6 minute read 24 May 2019
Two engineers wind farm

How technology is enabling a coming of age for microgrids

By

Thierry Mortier

EY Global Innovation Lead for Power & Utilities

Innovative and creative leader. Curious accelerator and visionary. Technology enthusiast interested in agile, blockchain, artificial intelligence, mixed reality, Internet of Things, market and trends.

6 minute read 24 May 2019

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Microgrids’ mighty potential to allay concerns over energy reliability and resilience is becoming a reality.

For the first time ever, fewer than one billion people do not have access to electricity, but imagine what it would be like to be one of them in 2019. Imagine performing surgery in a hospital with an intermittent power supply or being unable to turn on the lights in your office in an industrial park during a blackout. Whether we live in developing or developed economies, the need for electricity is pretty fundamental — but not guaranteed.

Microgrids could change all that.

Microgrids are small-scale power grids, fed primarily by a combination of solar, wind or biomass to provide reliable green energy. But, if circumstances dictate, they can work off fossil-fuel energy resources too.

Microgrids operate either independently from the main grid – known as “islanding” – or can be synched to it, at the same voltage, to shift energy in response to peaks and troughs in supply and demand. There is no interruption in power supply.

Microgrids operate either independently from the main grid or can be synched to it, at the same voltage, to shift energy in response to peaks and troughs in supply and demand.

Independent, local, sustainable and resilient power supply is useful for all sorts of reasons – not least peace of mind. That is why microgrids work especially well in critical scenarios, such as hospitals and defense organizations, which need instant energy backup. They are also good for university or corporate campuses, housing associations or residential developments, science parks or commercial centers – in fact, pretty much anywhere with a community of people who need energy self-sufficiency.

Entering the mainstream

Microgrids are now entering the mainstream. It is, in part, a consequence of greater affordability, as the technology improves. But, what makes them really relevant right now is their game-changing potential in the emerging distributed energy ecosystem.

The EY countdown clock identifies three major and transformative tipping points in the energy transformation. Each is changing the nature of energy supply and demand as we currently know it:

  • Distributed energy resources (DERs), such as rooftop solar and wind, become equal to or cheaper than taking energy from the main grid. This means even greater consumer take-up and more DERs integrating into local networks.

  • Electric vehicles (EVs) reach price and performance parity with combustion engines. The load on local networks increases as drivers charge their vehicles as and when they choose. It is becoming more critical to balance the network given variable and unpredictable surges in demand.

  • Storing and distributing energy locally becomes cheaper than transporting it over networks.

Microgrids can unite these solar, storage and EV technologies to improve the quality, reliability and resilience of power networks, while reducing overall costs. With such huge and transformative potential, microgrids are becoming very difficult to ignore.

Microgrid applications for power networks make them a potential game changer

T&D investment deferral

Reduction in peak load avoids investments in T&D infrastructure

Islanding

Seamless transition from grid and remote power access during grid disruption

Load leveling

Absorption of excess energy during low demand eliminates need for energy curtailment

Renewable integration

Integration of intermittent and variable power output from renewables

Demand response

Real-time pricing signals enable demand response for connected loads

Reliability

Improved power availability for critical loads

Peak load shaving

Release of stored excess energy during periods of high power demand

Interoperability

Interconnection and interoperability for smart grid infrastructure

Spinning reserves

Reduced need for backup generators due to supply from storage during grid disruption

Who benefits?

It’s easy to say that everyone’s a winner. But, with microgrids, it’s quite possibly true.

  • Consumers

On a stand-alone basis, microgrids, enabled by solar and battery technology, often have the potential to transform lives in remote or disadvantaged communities with limited or no access to reliable electricity supply. Microgrids also offer a compelling solution to consumers’ rising concerns over grid resiliency. In the British Virgin Islands, a microgrid comprising 350 kW solar, 900 kW wind and 500 kWh battery continued to provide power when Hurricane Maria made landfall in September 2017.

  • Utilities

Microgrids could take away more than 6 GW of business from utilities by 2020 as grid defections increase. But, it’s not all bad news. If utilities move into the microgrid space too, they could win a share of a market expected to reach US$31 billion by 2027, according to Navigant Research. In fact, research by EY finds that up to one-third of losses from DERs could be recovered if utilities tap in to the microgrid opportunity

Microgrids present opportunities to provide new services, partner with DER providers and boost revenues by including microgrids in rate structures

Microgrids article graphic

Up to one-third of losses from DERs could be recovered if utilities tap in to the microgrid opportunity.

Some utilities are ahead of the game. A leading French firm, for instance, is embarking on the world’s largest microgrid project by a utility. A 100 MW microgrid in the Republic of Palau will couple renewables with energy storage and enable the island nation to achieve its renewable energy target five years ahead of schedule.

  • Governments and regulators

In developed and developing countries, governments are pushing for microgrids to fast-track their national electrification and decarbonization objectives and to improve grid resiliency and energy security.

Many governments are providing grants or funding to set up pilot projects. Some regulators are “incentivizing” utilities to encourage microgrid deployment by requiring them to compensate customers for blackouts. Others are working on tariffs and standards to underpin the commercialization of microgrids. Hawaii, for instance, is the first US state aiming to create a tariff to pay microgrid owners and streamline interconnections. Meanwhile, California has signed into law a bill to boost microgrid development.

In less developed economies, microgrids are proving to be a cost-effective alternative to extend conventional grids and transmission lines. Policy-wise, they boost electrification and decarbonization endeavors. Evidence of increased government backing is that microgrids are expected to account for almost one-quarter (23.5%) of total global electricity access investment between 2018 and 2030. The Government of India, for instance, aims to install 10,000 microgrids and minigrids across the country by 2021

Microgrids are expected to account for almost one-quarter (23.5%) of total global electricity access investment between 2018 and 2030.

Long-term view

Hook up microgrids with other emerging technologies, and their long-term potential looks even brighter.

Combined with blockchain, for instance, which creates a permanent and immutable ledger of transactions, there is the opportunity to trade electricity between participants in a safe and transparent environment. In the US, LO3 has set up a local peer-to-peer renewable energy trading market for prosumers and customers using blockchain, while Power Ledger has done the same in Australia.

Add in artificial intelligence (AI), and the microgrid gets a “brain.” It forecasts input from renewables, deciphers user behavior and estimates outputs. It means the microgrid is optimized to adapt to fluctuations in supply and demand in real time. At a test and research platform near Singapore, French-based energy intelligence company METRON is applying AI to identify the optimal microgrid strategy

Analytics, meanwhile, will enable networks to sequence, dispatch and source energy to lessen impacts on peak demand.

To get ahead, companies will need to:

  • Develop a detailed strategy to direct prudent investment into this emerging business segment
  • Analyze market conditions and regulations, and undertake engineering and feasibility studies to build a strong business case 
  • Determine the right business model and design 
  • Understand available technology options, be open to new solutions and collaborate with others with expertise in ancillary areas
  • Comply with and prepare for existing and emerging regulation relating to microgrids
  • Anticipate the potential for merger and acquisition activity and venture capital investment
  • Prepare for integration of microgrids with legacy systems to optimize deployment

The long-term view is already in sight. Utilities are embracing the innovation agenda and supporting the technology-enabled, consumer-embraced energy transition. Within the emerging renewable energy ecosystem, it looks as though the future of microgrids is not so “micro” after all.

Summary

The potential for microgrids to improve the quality, reliability and resilience of power networks is well-known. Now, however, technological advances and greater affordability are bringing microgrids into the mainstream. They are today’s flexible and compelling solution to energy security and supply, irrespective of terrain or climate.

About this article

By

Thierry Mortier

EY Global Innovation Lead for Power & Utilities

Innovative and creative leader. Curious accelerator and visionary. Technology enthusiast interested in agile, blockchain, artificial intelligence, mixed reality, Internet of Things, market and trends.