The rise of the microgrid

UC San Diego's 2.8 MW fuel cell, Soitec 22 kW concentrating PV and the east campus utility plant<br>Credit: Rhett Miller, UC San Diego
UC San Diego’s 2.8 MW fuel cell, Soitec 22 kW concentrating PV and the east campus utility plant
Credit: Rhett Miller, UC San Diego

By 2020, the microgrid sector is estimated to generate $40 billion in annual revenues. As this innovative concept moves from pilot to commercial-scale, Dr. Heather Johnstone charts the rise of this sector, highlighting some of the most interesting projects underway.

When Hurricane Sandy hit the United States last October, it caused an estimated $71 billion in damages, including bringing down power lines and affecting the supply of electricity to 3.5 million homes and businesses. One of the consequences has been the ratcheting up of the distributed generation versus centralised generation debate, and in particular the microgrid concept.

According to the Perfect Power Institute, which was born out of the Galvin Electricity Initiative, if the 24 US states affected by Hurricane Sandy had had 2,000 microgrids in place, key facilities, such as police and fire, medical centres, schools, fuel stations, hotels, etc, would have been able to operate for a month without access to grid power.

This all chimes well with the comprehensive and ongoing research being conducted by Navigant Research (formerly Pike Research). Its latest research forecasts that the worldwide microgrid market will surpass $40 billion in annual revenue by 2020 – four times the estimate for this year. Also, in March of this year, the World Microgrid Forum took place in California, again reinforcing the growing interest in microgrids as a strategy for ensuring grid reliability and energy independence.

So what is a microgrid? You will come across a number of definitions, but the most unambiguous I have found is from Navigant Research: “An integrated energy system network consisting of distributed energy resources (DER) and multiple electrical loads and/or meters operating as a single, autonomous grid either in parallel to or ‘islanded’ from the existing utility power grid.”

And it is this ‘islanding’ capability, or ability to function autonomously, in particular, that is increasing the microgrid concept’s popularity, particularly in America and in specific market segments.

In addition, there is a growing need to replace our ageing grid infrastructure in the developed world with a system that is more intelligent and more flexible. According to SBI Energy, the microgrid could, in fact, serve as the building blocks of a Smart Grid.

Who is favouring the microgrid?

Over the last two years, the most significant development in the nascent microgrid market has been the move away from pilot projects and towards full-scale commercialisation. According to Peter Asmus, a principal research analyst at Navigant Research: “A wide range of electricity users are demonstrating strong demand for power generation and distribution systems that can be operated independently from the utility grid.”

In its extensive research, which dates back to 2009, Navigant Research has identified five major market segments that are taking advantage of this innovation. They are:

  • Commercial/Industrial
  • Community/Utility
  • Institutional/Campus
  • Military
  • Remote/Off-Grid

According to Navigant Research, in 2011, the Institutional/Campus market segment dominated with 44.6 per cent of market share, and Community/Utility hot on its heels at 31.7 per cent. The remaining three – Commercial/Industrial, Military and Remote/Off-Grid – were all significantly lower, at 5.6 per cent, 6.3 per cent and 11.8 per cent respectively.

Interestingly, when Navigant Research released its 4Q 2012 report, there had been a major rebalancing of the market segments. The market share of Institutional/Campus had almost halved to 28.8 per cent, with Community/Utility also seeing a drop to 21 per cent.

Thus the robust growth was seen in the Commercial/Industrial segment, almost doubling to 10.3 per cent. Remote microgrids showed a huge leap in its market share, increasing to 21.7 per cent, but it was the military sector that showed the biggest gains, increasing its market share to 18.2 per cent. According to Navigant research, that represents 21 new microgrid projects, adding up to 350 MW of capacity.

If we turn our attention to the geographical split of microgrid take-up, without a doubt North America is the world’s leading market for microgrids, with Navigant research reporting in its 4Q report, 2,088 MW of overall planned, proposed, under development and operational.

Looking historically, North America has maintained, or very slightly reduced, its market share (65.7 per cent in 4Q 2012, compared with 69 per cent in 2Q 2011).

Where market share has been won, and done so in some style, is in the Rest of the World, which has jumped from an almost non-existent 0.1 per cent in the first half of 2011 to an amazing 12.7 per cent by the end of last year, which represents a capacity of 404 MW, according to Navigant.

Asia-Pacific, meanwhile, saw a drop in its market share, while Europe maintained its market share at around 12 per cent. The latter, according to Asmus, appears to be focusing its efforts on the virtual power plant concept, rather than microgrid developments (see ‘The VPP concept’ section later in article).

Figure 1: Microgrid capacity by market segment, 4Q 2012<br>Credit: Navigant Research
Figure 1: Microgrid capacity by market segment, 4Q 2012
Credit: Navigant Research

Although some microgrids have been operating for years, these, what are termed ‘first generation’ systems, relied on manual controls and were predominantly fuelled by diesel generators. In contrast, the new microgrid concept relies on IT advances, sophisticated software and new islanding inverters to network resources, so they harmonise as a system.

In the following section, we highlight some of the most promising microgrid projects.

UC San Diego 42 MW microgrid

With its 42 MW microgrid, the University of California, San Diego (UC San Diego), is a leading light in this field.

The whole system comprises a pioneering 2.8 MW fuel cell, utilising biogas from the local wastewater treatment plant, 1.5 MW of photovoltaics (PV) and two concentrating PV systems, and a 30 kW/30 kWh PV fully-integrated storage system, plus an awarding winning 27 MW combined cooling heat and power plant, and a 4 million gallon (15 million litres) thermal storage system.

UC San Diego also owns and maintains a 69 kV substation, 96 12 kV underground feeder circuits and four 12 kV distribution substations throughout the 1,200-acre campus. According to the university, the microgrid provides an impressive 92 per cent of its annual electricity load and 95 per cent of its heating and cooling load.

However, the most impressive outcome of having a microgrid system, which serves a campus community of more than 45,000 people, is that UC San Diego now saves more than $850,000 a month, compared with the alternative of being a direct-access customer importing from the grid.

Earlier this year, the university received $1.6 million in funding from the Californian Energy Commission to advance the development of its pioneering microgrid. And UC San Diego is providing an additional à‚£1.5 million in match funding. The funds will be partly invested in analysing multiple stand-alone energy storage technologies to further improve the performance of its microgrid system.


Michigan-based TARDEC (Tank Automotive Research, Development and Engineering Cente) will be the first US Army installation to use a solar-powered microgrid, designed to achieve energy security for two of its laboratories, enabling it to run off-grid in case of power outages.

The microgrid comprises wind power, fuel cells and other energy sources, as well as a mobile solar generator and a charging station for hybrid electric vehicles. It has been designed to power TARDEC’s two System Integration laboratories as well as car park lighting. The designers anticipate that at least part of the time, the microgrid will generate excess power that can be used elsewhere in the sprawling TARDEC complex.

The installation marks an important step forward in the US Army’s ‘Net Zero’ goal of enabling its facilities to use only as much energy as they can produce on site. Part of the Net Zero initiative involves sharing information with the civilian sector, so lessons learned from operating the microgrid will help enable commercial facilities and communities to develop locally-sourced energy too.

‘Perfect Power’ at IIT

Dubbed ‘Perfect Power at IIT’, the US-based Illinois Institute of Technology’s (IIT) project, is a five-year plan that will see the institute’s electricity supply system completely overhauled. And at the heart of this lies a smart microgrid.

Figure 2: Microgrid capacity by region, 4Q 2012<br>Credit: Navigant Research
Figure 2: Microgrid capacity by region, 4Q 2012
Credit: Navigant Research

On average, IIT’s main campus experienced three power failures a year, costing in the region of $500,000 annually in restoration expense and lost productivity. Therefore it was clear that something had to be done. So in 2008, IIT joined forces with the US Department of Energy – which awarded $7 million in funding – with Galvin Electricity Initiative and local utility companies, and the Perfect Power at IIT project was born.

The Perfect Power System has been developed by Galvin Electricity Initiative, and consists of two substations and seven electrical loops that bring power to the buildings, which will be generated from a mix of on-site sources, including solar and wind.

The brain – what gives intelligence to the microgrid – is the master controller. It will analyse real-time information and send electricity out as demanded. To cut waste, it is programmed to send more power to high-priority areas and less to low-demand areas and check prices from utility companies. It will also identify any problems in the electrical loops and report them instantly.

The estimated cost of the microgrid project is $14 million, but based on potential annual savings of $1.3 million through reduced demand and usage, IIT is expected to have the investment returned within five years.

Other microgrid projects of note

Japan’s Toshiba Corporation is working on a microgrid system on the remote island of Miyako with Okinawa Electric Power Company Incorporated. Once operational, it will be the largest such system in Japan.

A mega-prison is California, Santa Rita Jail, has an operational microgrid that is expected to save $100,000 per year. It was designed and built by Chevron Energy Solutions, and includes a 1 MW fuel cell, a 1.2 MW rooftop solar PV array, five 2.3 kW wind turbines and a 2 MW battery storage system.

The VPP concept

As mentioned previously, Europe has not embraced the microgrid to quite the same extent as the US, and instead has focused efforts on the Virtual Power Plant (VPP) concept.

One of the most interesting VPP projects currently underway will see the Danish island of Bornholm, a quiet farming and fishing community of 42,000 in the Baltic Sea, become one of the most advanced VPPs in the world. Through a four-year, €21 million ($28 million) EcoGrid project, approximately 2,000 households on Bornholm will be connected to an island-spanning network that will enable homeowners to reduce their electricity usage at times of peak demand and sell that unused power back to the grid at market rates.

As its name implies, a VPP does not physically exist. Rather, it uses the smart grid infrastructure to tie together small, disparate energy resources as if they were a single generator. Just about any energy source can be linked up – for example, Bornholm has 36 MW of wind power and 16 MW biomass. A central control will manage the whole system.

The first VPPs came on line about ten years ago, mainly as research projects. However, in the last several years, energy market players, especially in Europe, have come to accept the VPP as a commercially-viable alternative to adding new capacity, as well as a way to handle the variability of renewables.

Navigant Research has estimated that the worldwide capacity of VPPs could grow to as much as 105 GW by 2017, generating revenues of about $6.5 billion.

Although the greater uptake of microgrids still face barriers in terms of cost and integration, concerns about utility grid reliability, rising costs of fuel, greater availability of distributed generation technologies and a drop in the cost of renewable energy sources – such as solar photovoltaic systems – are all driving this sector forward, meaning that its future looks extremely positive.

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