What are the value propositions for microgrids?

This is the second in a series of short articles on the topic of microgrids.  In Hawaii, there has been a lot of interest in microgrids of late, with bills being introduced in the 2017 Hawaii Legislature that purportedly promote microgrid development.   In our last blog entry we defined microgrids.  In this post we answer the question:  Why would anyone want to set up a microgrid?   Here we delineate three core value propositions around microgrids.  

Reliability:  The most common objective for a microgrid is to provide reliability that is superior to that provided by the local utility.  In this application, the energy end-user requires continuous service even during extreme conditions e.g. a storm, earthquake, or perhaps during "routine" utility outage situations on the power grid (e.g. fault on the utility grid) that cause a disruption in delivery of electricity to the customer's loads.  These “high 9’s” applications (referring to the level of reliability e.g. 99.9% uptime, 99.99% uptime, 99.999% uptime and so on) are typically found in mission critical situations such as data centers, hospitals, labs, military bases, etc.)   In a reliability application, the cost of the microgrid is secondary to the mission i.e. maintaining a flow of energy to the load even under extreme circumstances is paramount.  Said another way, the value of electricity in these situations is usually multiples of its cost.  

Economics:  Another objective of a microgrid is to provide power at a cost that is lower than that available from the local utility.  In this application, the microgrid produces and manages a supply of energy from its own internal resources that results in a cost that is less than (or at least competitive with) paying the utility for equivalent service.   Customer-owned net energy metered solar PV systems are a very simple example of such a microgrid.  However, most microgrids installed for the purpose of providing electricity at a cost that is competitive with the local utility are going to be somewhat more sophisticated.  Achieving a lower cost of electricity requires cost effective generating resources, careful control of loads in order to optimize the generation, and perhaps the ability to "trade" electricity at the microgrid point of interconnection with the utility (a future blog post on microgrids will cover the policy topic of "interchange").    Some microgrids also incorporate management of other energy commodities such as natural gas to take advantage of the arbitrage opportunities that may exist between electricity and other forms of energy.  

Remote Service:  The vast majority of microgrids in service around the world today serve electric loads in areas where there is no utility (e.g. small remote islands, remote communities, etc.).  In these applications, the microgrid must provide all the functions of a larger electric utility.  

These value propositions are not mutually exclusive, although the level of reliability required will drive the sophistication of the microgrid design, and hence the ultimate cost of the electricity delivered by the microgrid.  

In our next blog post we will answer the question:  What are the components of a typical microgrid?  

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