Self-reliance: Why building owners should go off the grid

Self-reliance: Why building owners should go off the grid

[Editor's Note: As managing principal of Smart Buildings, Jim Sinopoli discusses the benefits of using a microgrid to generate power.]

Centralized power plants have been around since the 1880s. More than a century later, we’re starting to see growth of microgrids -- decentralized or distributed generation of power at individual buildings, primarily through renewable sources such as solar panels or wind turbines. With microgrids, real estate developers, building owners or the local community builds the power grid for their large development, industrial park, campus or even an entire neighborhood. No longer just a new concept, microgrids have moved beyond the pilot phase – they are now.commercialized with roughly 300 microgrids operational worldwide.


Within a microgrid are small power generators such as traditional fossil fuel generators, photovoltaic, wind and fuel cells. Different sources of power generation improve the microgrid’s reliability. The microgrid may be able to operate independently (such as in remote villages or military bases) or it could be connected to a larger utility power grid, in which case the microgrid then appears as one customer to the larger grid. The organization and management of the microgrid could be a cooperative arrangement for a community, coordinated by developers, or it may just be a large campus with one owner.

Microgrids improve the reliability of the older grid and the overall power system as well. Locally generated power lessens the burden on centralized generation and related transmission and distribution systems. Energy losses in the transmission process, which are significant in the larger grid, are negligible with a microgrid.

Potential Benefits

Microgrids will soon be a reality for each of us involved with designing, constructing, operating and managing buildings. So why would a developer or building owner be interested in a microgrid? Here are some compelling reasons:

· The microgrid improves power reliability. A microgrid with multiple generation sources provides diversity and therefore greater reliability. Connecting a microgrid to the larger grid simply means increased power dependability.

· The microgrid has more potential to lower energy costs. While it’s true that centralized power plants produce cheap power, there are opportunities to lower costs further with a microgrid. For example, if a microgrid is connected to the larger grid, the operator can use power from that grid when prices are cheaper than the microgrid. Conversely, the operator can maximize the use of the microgrid when prices from the larger grid are high. Given variables such as time-of-day rates, demand charges, weather, potential demand response events and load shedding scenarios, some analytics can be used in order to optimize when to use the larger grid or the microgrid. This will eventually minimize the cost of energy or could even facilitate making money by selling power into the larger grid. Owning a microgrid offers more flexibility for the owners in managing their energy costs.

· The microgrid is energy efficient. A typical coal-fired power plant might only be around 38 percent efficient, meaning 62 percent of the original energy is not converted to electricity. Add to that another 7 percent loss in transmission and distribution. A microgrid with multiple generation sources is likely to be more efficient through renewable sources, eliminate the transmission and distribution energy losses and have the capability to recover and use heat locally. The result is higher energy efficiency and lower carbon production.

A recent study by Lawrence Berkeley National Laboratory looked at a microgrid in Canada with 10MW peak load and a 6.2 MW average load. The study, called A Framework for the Evaluation of the Cost and Benefits of Microgrids, found the average cost of electricity for customers via the microgrid to be $5 less per MWh. The load reduction provided benefits to the grid operator related to investment deferral, which means a utility company can defer or doesn’t need to make a capital investment in generation, infrastructure and land. There were also substantial gains to society related to reduction of GHGs. Finally, the study monetized benefits related to increased power reliability that accrued primarily for customers, but also the microgrid operator and the larger grid.

The take-away from this study is that while most gains from microgrids are related to the customer, everyone benefits.

Developers and Building Owners

A property served by a microgrid that provides more reliable power service at a lower cost adds value to the property. Studies have shown that tenants will pay slightly more for space that is LEED certified. The same may eventually be true for microgrids, maybe even more so because of the explicit benefits.

Building owners may also gain by deploying a basic microgrid and providing or charging for space in a microgrid “co-location” area for tenants to install their own generation equipment. This approach is similar to data center companies that sell space within their locations to multiple users.

There is now an international standard for microgrids reflecting the viability, credibility, interest and momentum of the approach. The IEEE standard developed in 2011 provides best practices for designing, operating and integrating microgrid electric power systems. This includes the ability to separate from and reconnect to part of the larger utility grid while providing power to the microgrid. This standard addresses engineering concerns for microgrids specifically targeting reliability, contingencies and interconnection requirements.

According to Pike Research, institutional, single owner microgrids will be the largest segment of growth with 53 percent of deployments by 2015, followed by commercial with multiple owners at 39 percent of deployments.

Macro vs. Micro

One issue regarding microgrids is the role of the larger grid utilities -- the “legacy” providers. It’s generally assumed that microgrids will be deployed by non-utility developers, probably working for the real estate developer, building owner or the neighborhood. These microgrid entrepreneurs and developers may offer improved power quality and reliability and tailor their services to specific customers.

Some utilities have opposed microgrids because of safety concerns, while others support microgrids as long as the larger utility owns, operates and bills customers, an approach that doesn’t necessarily resonant with microgrid providers and building owners. Some utilities, such as the Sacramento Municipal Utility District have embraced the concept -- SMUD is deploying microgrid architecture in their own corporate headquarters.

The potential utility grid versus microgrid differences could play out much as the telecommunications industry did in the 1980s and 1990s, when the telecom utilities were reorganized and decentralized. Then everything radically changed due to technological advancement, when telecom companies' bread-and-butter offering and largest revenue producer - telephone landlines for residences - evaporated with the onset of cellular and smartphones.

There is a significant trend to decentralize some energy generation. You see it in individual buildings using renewables and massive efforts to move towards net zero buildings. Yet the microgrids are the most credible entry in this accelerating trend: They have sound benefits and financial metrics, and are much easier to deploy than net-zero buildings.