future?

September 21, 2012

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. PageBreak

“It keeps the customers out of the game,” Kelly notes. “But utilities are missing the fact that customers will invest their own money in renewables or power generation. Their ability to produce power reduces peak load in their neighborhood, which is mutually beneficial for the utility and the client.”

If your region faces regulatory hindrances for microgrids, become an advocate on behalf of your site. Your area leadership may not be aware of the vast advantages of grid independence for commercial clients.

“The primary benefit boils down to reliability for both the customer and the utility,” Dohn says. “Because commercial buildings are such large consumers of energy, it may be financially favorable to the utility to allow a client to produce its own energy to alleviate the demand on the grid and ensure reliability for all customers.”

For example, there may be times when the utility requests that a microgrid to come online to avoid a brownout. “In the case of a large disturbance to the main grid, the utility can take a large customer out of the mix. While that microgrid takes care of its own needs, the utility can worry about restoring service to other consumers,” explains Smith.

A network of on-site power generation also reduces the total output required of the utility. “The closer the energy consumer is to the source of power generation, the less you lose in line loss,” posits Puffer. “If you have to run lines 100 miles from the power plant to the user, the utility has to produce more energy in order to deliver the amount needed to the location.”

The Building Blocks of a Microgrid
Microgrids aren’t a plug-and-play technology – they are a multi-phase project with specific actions that must be tailored to your site’s unique energy profile.

“A microgrid includes generation, a distribution system, consumption and storage, and manages them with advanced monitoring, control, and automation systems,” explains Dohn.

The first step is to get a clear picture of your demand needs. Without data in hand, you cannot make effective decisions about on-site generation requirements and load shifting strategies.

“The next step is a permanent reduction in consumption for electricity, water, and gas,” Dohn says. “This will give the consumer near-term cost savings driven by measured and verifiable conservation measures.”

These initiatives commonly take the form of lighting retrofits, envelope improvements, the use of advanced metering, and upgrades to HVAC and other energy equipment. Make sure to build in active load management automation, as demand response functionality is a key cornerstone of a microgrid.

After energy efficiency projects, target on-site generation and storage equipment. Renewable energy will be a significant component of this phase as one of the goals of a microgrid is to draw electricity from more sustainable sources than the bulk grid can offer. Cogeneration (engines, turbines, fuel cells) and power storage options (chilled water or ice, batteries, flywheels) will also serve as additional power providers.

Extensive metering is necessary to keep all elements in communication with each other. “A microgrid requires meters at the point of the load, on the individual pieces of generation equipment, and at the interface between the utility and the site,” explains Puffer. “You need to meter at the interface between your campus and the utility so you can tell how much electricity is going which direction and at what time of the day. You also want to know how much your loads are – you don’t want to serve more load than you’re capable of because that will bring your on-site generation down very quickly.”

With these phases complete, your site is ready to become grid independent in one of two ways. “If the microgrid has internal combustion engines with reactive power compensation within the system to provide voltage and frequency regulation, the power system can connect or disconnect via relays, switches, and breakers,” Dohn explains. “Alternatively, the microgrid generation and storage assets can connect to the main grid via a series of inverters, allowing for more advanced control of power in both directions between the main grid and the microgrid – this is a more elegant yet expensive option.”

Throughout a microgrid’s development, it is imperative to assign a dedicated team to its creation and operation. It must be clear who will oversee and maintain the system. “Someone has to be in charge – you can’t form a microgrid and just walk away,” stress Dohn.

Looking to the Future
Broad acceptance of microgrids, just like the national smart grid, will likely be realized down the road. With the push for renewable energy capacity, the grid’s increasing vulnerability to cyber attacks, the rise of global competitiveness, and the need to blunt the impact of fuel price fluctuations, more solutions like microgrids will be required to keep power quality in check. In the interim, microgrids provide building owners with a flexible operating model that enables grid independence on short notice.

Jennie Mortion is associate editor of BUILDINGS.


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About the author
Jennie Morton