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Serious money is now flowing into a technology that is set to transform how electricity is produced and distributed in every corner of the globe. Mike Scott reports
Type the word “microgrids” into a search engine and two stories sit next to each other. The first, from MIT Technology Review, is headlined How Solar-Based Microgrids Could Bring Power to Millions, and highlights the potential of microgrids to provide power to 1.5 billion people, many of them in remote areas in the developing world; the second, in Scientific American, proclaims A Microgrid Grows in Brooklyn.
The latter article outlines how a start-up company called LO3 Energy is helping owners of solar panels in the New York neighbourhood to sell their surplus energy to neighbours who want to use more green energy, rather than having to sell it (at cost) to the local utility.
The juxtaposition of the two stories is a neat illustration of how this nascent technology could provide the solution to a host of challenges in both the developed world and across emerging markets.
In places such as Africa and South East Asia, microgrids can help provide access to energy to people with no power
“The world is becoming more and more electric,” says Matthieu Mounier, head of the microgrid business at Schneider Electric. “In places such as Africa and South East Asia, microgrids can help provide access to energy to people with no power, while in developed countries, electricity will be a bigger part of the energy mix thanks to the growth in the number of electric vehicles.
“At the same time, we are completely changing the way we produce that electricity. It will be a lot more distributed and decentralized, and it will be provided by renewable energy, which is the cheapest, fastest way to provide power now.”
However, because much of the electricity will be from renewable sources – mainly wind and solar photovoltaic – it will be more intermittent. The rapid development of energy storage will help to integrate these energy sources into the existing power network. The costs of energy storage are falling rapidly as technology advances and capacity increases, but storage alone will not be enough to enable the fully decarbonized energy system that we need to meet our climate change targets.
“The microgrid is one of the key technologies to enable the integration of these renewable sources and to provide cheap, reliable, low-carbon electricity,” Mounier says. It has the additional benefit of making grids more resilient – a factor much on the minds of the power industry, regulators and policymakers in the wake of recent high-profile disasters such as hurricanes Harvey, Irma and Maria in the US, as well as hugely damaging typhoons in Asia such as Haiyan, which devastated large parts of the Philippines in 2013.
More than $100bn will be spent on microgrids over the next decade, up from next to nothing today
The potential of the market is huge: Navigant Research says that more than $100bn will be spent on microgrids over the next decade, up from next to nothing today. Already the sector is attracting investors such as private equity giant The Carlyle Group, which has allocated an initial $500m and expects that investment to increase over time.
In their simplest form, microgrids have been around for decades in the form of isolated communities producing their own electricity using diesel generators, and industrial facilities and essential infrastructure having their own back-up power in case the grid goes down. But the future microgrid is likely to contain renewable energy assets, some kind of energy storage and possibly diesel gensets to supplement the clean energy capacity. Unless they are isolated “islanded” grids, they will also use “smart” features such as advanced analytics and the ability to feed power into and withdraw power from the grid network.
Blockchain technology, which is an integral part of LO3’s Brooklyn microgrid, may be used to keep track of and verify what power is being produced and consumed and by whom.
While the potential is huge, the market is still in its infancy, with many companies carrying out pilot projects to work out how best to integrate different assets into microgrids and the microgrids themselves into larger networks.
One such project is being carried out in Oxford, England, by UK firm Moixa. The company has equipped 89 homes, many of which have solar panels on their roofs, with its smart batteries. Using a software platform that integrates different energy sources and storage devices, the company can “change the flow of energy into or out of the batteries to deliver savings”, says Ed Gunn, operations director.
“The value of the microgrid to the consumer is that it reduces the requirement to buy energy from a mainstream supplier, which leads to lower bills,” he adds. “Customers can look at our apps and see what energy they are consuming and where it’s coming from. They can see where their peaks and troughs in supply and demand are and adapt their consumption patterns accordingly. With visibility comes customer empowerment to make their own decisions.”
The entry of deep-pocketed investors is important because microgrids require significant upfront investment
At the same time, microgrids that are connected to the distribution network can enable distribution network operators (DNOs) or distribution system operators (DSOs) to balance their grids by connecting and disconnecting from the grid as necessary and feeding power into the network or taking it out to be stored in batteries as the network requires.
Another Moixa pilot scheme, in Barnsley, links 40 home batteries. The company says this will demonstrate how virtual power plants can relieve pressures on the electricity network and enable more homes to install solar panels without having to upgrade the local network. The project is expected to halve residents’ energy bills and save millions in the costs of running the UK’s power network. In total, Moxia is delivering 10 projects this year ranging from peer-to-community, electric vehicle smart charging and smart storage management.
One key driver for growth will be the increased focus in years to come on decarbonizing the heat and transport sectors, Gunn asserts.
“The demands that electric vehicles will place on local grids will be a massive challenge for DNOs to manage. Putting them in a microgrid is one way to head that off,” he adds.
The entry of deep-pocketed investors such as Carlyle is important because, although microgrids have very low operating costs once they are up and running, they require significant upfront investment, Mounier says. Schneider Electric is developing a microgrid-as-a-service model that removes the need for upfront investment from the customer, but Mounier says in developed markets there will be a mix of investor-owned microgrids, those owned by developers and those owned by end users. In emerging markets, however, he thinks new utilities will spring up that will own and operate microgrid assets.
In future, there will not be a national grid as we know it – it will be more of a grid of grids
The growth of the microgrid market will change the nature of national grids, he adds. “There is still a need for a national-level power network. It provides stability and strength to microgrids. But as an increasing number of microgrids become connected to the grid, it is changing the grid itself. In future, there will not be a national grid as we know it – it will be more of a grid of grids and the network operator will be in charge of ensuring consistency between them.”
Microgrids have the potential to answer many of the questions that the power sector will face in coming years, including how to incorporate more renewable energy into the system, how to shift energy demand from peak times, how to integrate electric vehicles into the system and how to store energy, both electrical and heat/cooling. However, the technology is ahead of regulators and for the market to grow, legislation will be needed to make it easier for utilities to get involved.
There is understandable reluctance to embrace microgrids on the part of utilities, given that they will reduce the market for the power that they provide, but as Israeli and Danish researchers point out in a recent article in Renewable and Sustainable Energy Reviews: “Utilities are coming around to the view that they may be well positioned, if allowed by regulators, to provide microgrid services to their existing customers since they have extensive knowledge, distribution infrastructure already in place, and franchise rights from local authorities.”
Mike Scott is a former Financial Times journalist who is now a freelance writer specializing in business and sustainability. He has written for The Guardian, the Daily Telegraph, The Times, Forbes, Fortune and Bloomberg.
This article is part of the in-depth battery storage and microgrids briefing. See also: