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Microgrids have had a minor presence in the electric utility industry for years. Historically, implementation costs have kept microgrids from competing against the traditional electric grid, with its economy of scale. However, the growth of shale gas and the convergence of thermal, electric, and waste systems now are creating a compelling microgrid business case.

As microgrids become more prevalent, utilities stand to benefit in multiple ways—with rewards in operations, revenues, and customer service. The opportunity calls upon utilities to prepare for microgrids as partners on the system rather than competitive threats.

Defining the Microgrid

A microgrid is classically defined as a small electric utility than can be separated from the larger grid for stand-alone, computer-controlled, independent operation to locally take the place of the electric utility operations. Three main types of microgrids exist: single-parcel or single-owner campuses; multi-parcel or multi-owner campuses; and remote off-grid sites.

Various forms of single-parcel or single-owner institutional and military microgrids have been around for years, particularly in college, hospital and corporate campus settings. According to Pike Research, single-parcel campus microgrids will account for approximately 47 percent of the microgrid market over the next 10 years. These customers typically are primary metered customers, with self-owned utility infrastructure. Since the microgrid resides in a single parcel, a microgrid isn’t considered a public utility, and as a result it isn’t regulated by a public utility commission (PUC).

Unlike single-parcel microgrids, multi-parcel microgrids—such as industrial parks, developments and cities—require PUC regulation. Most states dictate that only a utility can install infrastructure that crosses property lines. Hence, only an existing utility, or a business entity willing to become a utility, can implement multi-parcel microgrids. This creates business opportunities for utilities, and those opportunities are expanding further as commercial developers are looking at combined microgrid energy systems.

Off-grid microgrids typically are found in military forward operating bases ( i.e., in Afghanistan) and communities located away from the electrical grid, such as remote Alaska communities and isolated gas drilling camps.

The best microgrids of today blend distributed generation and dispatch and utility operations with a host of features that provide energy efficiency, demand response, situational awareness, and campus system optimization. Modern microgrid technologies also provide services like conservation voltage reduction (CVR) and volt-VAR optimization, along with other approaches to drive down generation cost, use less energy, enhance reliability and balance local energy supply and demand.

Portfolio Benefits

Microgrid systems that integrate electric, thermal and waste systems will drive microgrid implementations and create an energy system, not just an electrical system. This platform approach can provide greater customer, environmental, and economic value than the typical electric-only system.

Inexpensive natural gas makes onsite gas-fired generation—using either combined heat and power systems (CHP), micro-turbines, or fuel cells—less expensive than some utility-supplied power, particularly in areas with large spark spreads. Renewable energy sources, supplemented by energy storage and the ability to dispatch during peak electric rate times, also contribute to lower