Does your company want a microgrid? Hitachi has these tips

When the energy produced is at the scale of the load, efficiency gains and financial savings follow.

As the North American power grid grows increasingly secure, microgrids are drawing attention as a potentially elegant solution to a whole series of challenges.

First, the grid is aging. Grid components have been grafted onto the system, often haphazardly, over the course of 120 years. The American Society of Civil Engineers gives our energy infrastructure a D-plus. Indeed, North American utility executives identify aging infrastructure as the single most pressing challenge for their industry.

Second, severe weather events are becoming more frequent and more damaging. A 2014 Climate Central report found a tenfold increase in major power outages between the mid-1980s and 2012. Hurricane Sandy affected 8.7 million power customers, some of whom were hundreds of miles away from the coast. Of these customers, 1.4 million were still without power six days after the storm.

Third, our "centralized distribution system presents an array of vulnerabilities from a cyber and physical security standpoint," according to the former commissioner of the Federal Energy Regulatory Commission (FERC), Jon Wellinghof.

Microgrids help to address all of these challenges, and can advance all of the major missions charged to sustainability directors in a single project. A GreenBiz webinar earlier this month highlighted microgrids’ primary benefits:

  • Reduced energy costs

  • Improved energy resilience

  • Cost savings

Speakers from Hitachi Energy Solutions and the Microgrid Institute provided insight into how organizations can capture the value of microgrid deployment.

The nature of the grid

To understand microgrids, it can be helpful to consider a few defining characteristics of our traditional energy system. First and foremost, it is centralized.

  1. The vast majority of the energy in the U.S. power system is generated in large, centralized power plants.

  2. High voltage electricity is transmitted, often over long distances, from the power plant to a substation near a demand center.

  3. Substations connect high voltage transmission lines to lower voltage lines appropriate for most end uses.

  4. After power flows through or is transformed at the substation, distribution lines carry it to each end user.

  5. The utility meters the use of each end user to determine charges. Each end user pays for the power they use at set rates. In addition, they may pay "demand charges" for using large amounts of power at once.

At its most basic, a microgrid is a local group of interconnected loads and distributed energy resources that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to operate in both grid-connected or "island" mode. This means that instead of drawing from a distant, large power plant, microgrids are built around small, on-site power generation (often from renewable sources), and are actively managed by a dedicated microgrid controller.

Microgrids can operate in island mode, making use of on-site generation to remain powered during an outage. Notably, during the massive power outages that darkened large swaths of New York City in the aftermath of Hurricane Sandy, aerial photos showed several bright spots where microgrids had kept the power running.

Institutions that cannot afford even a short interruption to their operation from a power outage can take control of their destiny by bringing energy generation, distribution and management onsite. Primary examples of ideal end users include military installations, hospitals and corporate campuses, although there are surely few electric customers for whom an outage would not constitute some degree of loss. Microgrids can improve power supply resilience for all end users.

Savings grow over time

An entire microgrid project can be developed with a single power purchase agreement (PPA), like those used for stand-alone solar and wind projects. The customer pays a set rate for all the energy the microgrid generates. This rate can be set below the current rate the customer pays for energy. Importantly, the PPA rate can be designed to grow much more slowly than the price of energy from the utility is forecasted to grow, therefore compounding the customer’s savings over time.

Microgrids promote savings in other ways, as well. Microgrid controls maximize efficiency of energy generation and consumption, and automatically choose the lowest cost source of energy at any given time. Automated controls can allow microgrid owners to benefit financially from demand response programs. Efficiency measures taken as part of microgrid development further reduce costs. Furthermore, microgrids do not rely on vulnerable net-metering policies for cost savings, because a well-designed microgrid doesn’t export much to the grid.

All this can add up to substantial savings. According to a recent Lawrence Berkeley National Lab study (PDF), the cost to customers of a 16-hour electrical service interruption amounts to about $32.40 for residential customers, $9,055 for small commercial and industrial customers and $165,482 for medium to large commercial and industrial customers.

Microgrids for sustainability

Microgrids also can support organizations’ overall sustainability goals. Investment in rooftop solar or a community wind project can help businesses to lower their carbon footprint and may lower energy costs, but it does nothing to help organizations plan for emergencies and adapt to climate change. Even with solar on the roof, the power goes off during a utility grid outage. A microgrid increases the value of investments in renewables, by providing not just a cleaner energy portfolio and lowered energy costs, but also a dependable, resilient energy supply.

Additionally, net-metering policies are under attack at the regulatory level in some jurisdictions, and in some cases may be replaced over the coming years with tariff structures that compensate distributed energy resource owners at a lower rate than the full retail rate. Microgrids do not rely on net metering for cost savings.

Institutions with microgrids generate and use energy more efficiently. Facility efficiency upgrades are the first step in a microgrid project, so generation can be matched to a smaller load. Microgrids use automated software controls to maximize the efficiency of on-site energy resources and building systems to maximize cost savings and environmental performance. Generating power onsite eliminates transmission losses, which can be significant. It also presents opportunities for combined heat and power systems to support building heating and cooling.

The bottom line

Sustainability directors may find a lot to love in microgrids. In the context of an aging electrical infrastructure at increasing risk from extreme weather events, microgrids can keep their host institutions powered with on-site generation, even when the utility grid goes down. Microgrids can deliver more sustainable energy profiles, not only by improving efficiency, but also by enabling the cost-effective and coordinated deployment of onsite renewable energy resources.

Finally, microgrids offer customers low, predictable energy costs that don’t grow along with the market. The microgrid controller can maximize the cost savings customers realize by supporting demand response and continuously choosing the least expensive source of energy, whether from onsite renewables or the utility.

In short, a microgrid has the potential to deliver cleaner, reliable energy on a resilient system that costs less in the long run than traditional utility hookups. Organizations would do well to consider the microgrid option in their facilities planning.