Behind the scenes of your electricity typically lies a complex web of public and private energy companies that produce and distribute power that ultimately arrives at your business through power lines. While it may seem like just your utility company is responsible for delivering your power, these utility companies are connected to large regional power grids, which are the power lines and related equipment that move power from one point to another.
Yet some organizations are starting to use microgrids, which, like the name implies, are small grids that connect to the larger grid but can also operate independently to serve a limited area. This switch between the main grid and microgrid can either be done manually or automatically.
These grids can be owned and operated by individuals, businesses or even cities like in Fort Collins, Colorado. And they can be powered from a variety of local sources — often from renewables like solar or wind — in order to distribute power to the end-user so that they can use electricity as if it was coming from the traditional grid.
Avoiding Catastrophe
Because of the scale and interconnectedness of the grid, what happens in one state could affect people in another, such as with the widespread blackouts across the Northeast in 2003. This was due to power lines failing in Ohio, setting off a chain of events that caused places like New York City to go dark, as the New York Times explains.
Yet whether parts of the grid go down because of weather, faulty lines, or any other reason, microgrids can still provide energy because they can be disconnected from the main grid and use their own power generation and energy storage assets.
Like an insurance policy, this backup allows businesses to still function when the unexpected happens. And while the cost of setting up a microgrid can be expensive, it often pays for itself, as going a week without power after a hurricane, for instance, could be devastating to a business.
Controlling Price Peaks
Beyond serving as a backup in disasters, microgrids can also be used to avoid other downsides to the grid. During times of elevated energy prices, such as during periods of peak demand, a Microgrid can disconnect from the grid and capture the arbitrage benefits of using their own stored power.
For instance, some utilities assign capacity tags to businesses, which is a rate based on how much demand that business puts on the grid during peak load times. These rates can be based on as short as a 15-minute period during the peak grid day in some markets.
In order to avoid these capacity tags, which lead to higher energy costs the following year, businesses can use energy analytics software (EAS) to identify when those periods are likely to occur and then switch over to their microgrid.
By utilizing their own power generation and storage assets, they gain control of their costs, rather than relying on the grid operators and utility market price of energy.
A Case Study of a Microgrid’s Effectiveness
A good example of a microgrid in use comes from New York University (NYU), as The Microgrid Team at Berkeley Lab explains. The college produces power on-site, and with a $126 million investment updating its power production facility to use power sources like natural gas and heat recovery steam generators, the college was able to develop its own microgrid, which is connected to the larger Con Edison grid. When NYU needs more power than it can produce on-site, it’s able to tap into the ConEd grid, while the rest of the time it can use its own locally produced power.
Despite the large upfront investment, the microgrid has been paying off. The college estimates it saves $5-8 million per year on total energy costs, along with a 68% decrease in EPA criteria pollutants and 23% decrease in greenhouse gas emissions.
And the good news for those interested in microgrids is that it’s likely to become easier to install one. SolarCity and Tesla, for example, are merging in order to make microgrids more easily available to businesses and communities, as Microgrid Media explains. As a result, more people will be able to take control over their energy rather than having no choice in how they obtain power.
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